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What is a 529 college savings plan?

Curious about College planning

What is a 529 college savings plan?

A 529 college savings plan is a taxadvantaged investment account designed to encourage saving for future college costs. It is named after Section 529 of the Internal Revenue Code, which governs these types of accounts. A 529 plan is operated by a state or educational institution and allows parents, grandparents, and other family members to save money for a beneficiary's future college expenses, such as tuition, room and board, textbooks, and other related fees.

There are two types of 529 plans: prepaid tuition plans and education savings plans. Prepaid tuition plans allow you to prepay for college credits at today's prices, while education savings plans let you save money in an investment account that can be used to pay for qualified education expenses in the future. 529 plans offer several tax benefits, such as taxdeferred growth and taxfree withdrawals for qualified education expenses. Additionally, some states offer state tax deductions or credits for contributions to their 529 plans.

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