Compare college savings plans


  Savings accounts Coverdell ESAs UGMA/UTMAs 529 plans

State and federal tax benefits

High contribution limits

Money is invested

Only for eligible education expenses

No income limitations

Controlled by the account owner

Beneficiary change allowed

* *

Upromise® earnings can be swept into your account

* There may be restrictions as to who is eligible.

Which college savings plan is most flexible?

In general, a traditional savings account is the most flexible way to save for college, as you can deposit and withdraw as much or as little as you’d like. They’re easy to open and they’re a good first step to saving for college. Plus, there are no tax penalties if you use the funds for non-education costs. That said, you may not save as much as you would with another college savings plan that has a higher interest rate.

After you’ve opened a savings account and developed the habit of contributing regularly—or automatically—then you may want to consider a savings plan that could help you increase your earning potential.

Our study, How America Saves for College 2016, shows that only 37% of parents who are saving for college use a 529 college savings plan—but those who do use them save more, on average.


College savings plan comparison glossary

  • 529 college savings plan: a tax-advantaged savings plan for future college costs. 529 plans are offered by states or educational institutions under Section 529 of the Internal Revenue Code.
  • Able to change beneficiary: If your child decides not to go to school, or if you have funds left over, you can change the beneficiary (within specified limits) to another member of the family.
  • Contribution limits: The amount of money you can contribute in one year. The level ranges from $2,000 (Coverdell ESA) to several thousands of dollars in some 529 plans.
  • Controlled by the account owner: If you’re the account owner, you can choose when to withdraw the funds.
  • Coverdell ESA: The Coverdell Education Savings Account (ESA) is a college savings plan that allows you to save up to $2,000 a year on behalf of your child under the age of 18.
  • Custodial Accounts (UGMA/UTMA): These accounts are set up by an adult on behalf of a minor under the Uniform Gift to Minors Act (UGMA) or the Uniform Transfer to Minors Act (UTMA). The funds are transferred to the beneficiary when he or she reaches adulthood (the age of majority varies by state but is typically age 18-21).
  • Income limitations: Coverdell ESAs are only available to families with certain income levels; after that, contributions are phased out.
  • Investment potential: Your money is invested, so it’s subject to market ups and downs; you could potentially lose principal.
  • State and federal tax benefits: Tax-advantaged plans generally allow your savings to grow tax-deferred; they’re tax free when used for qualified (allowed) education expenses.
  • Used only for eligible education expenses: Tax benefits are available if funds are used for tuition, room and board, fees, supplies, and other education expenses.

Information as of September 23, 2016. https://www.consumer.gov/articles/1003-opening-bank-account#!what-to-know (savings accounts); https://www.irs.gov/publications/p970/ch07.html; http://www.finra.org/investors/coverdells-and-custodial-accounts (Coverdell ESAs); http://www.finaid.org/savings/ugma.phtml (UGMA/UTMAs); and https://www.sec.gov/investor/pubs/intro529.htm (529 plans).

Before investing in any 529 plan, please consider whether your or the designated beneficiary's home state offers its taxpayers any benefits that are only available through that state's 529 plan. Investment objectives, risks, charges, expenses, and other important information are included in each 529 plan's offering statement; please read and consider it carefully before investing in a 529 plan.

When you invest in a 529 plan, you are purchasing municipal securities whose value may vary based on market conditions. Investment returns are not guaranteed, and you could lose money by investing in a 529 plan. Account owners assume all investment risks as well as responsibility for any federal and state tax consequences.

The availability of tax advantages or other benefits may be contingent on meeting other requirements. Please consult your financial, tax, or other advisors to learn more about how state-based benefits and limitations would apply to your specific circumstance. You may also contact your home state's 529 plan(s), or any other 529 plan, to learn more about those plans' features, benefits and limitations.