Author: Vince Sullivan, Director, NEST 529 Direct Plan, First National Bank of Omaha
Learning the alphabet is one of the most important steps in a child’s educational journey. With this knowledge, they can access a new world of communication, understanding and learning.
Likewise, when it comes to college savings, knowing your ABC’s can broaden your perspective and unlock new opportunities. The NEST 529 team strives to make the college savings process accessible and intuitive – that’s why we’ve compiled this at-a-glance guide to the ABC’s of NEST 529. Read on for an overview of some key terms in our dictionary:
Account Information Change Form
This form is a small but key player in your college savings. If you have a change of address, phone number or other information, or if you would like to transfer all or a portion of an account to a new account owner, make sure to fill out the Account Information Change Form. Access this and other forms by visiting the NEST 529 Savings Plan Forms homepage.
Automatic Investment Plan (AIP)
AIP is a tool to help account owners save, no matter how busy life gets. It allows you to automatically contribute to your NEST Direct Plan account directly from your personal checking or bank savings account – ensuring you never miss a contribution. You can even sign up for automatic annual AIP increases, keeping you on track to achieve your savings goals over time.
Account owners can also make automatic contributions to their NEST account using payroll direct deposit of after-tax dollars. Check with your employer to determine whether they offer payroll direct deposit.
The beneficiary of a NEST 529 account is the individual that will use (or currently uses) the assets in the account for qualified educational expenses. Most often parents, grandparents or other loved ones own an account on a beneficiary’s behalf but a beneficiary can open his or her own account. Should the beneficiary no longer need the funds due to events such as receiving scholarships or having remaining funds in the account after graduation, NEST 529 makes it easy to switch the beneficiary to another member of the family.
College Savings Calculator
The NEST Direct College Savings Calculator is a personalized tool that helps account owners take a closer look at how to pay for college. The Calculator takes into account your college savings goals and the amount you are currently saving, summarizing the total projected education costs in your time frame and estimating the monthly savings needed to meet your goals. Try it out at www.nest529direct.com/home/calculator.html.
Eligible Educational Institutions
Eligible institutions are generally any accredited college or university, including trade and technical schools, in the United States and abroad that participate in federal financial aid programs. Use this simple search tool to determine whether a school is eligible: nces.ed.gov/collegenavigator/.
The Free Application for Federal Student Aid (FAFSA) is the form that college applicants must fill out to apply for federal grants, work-study and loan programs. Many colleges use information from the FAFSA to determine their scholarships. Learn more about the FAFSA and upcoming deadlines at studentaid.ed.gov/sa/fafsa.
If you make a financial gift that exceeds the $15,000 limit per recipient for 2019, you will be subject to the federal gift tax. All NEST 529 contributions are considered completed gifts, so in a single year you can contribute up to $15,000 per beneficiary from your federal taxable estate without incurring the gift tax. You can also avoid the gift tax on contributions up to $75,000 per beneficiary in a single year, as long as there is no additional gift to the beneficiary for five years. These maximums double if filing jointly. You must file an additional tax form to avoid paying the federal gift tax – consult with your tax advisor for further details.
The NEST Direct Plan puts account owners in control of their college savings, with investment options to fit unique risk tolerances, time frames and savings goals. You can be as hands-on or as hands-off as you'd like when it comes to managing your investments, and if your strategy ever changes, you have the flexibility to change your investment option twice per calendar year per beneficiary account.
There are three paths to investing with NEST:
- Age-Based Investment Options: Your account will be placed in a portfolio based on the child’s age, adjusting over time to become more conservative as the beneficiary nears college. Your account automatically moves into the next age-range portfolio the month before your child reaches each age milestone to keep you on track.
- Static Investment Options: A fixed allocation throughout the life of the account. You can choose from among the following six options depending on your current income and growth-based needs: All Equity, Growth, Moderate Growth, Balanced, Conservative and FDIC Insured Bank Savings.
- Individual Investment Options: The NEST Direct Plan offers 15 Individual Investment Options from various investment companies. These individual options give you the greatest amount of hands-on control. You can create a savings portfolio that is conservative or aggressive, or you can add one or more Individual Investment Options to an Age-Based or Static Investment Option.
Lump Sum Contributions
Contribute to your NEST Direct account at any time and on your own schedule using our Electronic Funds Transfer (EFT) process or by sending in a check. To initiate an EFT lump sum contribution, simply log on to your account or call the NEST Direct Plan at 1.888.993.3746.
Qualified Higher Education Expenses
For the earnings portion of withdrawals from your NEST 529 account to be tax-free, the funds must be used at an eligible educational institution for qualified expenses. Certain expenses required for enrollment or attendance at a qualified institution fall into this category, such as tuition and fees, books, supplies, necessary technology and even room and board on and off campus (if enrolled at least half-time).
NEST 529 is committed to helping more children achieve their dreams of a college education. We offer scholarships, contests and drawings regularly, and award tens of thousands of dollars in scholarship contributions each year. NEST 529 scholarships are a fun and engaging way to get kids excited about saving for college, not to mention a great opportunity to potentially win a savings boost. For a list of currently running scholarships, visit www.NEST529.com/scholarships.
NEST 529 account owners benefit from compounded, income tax-deferred growth, also known as “growth on growth”. Because NEST 529 account earnings are state and federal income tax-deferred, the full earnings amount remains in the account and grows with no money being subtracted to pay current tax obligations. Consequently, earnings happen more tax efficiently, helping to increase your account value even faster and maximize earnings potential associated with market growth.
Upromise is a rewards program that can help you turn everyday purchases – from travel and gas to dry cleaning and groceries – into cash back for college. A percentage of your eligible spending will be deposited into your Upromise account, and you can link your Upromise account to your NEST 529 account and have your college savings automatically transferred. Best of all? It’s free to join. Learn more at www.Upromise.com.
If you have any additional questions regarding your account or the ABC’s of NEST 529 Plans, please reach out to the NEST team at firstname.lastname@example.org, or by calling 1-888-993-3746.