What Is a 529?

One of the best ways to save for college

Did you know that opening a regular savings account at your bank may not be your best option when it comes to saving for college? You can get tax breaks and other benefits by opening an investment account specifically designed to let you save for college.

Also known as qualified tuition programs, 529 college savings plans are administered by state agencies and organizations in 49 states and Washington, D.C. They’re designed specifically to help you save for future higher education expenses such as:

Tuition
Computers and technology
Mandatory fees, books, supplies, and equipment required for enrollment or attendance
Certain room and board costs during any academic period the beneficiary is enrolled at least half time
Certain expenses for a special-needs student

Save more now—pay less later

There’s no denying it—it’s cheaper to save for college than it is to borrow money for college. And the earlier you start, the more time your savings have to earn interest. The bottom line is that the more you plan and the more you save, the more options your child will have.

If you start saving now, you and your child may be able to:

Take out fewer loans to pay for a college education
Select the school that is the best for your child, with less emphasis on cost in the decision
Experience less stress when the time comes to pay for college, knowing you’ve gotten a head start

See how your savings can add up

The graph on this page shows how your return on an investment of $125 a month can add up over 18 years. But even saving $25 a month can get you started.

Saving $125 a month

New parents start a 529 plan as soon as they can after their child is born. They invest $125 a month for 18 years with an annual return rate of 4 percent. By the time their child is ready for college, the plan’s value is just under $40,000.

Investment: $27,000
Return on investment: $11,785
Total savings: $38,785

Saving $25 a month

Another set of parents start a 529 plan at the same time. They invest $25 a month for 18 years with an annual return rate of 4 percent. By the time their child is ready for college, the plan’s value is just under $8,000.

Investment: $5,400
Return on investment: $2,357
Total savings: $7,757

Savings, income, and financial aid: putting the pieces together

Savings plans should be only part of your strategy for paying for college. Think of college savings as a way to supplement financial aid, and don’t be discouraged if you’re unable to fully cover the cost of an education with your savings. Remember, every little bit helps—even if your child is in high school when you open a plan.

No matter when you start or how much you’re able to save, you’ll be building a solid foundation for a college education.

Do your research

Want to learn more about your options when it comes to paying for college?

The Consumer Financial Protection Bureau can help you make informed decisions about financial aid.
The College Savings Plans Network offers a lot of good information about saving for college.
The College Board offers comprehensive information about paying for college, including tools and calculators to help you figure out how much you’ll need to save.

How much should you save?

Estimate what college will cost for your child.

Learn more about 529 plans

Explore the features

The fine print

This site is here to help you get started, but we can’t open a plan for you or give you financial or tax advice. Plan providers (such as The Indiana529 Direct Savings Plan) can help you select a plan, or you can talk with a financial advisor or tax professional.