What is a 529 Plan?
A 529 Plan is an education tuition plan that is both tax-free on savings and investments. It is the most popular savings vehicle for college, grad school, and medical school.
529 Plans come with many benefits.
Tax breaks are the most well-known advantage. Earnings are not subject to state or federal tax when used for a qualified education expense. Other investment options, such as mutual funds, are hit with a capital gains tax at withdrawal. This is not the case for 529 Plans, making them one of the best ways to save long-term for college.
Need another reason to open a 529 Plan?
Ok, I will let you in on a 529 little-known secret.
Both parents and students are happily surprised when I tell them that 529 Plans can often to be used to pay for a gap year.
What is a gap year?
A gap year is a life-changing year, typically taken between high school and college. Students often travel, volunteer, and deepen their understanding of both themselves and the world they live in.I know what you’re thinking. I am not British nor wealthy; I can’t do a gap year.
That’s not the case anymore. More and more American students are pursuing a gap year. In fact, a growing number of students are using funds they already have in their 529 Plans to pay for their gap year.
The most prestigious universities throughout the country are promoting gap year programs. Malia Obama has deferred her admission to Harvard to pursue a gap year and she is certainly not alone. Harvard encourages their students to take a gap year. They are eager to defer admission to allow students to pursue a transformative gap year.
Students are listening, gap year programs are on the rise.
Harvard is hardly alone.
Tufts University, Princeton University, and the University of North Carolina – Chapel Hill have all developed their own service-based gap year programs.
At UNC, students in the Global Gap Year Fellowship are granted $7,500 to use towards a service-oriented gap year. Selected students have the leeway to design their own service-based initiative.
Princeton’s Bridge Year is a nine-month gap year program that is tuition-free. Small groups of students perform service-based projects in five countries: China, Bolivia, India, Indonesia, and Senegal.
Ok, now that you are day-dreaming about a globetrotting gap year, let me tell you how to pay for it.
Depending on the program, many gap year programs qualify for using 529 Plan funds. In addition to utilizing these funds, numerous gap year programs also offer scholarships and unique funding options.
Not sure where to begin?
Not to worry, below are four transformational, structured gap year programs.
Thinking Beyond Borders
Thinking Beyond Borders has been a global leader in gap year programs for over ten years. Not only do they offer culturally enriching experiences, but they work hand-in-hand with students to help fund their gap year.
At TBB, applicants can both apply for a scholarship and receive support in raising funds toward their tuition. The TBB staff assists students in building a crowd funding campaign through Generosity.com. TBB founder, Robin Pendoley, explains how “giving expertise to help shape the message and structure of the campaign has helped ensure students success in raising their tuition. Students have raised anywhere from a few thousand to over twenty thousand dollars.”
Outward Bound’s mission is to change lives through challenge and discovery. Expeditions and programs bring Outward Bound’s mission to life through a variety of wilderness and urban programs, including 30 to 85-day wilderness expeditions for gap year students seeking real-world experience.
Semester specialist, Jason Stout, highlights the value of gap year programs. “Gap year programs are a more holistic approach to education that better prepares a student for college and beyond. Imagine interviewing someone for a job who has a college education and has successfully completed a challenging 80-day wilderness expedition – it sets them apart.”
Outward Bound’s partnership with Western State Colorado University accepts 529 College Savings Plan through their Extended Studies program. Registration is not limited to current Western State Colorado University students; anyone can participate.
Another perk is that students can receive anywhere from 3-18 credits, depending on the length of the course.
Youth International is another gap year program, affiliated with Western State Colorado University, that accepts 529 Plan payments and offers academic credit.
Youth International Founder & Director, Brad Gillings, has over twenty years experience planning gap year programs. He described to us how participants on a gap year semester join a team of fourteen students, who together explore three different countries with a mix of rugged travel, intercultural exchange, homestays, volunteer work, and outdoor adventure.
NOLS offers immersive gap year experiences where students explore remote corners of the globe, from Alaska to Tanzania.
Gap Year Advisor, Dan Chell, details how NOLS students “gain leadership experience, confidence, and college credit, which can be transferred to their university at the end of their gap year.”
Students can use their 529 Plans and NOLS Scholarships to pay for this monumental experience.
Your last name does not have to be Obama to partake in a life-altering gap year. A 529 Plan, along with scholarships and financial aid options, can help make that dream a reality.