Maine 529 Plan Basics

While we are providing general information about the state’s 529 plan, please consult the Plan Description and Participation Agreement for more detailed information and facts about the plan.

A 529 plan is a savings plan that encourages education savings for qualified higher education expenses: college, vocational, or other post-secondary learning. 529 plan funds can also go to private high school or K-12 tuition at a qualified tuition program, up to $10,000 annually.

Unlike a traditional savings account or bank account, your money grows tax-deferred in a 529 account and qualified distributions are federal tax and state tax free.

States offer plans with various investment options and different tax benefits. They will also have a variety of contribution requirements and plan fees. You are not required to open a 529 plan in your home state. Maine residents can open a 529 plan in any state that accepts out-of-state enrollments. Additionally, 529 plans can be linked to the Upromise rewards service. Earn an extra $25 bonus when you link your first 529 account to your Upromise profile.

The state of Maine has three 529 college savings plans: NextGen 529 Connect Series, NextGen 529 Direct Series, and NextGen 529 Select Series.

NextGen 529 Connect is a direct-sold plan that does not require Maine residency and provides a simplified approach. Fees range from 0% to 0.29% of a portfolio’s average annual net asset value. The plan is available through the Program Manager, Vestwell State Savings. Accounts can be opened with one Year of Enrollment Portfolio. After your account is opened, you can change your investment to include other Year of Enrollment Portfolios or the NextGen Savings Portfolio.

NextGen 529 Direct is a direct-sold plan that does not require Maine residency and provides a variety of investment portfolios. It comes with fees range 0% – 0.56%. This plan is available through Merrill Edge, and it utilizes BlackRock (including iShares ETFs) funds in its Year of Enrollment and static options. The Principal Plus Portfolio and the NextGen Savings Portfolio are also available.

NextGen 529 Select is the advisor-sold plan. Similarly, this plan does not require Maine residency. This plan has advisor fees ranging from 0% – 2.04%. This consists of, Year of Enrollment, static multi-fund, and individual-fund options from a number of money managers, including BlackRock, Franklin Templeton, iShares, Lord Abbett, New York Life Investment, MFS and Neuberger Berman. In addition, the Principal Plus Portfolio and NextGen Savings Portfolio are offered.

You can find more information about NextGen college investing plans or open a NextGen account at NextGenforME.com.

What are some Maine 529 plan benefits and tax advantages?

Funds you invest in a 529 plan grow tax-deferred. And funds that the student eventually withdraws from the plan towards qualified educational costs are free from federal taxes.

A common misconception is that these 529 plan assets will disqualify your child from financial aid. On the contrary, 529 plan funds are treated more favorably in the financial aid formula than other savings in your child’s name through a custodial account such as an UTMA/UGMA. This is because assets in a child’s 529 plan belong to the parent not child, and FAFSA (Free Application for Federal Student Aid) gives preferential tax treatment to assets belonging to a student’s parent versus the student.

If your child is an Einstein or football star, and manages to score a free ride to school, you can still repurpose those funds. You can take out an amount equal to the scholarship fund amount from the 529 plan without incurring the 10% penalty tax fee you’d normally have to pay on funds not going to qualified education costs. (You would have to pay regular ordinary income taxes on earnings, but there would be no penalty. Alternatively, you can leave the funds in a 529 plan to be used at a later date by this beneficiary or a direct relative of the original beneficiary.)

And for many, a 529 plan can be used to transfer wealth. Contributing to a 529 plan lets grandparents or other contributors reduce the size of their taxable estate while helping them fund a grandchild’s or family member’s education. It’s even possible to make five years worth of contributions in a single year, up to $80,000 (or $160,000 for married couples) and still get the gift tax exclusion.

Is a 529 plan tax deductible in the state of Maine?

Yes, Contributions made to any 529 account, of up to $1,000 for each per Designated Beneficiary student, may be eligible for a Maine state income tax deduction.

What happens to a Maine 529 Plan if not used?

There is no time in which the contributions and earnings within a Maine 529 plan need to be withdrawn. Unused funds can remain in the account and continue to grow tax-deferred. The account owner may also choose to change the beneficiary, without penalty, to another eligible member of beneficiary’s family. This individual must have a valid social security number and be a U.S. citizen or Permanent Resident. This is not limited to immediate family members; funds can be transferred to cousins, nieces, nephews, and other close relatives. The account owner can withdraw funds and close the account if not used, but earnings in the account will be subject to federal and state income tax as well as a 10% penalty. Since 2024, unused funds in a 529 can now be transferred into a Roth IRA owned by the Designated Beneficiary, subject to certain limitations.

Maine does manage the Maine Grant Programs where additional restrictions apply. See Terms and Conditions of Maine Grant Programs at NextGenforME.com for details.

Can a Maine 529 Plan lose money?

Yes, a 529 plan is an investment with different types of investment options. Each option offers different levels of market risk.

Speak with a qualified financial advisor about your financial goals and different investment portfolio options.

Do I need a Maine 529 Plan for every child?

You don’t need a Maine 529 plan for each child but you may find it easier to administer if you do. You can only have one named beneficiary on a Maine 529 plan. The risk and mix of equities to fixed income of certain investment options is determined by the age of the beneficiary. For this reason, you may want to have a different 529 plan for each child.

You may be interested to know that multiple people can open accounts for the same beneficiary. This allows grandparents, other family members, and even family friends to save for the student’s benefit.

Can a Maine 529 plan be used to pay off student loans, apprenticeships, and K-12 private schools?

Maine 529 plans can be used to pay tuition at K-12 private schools up to $10,000 annually. Funds can also be used to pay eligible student loans up to $10,000 per person for the Designated Beneficiary and each sibling. 529 plans can also be used to pay qualified expenses associated with a registered apprenticeship programs, approved by the Secretary of Labor.

How do financial aid and scholarships affect a Maine 529 plan?

f the account is held by the parent or guardian of the student, funds within are considered parental assets. The Student Aid Index (SAI) calculation for parent assets is a maximum of only 5.64% versus 20% for the students assets.

Start saving towards a Maine 529 plan

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529 Plan Basics by State

Check out these College Savings: 529 Plan Basics by State

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