529 plans help families save for future education expenses in a tax-advantaged account. This means your parents, guardians, family members or others can save for your education by contributing money into a 529 account and any earnings in your account (money added to your account with interest or investment returns) will be tax-deferred and distributions are tax-free when used for qualified college education costs.

Using a 529 Plan:

• Can be used at most accredited colleges, universities, and technical colleges.
• Funds may be used for qualified education expenses, including tuition, fees, books, and some housing costs.
• Earnings grow tax-advantaged when used for qualified expenses.
• Investment returns are not guaranteed.

Prepaid tuition plans are a form of a 529 plan, which allow parents and others to save for tuition and fees at specific colleges. These plans are usually offered by state governments, but there are some offered by private organizations.

Using a Prepaid Tuition Plan:

• Locks in future tuition costs at today’s rates.
• Typically applies only to participating colleges or university systems.
• Usually covers tuition and fees, not housing or other expenses.
• May provide tax advantages.

Coverdell Education Savings Accounts, also called Education IRAs, is a trust or custodial account created for paying qualified education expenses on behalf of the account beneficiary. Total contributions made to an account cannot exceed $2,000 a year per student. While contributions are not tax-deductible, earnings can be withdrawn tax-free to be used for education. Contributions to these accounts are limited based on income.

Coverdell ESA at a Glance:

• Contributions are limited to $2,000 per year per beneficiary.
• Earnings grow tax-free when used for qualified education expenses.
• Can be used for K–12 and higher education expenses.
• Eligibility to contribute may depend on household income.

Custodial accounts (UGMA/UTMA accounts) allow adults to save and invest money on behalf of a child. Unlike education-specific accounts, funds can be used for any purpose that benefits the child once they reach the age of majority.

Custodial Accounts at a Glance:

• Can be used for education or other expenses.
• Assets legally become the student’s at adulthood.
• May affect financial aid eligibility.
• Do not offer the same education-specific tax advantages as some college savings plans.

If you haven’t started saving for college, you’re not alone. Many families begin planning during middle school or high school. Scholarships, grants, dual enrollment opportunities, reduced tuition programs, and financial aid can significantly reduce college costs.

Remember: It’s never too early—or too late—to start planning for college.