Your College Saving Options
Some families are able to save part of their income to help pay for college costs, using special savings plans. The savings grow because of tax benefits and because they earn interest over time.
Often, these savings plans are started when you are in middle school, and continue through your high school years. If your family has not started saving for your education, it’s not too late.
Here are several programs that were designed to help you and your family save for college:
529 Plans
There are two different types of 529 plans. Both kinds are exempt from federal income tax:
- College savings plans are state-managed investment accounts.
- Prepaid college tuition plans allow your family to purchase your education at today’s tuition cost.
Read more about saving for college and 529 plans.
Coverdell Education Savings Account (ESA)
Your family can also put money into an ESA to pay for college expenses. These accounts can be opened as soon as you are born and can help your family save a lot of money for college.
Each account can have up to $2,000 per student added each year during 2011 and 2012. Your family would need separate accounts for you and any siblings you have.
The money in the account earns interest tax-free. It can be used to pay for elementary, secondary or higher education costs. This type of account used to be called an Education Individual Retirement Account (IRA).
Learn more in IRS Publication 970, Tax Benefits for Education.
Calculate Your Savings
Use our online College Savings Calculator to see how your savings can grow over time.
This information is general in nature and should not be construed as tax or financial advice. Consult your tax adviser or financial planner for more complete information.
