GRANTS, N.M. — New Mexico families have more options than ever to save for future education expenses, according to officials with the New Mexico Education Trust Board, which oversees the state's two 529 education savings plans.
Representatives of the Education Trust Board visited Grants during the Route 66 Freedom Flight Car Show on June 7 as part of an effort to expand awareness of the programs in rural communities.
The Education Trust Board is a state agency that administers New Mexico's two 529 education savings plans: The Education Plan, which allows families to enroll directly online, and Scholar's Edge, which is designed for individuals who prefer to work through a financial advisor.
'Like a 401(k) helps people save for retirement, a 529 plan helps families save for future education expenses,' said Natalie Cordova of the Education Trust Board during an interview with the Cibola Citizen.
The plans take their name from Section 529 of the Internal Revenue Code, which provides tax advantages for education savings. While originally created for college expenses, the programs have expanded significantly over the past three decades.
Today, funds can be used for a variety of educational purposes, including college tuition, books, room and board, trade schools, apprenticeship programs, K-12 private school expenses, professional certifications and certain continuing education programs.
Officials said one of the biggest misconceptions is that families need large amounts of money to get started.
'We're one of the few states that does not require any minimum contribution to open an account,' Cordova said. 'You can open an account with a funding plan for later and still become an account owner.'
Accounts can be opened online in about 10 to 15 minutes. Parents or guardians typically provide basic information about the beneficiary, such as a child's name, date of birth and Social Security number. Contributions can be made through linked bank accounts, checks, one-time deposits or recurring automatic payments.
According to the Education Trust Board, New Mexico residents currently hold nearly $1 billion in assets through the state's 529 plans. Overall, the board oversees more than 100,000 accounts containing approximately $2.3 billion in assets.
One advantage for New Mexico residents is the state's tax treatment of 529 contributions.
'We're only one of three states in the nation that offer an unlimited tax deduction,' Cordova said. 'Any amount contributed to one of our plans can be deducted on a New Mexico state tax return.'
Funds grow tax-free when used for qualified educational expenses. If account holders withdraw money for non-qualified purposes, taxes generally apply only to the earnings portion of the withdrawal.
Officials emphasized that modern 529 plans offer flexibility that did not exist in earlier years.
If a child chooses not to attend college, account owners may transfer the funds to another eligible family member. Recent federal changes also allow certain unused 529 funds to be rolled into a Roth IRA, subject to federal requirements and limits.
Jeff Carr, an outreach representative for the Education Trust Board, said many families are surprised by the broad range of educational expenses now covered.
'Trade schools are huge in today's world because skilled labor is in such demand,' Carr said. 'AI is not going to take the place of welders or electricians.'
Carr encourages families to start small if necessary.
'Do something that's not going to make you broke,' he said. 'Start small. If it's $25 or $50 a month, you'll see it adding up.'
Research cited by the board suggests that even modest savings can have a positive effect on student outcomes. Officials said studies have found that children with as little as $500 set aside for future education often perform better academically because they know their families are investing in their future.
The Education Trust Board's website, etbnm.gov, contains additional information about both plans, investment options and qualified educational expenses.
For families looking ahead to college, career training or other educational opportunities, board officials say the most important step is simply getting started.
'Any amount they think they can put together, save away and add to over time is key for future success,' Cordova said.