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Open an account that’s designed for education expenses

529 college savings plans, which are sponsored by states, are some of the most popular ways to save for future education expenses. They offer tax advantages, flexible spending opportunities, and control of the account by the account owner. You can open an account in any state’s 529 plan, not just where you live; however, check your own state’s plan first to see if there are tax incentives for residents. The minimum contribution to open an account varies by plan and can be as little as $15.

529 plan accounts are designed to help you save for education expenses. When you withdraw the funds for a qualified expense—tuition, fees, books, supplies, equipment, and certain room and board costs—your earnings are tax-free. If you withdraw the funds for non-qualified expenses, however, you’ll face a tax penalty. You can open a 529 account online or through a financial advisor.

Note: Unlike a 401(K) plan account, 529 account contributions are made with after-tax dollars.

Take advantage of tax-deferred earnings

The money that you invest in a 529 plan account grows tax-deferred, which means that you don’t have to pay taxes on the earnings while it’s in the account. This may also give your money the potential to grow more than in a taxable account.,

529 plans and federal financial aid

When it’s time for you to fill out the FAFSA for federal financial aid, you’ll list your assets, including your savings and the funds available in your 529 plan account. One of the factors that the Department of Education considers is who owns each asset—the student or the parents. Students are generally expected to spend a substantially larger portion of their own assets on educational expenses than parents. And student assets are assessed at a higher rate than parents’ assets.

  • Assets held in a parent's name are considered at a rate of up to 5.64% (the highest rate on a tiered scale).
  • Assets held in the student's name are considered at a rate of 20% when determining eligibility for financial aid.

The good news is, since a 529 account is owned by the parent, it’s considered a parental asset, and will be considered at the lower rate.

Benefits of 529 plans

  • 529 plans offer tax benefits that can help your money grow faster.
  • A 529 plan account is easy to set up online or at a financial institution.
  • There is professional investment management available.
  • A student can use the account for qualified education expenses at any eligible college, junior college, or trade school around the country.

Considerations of 529 plans

  • Fees can differ between plans, so research several of them.
  • Since 529 plan accounts are invested, your account could lose value.
  • If you withdraw the money for non-education-related expenses, you’ll have tax penalties.

As with any investment, be sure to check with your financial or tax advisor before opening an account.

Information as of 9/13/16 on

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.

Earnings on non-qualified distributions are subject to federal income tax and may be subject to a 10% federal penalty, as well as state and local income taxes.

A plan of regular investment cannot assure a profit or protect against a loss in a declining market.

For more information about the SSGA Upromise 529 Plan ("the Plan") download the Plan Description and Participation Agreement or request one by calling 800-587-7305. Investment objectives, risks, charges, expenses, and other important information are included in the Plan Description; read and consider it carefully before investing. Ascensus Broker Dealer Services, Inc. (“ABD”) is the distributor of the Plan.

The SSGA Upromise 529 Plan ("the Plan") is administered by the Board of Trustees of the College Savings Plan of Nevada ("the board"), chaired by the Nevada State Treasurer. ABD serves as the Program Manager. ABD has overall responsibility for the day-to-day operations, including distribution of the Plan and provision of certain marketing services. State Street Global Advisors (SSGA) serves as Investment Manager for the plan except for the Savings Portfolio, which is managed by Sallie Mae Bank, and also provides and/or arranges for certain marketing services for the Plan. The Plan's Portfolio invest in either (i) Exchange Traded Funds and mutual funds offered or managed by SSGA or its affiliates; or (ii) a Federal Deposit Insurance Corporation (FDIC)-insured omnibus savings account held in trust by the Board at Sallie Mae Bank. Except for the Savings Portfolio, investments in the Plan are not insured by the FDIC. Units of the Portfolios are municipal securities and the value of units will vary with market conditions.

Investment returns will vary depending upon the performance of the Portfolio you chose. Except to the extent of FDIC insurance available for the Savings Portfolio, you could lose all or a portion of your money by investing in the Plan, depending on market conditions. Account Owners assume all investment risks as well as responsibility for any federal and state tax consequences.

Upromise is an optional service offered by Upromise, Inc., is separate from the SSGA Upromise 529 Plan and is not affiliated with the state of Nevada. Specific Terms and conditions apply to the Upromise service. Participating companies, contribution levels, terms and conditions are subject to change without notice. Transfers subject to a $25 minimum.