Guides / Saving for the future
529 college savings plans, explained
Tax-advantaged education savings, and the rules to know.
A 529 plan is a savings account built for education costs. Money grows without federal tax when it's used for qualified education expenses. Every state offers at least one plan, and you can usually use any state's plan.
The main benefits
- Earnings grow free of federal income tax when used for qualified education expenses
- Many states give a state income tax deduction or credit for contributions to their own plan
- Anyone can contribute, including grandparents
- The account owner (usually a parent) stays in control of the money
What it can pay for
- College tuition, fees, books and required supplies
- Room and board for students enrolled at least half time
- Some K-12 tuition, up to a federal yearly limit
- Some apprenticeship programs and, within a lifetime limit, student loan repayment
Rules to know
- Earnings on money taken out for non-qualified expenses are taxed and usually get a 10% penalty
- You can change the beneficiary to another family member
- Under certain conditions, some unused money can be rolled into a Roth IRA for the beneficiary
- Investment options and fees vary a lot between plans; compare before choosing
General information, not investment or tax advice. Rules and limits change; read the plan's documents and check IRS.gov. Family Nickel Saver isn't paid by any bank, plan or brand.