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How One Student Used Virginia529 to Graduate Debt-Free



How One Student Used Virginia529 to Graduate Debt-Free

For too many graduates, the excitement of a new career is overshadowed by the crushing weight of student loan debt. In 2024, the average student debt was over $30,000, a burden that can delay major life milestones like buying a home, starting a family, or pursuing a passion project.

But it doesn't have to be that way. Graduating debt-free is an achievable goal, not just a fantasy for the ultra-rich. The key is a proactive strategy built on a powerful financial tool: a 529 college savings plan.

Let’s look at how one student, we’ll call her Alex, was able to use the Virginia529 plan to navigate the high costs of higher education and start her adult life on a solid financial footing.

The Early Start: A Small Seed Planted

Alex's parents were not wealthy, but they understood the power of compounding interest. When Alex was born, they opened a Virginia529 account and committed to a monthly contribution of just over $200. This might have seemed like a modest amount, but time was their greatest ally.

  • The Power of Compounding: By the time Alex was ready for college, their out-of-pocket contributions had totaled around $44,000. However, thanks to the tax-free growth within the account, the balance had swelled to over $75,000. This is the magic of a 529 plan at work: the money you earn on your investments isn't taxed, so it can be fully reinvested and continue to grow exponentially.

  • A "Hands-Off" Investment Strategy: Alex's parents chose an age-based portfolio offered by Virginia529. This low-cost, professionally managed fund automatically adjusts its investments as the child gets older, becoming more conservative as college approaches. This simple, hands-off approach removed the guesswork from investing and maximized their returns.

Maximizing the Funds for Qualified Expenses

When it came time for college, Alex's parents were able to tap into their savings to cover a wide range of expenses. A common misconception is that a 529 plan only covers tuition. The reality is that the definition of "qualified expenses" is much broader, allowing a family to cover the majority of a student's costs.

Alex used her Virginia529 funds for:

  • Tuition and Fees: The largest portion of her expenses, paid directly to her four-year public university.

  • Room and Board: She used the funds for both on-campus housing and, for her later years, a portion of her off-campus rent.

  • Books and Supplies: The cost of textbooks, lab materials, and notebooks was all covered.

  • Technology: The funds also paid for a new laptop and software needed for her classes.

The Debt-Free Outcome

By strategically using the Virginia529 funds, Alex was able to cover all of her college expenses without needing to take out any student loans. The freedom this provided after graduation was immense.

While many of her friends were entering the workforce with thousands of dollars in debt, Alex was free to pursue a job she was passionate about, rather than just one with the highest salary. She had the financial flexibility to save for a down payment on a home, start investing for retirement, and build a strong financial foundation from day one.

What About Leftover Funds?

What if Alex had a scholarship or attended a less expensive school, leaving money in her 529 account? This is where the flexibility of today's 529 plans truly shines.

Thanks to the SECURE Act of 2019, any leftover funds can be used to pay off up to a lifetime total of $10,000 in student loans for the beneficiary or their siblings. The most recent legislation also provides for the ability to roll over unused funds into a Roth IRA, giving the student a head start on retirement savings.

Conclusion: A Pathway to Financial Freedom

The story of Alex is a testament to the power of foresight and smart financial planning. By choosing a low-cost, high-performing plan like Virginia529 and starting early, her family was able to turn a small, consistent effort into a life-changing advantage.

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