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Looking to save money for college? Open a 529 account

The savings account aren't subject to state or federal taxes if the money is used for qualified education expenses.

GREENSBORO, N.C. — Rising college costs may leave parents wondering how their child will afford college especially in the middle of a pandemic.

One way that can help is by contributing to what's called the North Carolina Savings plan of the NC 529 plan.

"We always encourage individuals to start planning ahead," Takelia Hall with the College Foundation Of NC said.

Earnings from money put into a 529 account don't get taxed when it's used to pay for higher education expenses like tuition, room and board, and books.

"Anyone 18 or older can establish an account for someone. So sometimes it's parents, grandparents, aunts. uncles, friends, and family," Hall said.

The funds can also be used for K-12 education, though many use it for college. Hall said the plan now allows people to use it to cover student loan debt and certain apprenticeship programs.

"So those are two things that people may not know about the 529 and we are so excited to share more information with individuals," Hall said.

One drawback is that you can be penalized if you use the funds for an unqualified expense. If you have an account and your child got a refund of some 529 funds from their university recently due to the COVID-19 pandemic, Hall said you will need to redeposit that money do avoid a penalty.

"So usually at 60 days after they receive the refund they [will need to ] do a redeposit. We would like for them to get that in right now.  We do give them until July 15," Hall explained.

Hall said even if you a child graduating in a few weeks, you can still benefit from opening an account.

"It's not too late and we always tell individuals that save as much as you can," Hall said.  "So if it's just for books, if it's for tuition, anything that you can save is going to be helpful.

This month the College Foundation of NC is hosting a contest for NC 529 Plan holders, called the "Dream Big 5/29 Day Drawing." One person will be chosen to get $5,529.

The contest runs till the end of the month. You can find the contest rules here.

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