be_ixf;ym_202207 d_07; ct_50
Text Size A A A

CESI Financial Blog

Get Debt Consolidation Options

Call Now! (866) 484-5373

Understanding the 529 College Savings Plan

529 college savings plan

The country’s student loan debt crisis is only getting worse. Thanks, in part, to the rising cost of college and stagnating wages, more than 44 million Americans owe a total of $1.5 trillion in student loans.

For many, it will take years—even decades—to pay off the money they borrowed to go to college. Lawmakers in Washington, D.C., and elsewhere are debating the issue as students and families continue to get squeezed by college debt.

But, going into debt doesn’t have to be part of the college experience, just like late-night study sessions and endless bowls of ramen. Parents and grandparents can set their students up for a debt-free education—starting from the time they are infants—by opening up a 529 college savings plan and regularly socking money away in it.

What is a 529 college savings plan?

These college savings plans are accounts that you can withdraw from, tax-free, as long as you use the money for approved education expenses. To encourage parents to save, some states let account holders deduct their 529 plan contributions from their state income taxes.

Parents, students ages 18 and up, grandparents and other family members or friends can open an account to save money for themselves or another individual.

Two kinds of 529 plans are available

Prepaid tuition plans are designed for students who plan to attend an in-state public college or university. With it, you can essentially pre-pay for tuition, locking in the current rate, so you don’t have to pay a higher price when your child is ready to attend. There are some restrictions. The money can’t be used for room and board, for example. But, if your child opts not to attend an in-state public school, all plans allow you to use your savings at other higher education institutions. You just won’t be able to take advantage of that lower tuition cost.

Education savings plans are like other investment accounts except the money is intended to be withdrawn for educational uses, including tuition for grade schools, high schools and college, along with other fees and room and board.

All 50 states and Washington, D.C., offer some kind of 529 college savings plan. has a list of savings plans by state.

Do 529 plans come with fees?

Just like every other investment account, 529 plans have fees and expenses. Some are more expensive than others, but the cheaper they are, the more money you can save for college. To help families make a decision, the Financial Industry Regulatory Authority offers an online tool that lets you analyze and compare the costs of plans. Though every state offers a 529 plan, it’s important to remember that consumers aren’t required to use the plan in their state. It’s important to shop around.

Do I lose my money if my child doesn’t go to college?

You don’t, and you have options. According to Consumer Reports, money from 529 plans isn’t just intended for four-year colleges. It also can be used for community colleges, vocational schools, trade schools and continuing education classes. You can look up eligible programs online. You also could move the funds over to pay for the educational expenses of another family member, including yourself. And you could always pull out the money. Just be aware that you’ll likely face a tax bill, according to Consumer Reports.

How much can you save in a 529 College Savings Plan?

It depends on how much you invest, but, even a little bit can add up. According to the College Foundation of North Carolina’s online calculator, by investing an initial deposit of $1,000 and saving $25 a month earning 4% interest for 18 years, you’ll have nearly $10,000 saved toward your child’s tuition. And, when you’re staring down a hefty tuition bill, you’ll be glad for any help you can get.

Consumer Education Services, Inc. (CESI) is a non-profit committed to empowering and inspiring consumers nationwide to make wise financial decisions and live debt free. Speak with a certified counselor for a free debt analysis today


1 Response to Understanding the 529 College Savings Plan

  1. MarryWalker says:

    A very informative and descriptive article on 529 college saving plan, I learned a lot from this blog. Thanks for posting this valuable article.

Leave a Reply

Your email address will not be published. Required fields are marked *


Consumer Education Services, Inc. empowers people to overcome their financial challenges and lead financially-healthy lives.


Debt Consolidation

Financial Education

Homeownership Center

View More of Our Services »


Financial Information about this organization and a copy of its license are available from the State Solicitation Licensing Branch at 919-814-5400. The license is not an endorsement by the State. 

Follow Us

Registered 501(c)(3). EIN: 56-2106758

Consumer Education Services, Inc. © 2022