Maine is one of 30 states collaborating with the College Savings Plans Network to declare May 29th “529 Day” in an effort to encourage families to start preparing for college costs early. I spoke with the Finance Authority of Maine’s (FAME) Elizabeth Vanderweide about Maine’s NextGen College Investing Plan® and the thousands of dollars in grants which are available to families across the state:
Q. I understand FAME has grant money available right now to help Maine families invest in college. What is available?
A. That’s right. We have up to $1,250 for each eligible NextGen account to put toward qualified college expenses. We encourage parents, grandparents and others who want to help Maine children plan ahead for college to start earning these grants.
There are grants with funds available for Maine residents:
• A one-time $200 Initial Matching Grant is available to eligible Maine accounts opened with at least $25 in the Client Direct Series, or $50 in the Client Select Series (advisor sold). This grant is not available to babies who are eligible for the Harold Alfond College Challenge Grant.
• The NextStep Matching Grant provides eligible Maine accounts with a fifty percent match on contributions, up to $100 match per year, with a lifetime maximum of $1,000.
• A $50 Automated Funding Grant is available for eligible Maine accounts that make at least six consecutive automated contributions through an automated funding option.
The $500 Harold Alfond College Challenge Grant is available to children born as Maine residents since January 1, 2013 or who are Maine residents at account opening and under the age of one.
Q. Those grants sound like an incredible incentive to get a head start on planning for college – you’re saying if I take $25 and open a NextGen Direct Series account, you’ll grant $200 to that account?
A. Yes, assuming you or your beneficiary is a Maine resident and hasn’t already received the Initial Matching Grant.
Q. And, if I then continue to contribute to my account, you will match the contributions over time. Why are you doing this?
A. FAME is committed to promoting access to and completion of higher education for Maine residents. We want to make investing for college with NextGen a natural part of Maine families’ lives and to help families replace debt with savings. To date NextGen has granted more than $12 million in matching funds to Maine students.
Over 30,000 Maine children have NextGen accounts thanks to the Harold Alfond College Challenge Grant for Maine newborns and FAME’s Initial Matching Grant! We’re really proud of that and want to add even more families to that roster.
These grants are part of several important services FAME provides, along with free information on planning and paying for college, FAFSA completion help and financial education, including responsible borrowing.
Q. What is a 529 Account? How does it work?
The NextGen College Investing Plan is Maine’s Section 529 Plan. It offers a wide range of professionally managed investment portfolios that can help you plan for college based on your needs.
Earnings, if any, in a 529 account have the opportunity to grow tax-free. And, withdrawals, including any earnings, used to pay for qualified higher education expenses are not subject to federal or state income tax. Qualified expenses are defined by the Internal Revenue Code and generally include the big-ticket items such as college tuition and room and board, as well as books and supplies. And NextGen can be used at any US accredited post-secondary institution such as college, universities, trade schools, and even foreign institutions that participate in federal financial aid programs.
Any earnings withdrawn that are not used for qualified expenses are subject to federal income tax and a 10% additional federal tax and may also be subject to state income or other taxes.
Q. What’s the process to open an account?
A. Anyone who resides in the United States age 18 or older with a valid social security number or U.S. taxpayer identification number can open a NextGen account. There are no income restrictions.
And, as I mentioned before, if you qualify for the $200 Initial Matching Grant, you only need a minimum of $25 to open a Client Direct Series account.
Anyone can open an account for the special child in their lives. You can open a NextGen account for your grandchild or any loved one. You can also open an account to invest for your own higher-education expenses. Family members and friends can even open accounts for your child, or contribute to an account you’ve opened.
Many people open the accounts themselves online – just have the social security number for yourself, your spouse and your beneficiary handy. Others work with their financial advisors to do it. It is a matter of personal preference. To learn more or to open an account visit www.FAMEmaine.com/NextGen
Grants are awarded to a NextGen account. See Terms and Conditions of Maine Grant Programs for other conditions and restrictions that apply at www.FAMEmaine.com/NextGen. NextGen is a Section 529 plan administered by the Finance Authority of Maine (FAME). Before you invest in NextGen, request a NextGen Program Description from your Maine bank or financial advisor, or call FAME at 1-800-228-3734 and read it carefully. The Program Description contains more complete information, including investment objectives, charges, expenses and risks of investing in NextGen, which you should carefully consider before investing. You also should consider whether your or your designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s 529 plan. Merrill Lynch, Pierce, Fenner & Smith Incorporated, a registered broker-dealer, member SIPC, is the program manager and underwriter.