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529 College Savings Plans: Learn the Basics

You want to save for college, get to know this popular option.

What Is a 529?

A 529 is an investment account designed specifically for saving for college. There are many types of 529 plans sponsored by states across the country. While they share many of the same features—such as tax savings—each plan is unique and comes with its own benefits.

Who Can Have One?

529s are great because just about anyone can open an account to save for anyone else.


Most 529 plans can be opened by a U.S. citizen or resident alien age 18+. The saver can be a parent, grandparent, second cousin twice removed, or even a friend.

Requirements for savers:

  • U.S. citizen or resident alien
  • Legal age of 18+
  • Social Security Number or Tax ID Number
  • Valid physical address within the United States or Puerto Rico


Requirements for students:

The technical term is "beneficiary"—but that's just a big word for the person who will benefit from the college savings.

  • U.S. citizen or resident alien
  • Any age, from newborn to adult
  • Social Security Number or Tax ID Number

What Is It Good for?

529s are flexible, so your future student can have options.

Types of Schools

529s aren't just for your typical 4-year schools, but are also good at community colleges, vocational and trade schools, and more. The only requirement is that the school participates in the U.S. Department of Education student financial aid programs.

  • 4 Year College & University

  • 2 Year Associate Degree

  • Trade & tech school

  • Graduate school

Location of Schools

No matter what state's 529 plan you use, your student can attend a school anywhere across the country and even abroad.

Costs Covered

529s cover just about anything required to attend the school. This means that you can use your 529 savings to pay for tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible school, certain room and board costs, certain computer related expenses and even required expenses for special needs students.

Savings Benefits

529 plans have a long list of benefits. Here are some of the most noteworthy.

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    Tax Advantages

    All 529 plans benefit from tax-deferred growth, meaning that you don't have to pay any annual taxes on your account earnings. And, if you use the savings for qualified higher education expenses, you don't have to pay any earnings taxes at all.1 Depending on your home state, you may also benefit from a resident state tax deduction or credit for your contributions.

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    Easy to Contribute

    Many plans accept contributions of as little as $25 from anyone who wants to add money to the account. Money can generally be contributed through checks, one-time or recurring online bank transfers, and even through payroll direct deposits.

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    Account Control

    The account owner has full control over the savings, not the student, so you get to choose how to invest it, when you use it, and what to use it on. 2

How Do I Get a 529 Plan Account?

Some 529 plan accounts can be opened directly by self-savers, while others have to be opened through financial advisors.


If you are comfortable investing on your own, direct plans allow you to open your own account online. They often are low in cost and include easy to understand investment options, ranging from conservative to aggressive.

With a Financial Advisor

If you use a financial advisor, ask them about starting a 529 plan. Advisor-sold 529 plans offer the same tax benefits but often allow more flexibilty in investment options.

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