Pennsylvania 529 Plan And College Savings Options
Pennsylvania has two 529 plans – the PA 529 Guaranteed Savings Plan (GSP and the PA 529 Investment Plan (IP) that can help you save for college. Pennsylvania also has a 529 ABLE Plan as well.
If you live in Pennsylvania, these might be good options for you to save for college.
These programs are designed to help make college more affordable - so that you can get the education you need. By saving for college early on, you can make paying for college easier down the road.
If you're not quite sure how 529 plans work, check out this starter guide to What Is a 529 Plan?
There is also a specific order of operations to save for college that we recommend families follow. These programs are specific to the State of Pennsylvania. Each state has different rules when it comes to 529 plan savings.
Average Cost Of College In Pennsylvania
When saving for college in Pennsylvania, it's important to take into consideration the cost of attendance in the state. If you choose to go to an out-of-state school, you need to look at the average cost of attendance in that state.
There are 380 colleges and universities in the State of Pennsylvania.
The total average cost of college (Cost of Attendance) in Pennsylvania for in-state residents is $28,508 for 2020. This includes tuition, room and board, books and supplies, and other expenses.
For just tuition alone, the average undergraduate tuition for in-state residents is $11,495 for 2020. The cost of tuition in Pennsylvania has been rising at about 1% per year.
See how this compares to the average cost of college here. Keep in mind the average student loan debt by graduating class here.
Explore the data here.
Pennsylvania 529 Plan Tax Information
Tax savings is one of the big benefits of using a 529 plan to save for college. On a federal-level, there is no tax savings for contributions, but qualified distributions are tax-free.
Here are the special tax benefits and considerations for using a 529 plan in Pennsylvania.
Pennsylvania offers a state tax deduction for contributions to any 529 plan (both Pennsylvania and non-Pennsylvania) of up to $15,000 for single filers and $30,000 for married filing jointly tax filers.
Minimum: $10 (as of September 2021)
Maximum: Accepts contributions until all account balances for the same beneficiary reach $511,758.
Matching Contributions: PA Treasury administers a statewide Child Development Account (CDA) called Keystone Scholars, which gives $100 to every PA baby born in 2019 and after to jumpstart education savings.
Rollovers into the state plan are allowed but not eligible for the state tax deduction.
Outbound rollovers are tax-free.
Qualified distributions from a Pennsylvania and non-Pennsylvania 529 plan are tax-free.
Pennsylvania does conform with Federal law in regards to using a 529 plan for K-12 tuition. See this guide: Using a 529 Plan For Elementary and High School Private Education.
Pennsylvania does conform with Federal law for using a 529 plan for student loans.
Non-Qualified Distributions Taxes, Penalties, Recapture
A non-qualified withdrawal from a Pennsylvania 529 is subject to Pennsylvania income tax to recapture any prior tax deductions.
Pennsylvania 529 College Savings Plan Options
Pennsylvania has several 529 plan options - one investment plan and one savings plan.
Pennsylvania 529 Investment Plan
The Pennsylvania 529 Investment Plan (IP) is the name of one of Pennsylvania's 529 Plans. This plan offers a variety of investment options, including target enrollment portfolios that become more conservative as the child approaches his or her projected enrollment date, and static investment fund options.
The funds offered include Vanguard.
There is a program management fee of 0.185%. There is also an annual Account Maintenance Fee of $10, thought this Fee is waived for accounts that elect to receive most account communications electronically.
The underlying funds all charge expense ratios from 0.02% to 0.12% depending on the investment option.
Who Should Use It:
We recommend that Pennsylvania residents use any 529 plan that fits their needs given the tax-parity of contributions. The Pennsylvania is a good plan, but residents can consider others as well.
We recommend that out-of-state residents utilize other plans.
Pennsylvania 529 Guaranteed Savings Plan
The Pennsylvania 529 Guaranteed Savings Plan (GSP) is a savings plan where account growth, when used for qualified college expenses, is based on post-secondary tuition increases. This plan is open to residents only (either the account owner or the beneficiary has to be a Pennsylvania resident).
The program has offers units based on tuition levels that are selected by plan participants. You can switch selections based on your child's needs.
There is a one-year maturity period before you can redeem tuition units with associated growth.
There is an annual account management fee of 0.40% which may be reduced to 0.30% for accounts that elect to receive most account communications electronically.
Pennsylvania 529 ABLE Plan Options
529A ABLE accounts are accounts designed to help those with disabilities escape poverty and save for themselves. Learn more about 529A ABLE Plans here.
The PA ABLE Plan is a 529A plan open to all residents in Pennsylvania.
This plan allows contributions of up to $15,000 per year from all sources.
It does have a minimum initial contribution amount of $25 per account. The minimum subsequent contribution amount is $25.
The plan does have an account maintenance fee of $60 annually, assessed at $15 per quarter (reduced for accounts signed up for email delivery to $45 annually, assessed at $11.25 per quarter). It also has a program management fee of 0.32%.
You can open an PA ABLE Plan here.
Other Programs To Save For College
A 529 plan is one way to save for college. Remember, we have a full guide on our approach to college savings here - and it helps you find other options.
If you're looking for ways to boost your college savings, check this out:
CollegeBacker is one of our favorite ways to save for college because they make gifting for college so easy. You can setup an account, link your 529 plan (in most states), and get a unique URL that you can share with friends and family to save for your children's college.
Plus, they have Backer Bucks, which allow you to earn rewards and rebates for the shopping you already do - directly deposited into your children's 529 plan.
Upromise is another awesome tool to help you save for college because they have a lot of ways that you can earn money for your 529 plan. You can get rebates and rewards, and you can get cash back into your child's 529 plan by using the Upromise credit card.
Pennsylvania Financial Aid
Using a 529 plan isn't the only way to save money for college. Each state typically offers a variety of financial aid programs for their residents. These include scholarships and grants, and sometimes unique forgivable student loan opportunities. Only PA 529 plans are not counted when determining Pennsylvania student aid amounts.
Check out the list of Pennsylvania Student Loan and Financial Aid Programs.
Return to the full list of 529 Plans By State.