College Saving Plan

How do you save for your college? This article clearly helps you to pay or save for your college easily.

Updated by Sreelekha R K on 31st March 2020

If you are keenly interested in comprehending more about the college savings programs or plans which come under section 529, then we are sure you would want to read this article and know everything concerning the plans and their types.


What is a 529 savings plan?

These are the strategic plans that are sponsored by states, provisional agencies, or educational institutions which are mostly understood as a qualified tuition plan and these are intended in order to encourage students in gathering money for future training costs and also these are authorized by Section 529 of the Internal Revenue Code. 

Types of 529 saving plans

Education Savings Plans

  • It is a plan that will let an account holder start investing to save for the receiver’s future higher education expenses such as tuition, room, and board. 

  • Investments in education savings plans may not make any money and could lose some or all of the money invested.

  • If you are using this account to pay for primary or secondary school tuition, you may have a lesser time for your money to increase. 

  • Education savings plans can also be used to pay up to $10,000 per year for tuition at any public, private school.

  • All education savings plans are sponsored by state governments but only a few have residency necessities for the saver.

Prepaid Tuition Plans

  • It is a plan that will let an account holder purchase credits at joining schools and colleges for tuition and compulsory fees at current prices.

  • If a receiver doesn’t attend a participating college or university, the prepaid tuition plan may pay less than if the receiver attended a participating college or university. 

  • These plans normally cannot be used to pay for room and board at colleges and multiversities.

  • These plans are not assured by the federal government but some state authorities mortgage the money paid into the prepaid tuition plans that they sponsor although some do not. 

  • It might pay only a small return on the initial investment.

What to consider before funding in a 529 college savings plan?

  • Analyzation and calculation of how much to be saved. 

  • Awareness regarding when to start.

  • Tax benefits obtained and how it varies.

  • Knowledge of tuition fees.

  • Regarding the timing of withdrawals. 

  • Taxes and penalties.

  • Basic investment risks.


College saving plans by the state

State 

Name of the Plan

Alabama

CollegeCounts 529 plan

Alaska

University of Alaska College Savings Plan

Arkansas

GIFT College Investing plan

Arizona

University of Alaska College Savings Plan

Connecticut

Connecticut Higher Education Trust

California

ScholarShare College Savings Plan

Colorado

CollegeInvest Direct Portfolio College Savings plan

District of Columbia

DC 529 College Savings Program

Delaware

Delaware College Investment Plan

Florida

Florida 529 Savings Plan

Georgia

Path2College 529 plan

Hawaii

Hawaii’s College Savings Program

Indiana

CollegeChoice 529 Direct Savings plan

Idaho

Idaho College Savings Program

Illinois

Bright Start College Savings Program

Iowa

College Savings Iowa 529 plan

Kentucky

Kentucky Education Savings Plan Trust

Kansas

Learning Quest 529 Education Savings Program

Louisiana

START Savings Program

Massachusetts

Massachusetts U.Fund College Investing Plan

Maine

NextGen College Investing Plan

Michigan

Michigan Education Savings Program

Maryland

Maryland529

Mississippi

Mississippi Affordable College Savings Program

Minnesota

Minnesota College Savings Plan

Montana

Montana Family Education Savings Program

Missouri

MOST 529 College Savings Plan

Nevada

Nevada College Savings Plans

New Jersey

NJ BEST College Savings Plan

Nebraska

Nebraska Education Savings Trust  Direct College Savings plan

New Mexico

The Education Plan

New Hampshire

UNIQUE College Investing Plan

North Carolina

College Foundation of North Carolina

New York

New York’s 529 College Savings Program

North Dakota

College SAVE

Oklahoma

Oklahoma College Savings plan

Oregon

Oregon College Savings plan

Ohio

Ohio CollegeAdvantage 529 Savings plan

Pennsylvania

PA 529

Rhode Island

College Bound Fund

South Dakota

College Access 529

South Carolina

Future Scholar 529 College Savings plan

Texas

Texas College Savings Plan

Tennessee

TN Stars College Savings 529 Program

Utah

Utah Educational Savings Plan (UESP)

Virginia

Virginia529 inVEST

Vermont

Vermont Higher Education Investment plan

Wisconsin

Edvest College Savings plan

    Washington

DreamAhead College Investment Plan

West Virginia

SMART529 WV Direct College Savings plan

Wyoming

There is no state plan


Advantages of these plans

Prepaid Plans

  • It is a risk-free way to pay for college. Invested money cannot be lost.

  • Possible tax breaks: These are free from federal income tax and are often excluded from state and local taxes, as long as they are used to pay restricted education expenses.

  • Many plans are guaranteed by state governments.

Savings Plans

  • Investments grow tax-free for as long as the money tarries in the program, and when money is taken out for education purposes, the saver will not have to pay federal taxes on any part of it.

  • For most plans, the student can attend any accredited college in the United States and many institutions abroad. Accounts can be opened for any number of people regardless of age.

Disadvantages of these plans

Prepaid Plans

  • Most of these plans will have a limited enrollment period.

  • Most state-sponsored plans require either the owner or the receiver of the plan to be a resident of the state.

Savings Plans

  • Since the investment is directly related to the stock market, these plans have the potential to lose money.

  • If money is taken out of this plan for purposes other than education, the saver will be charged a 10% penalty on the earnings.