From savings accounts to 529 plans, there are a variety of college savings plans available to help you reach your goals. Each college savings plan offers its own advantages and considerations. Let’s look at the common options so you can decide what’s right for your family. One thing all college savings plans have in common—Upromise can boost your savings in any plan you choose.
What Are Some Popular College Savings Plan Options?
A savings account with a competitive Annual Percentage Yield (APY) can be a low-risk and flexible way to save for college.
- Open and maintain your account with ease
- Use the money for anything, anytime
- Lacks the growth potential of a 529 plan or investment-based college savings plan
529 College Savings Plans
529 college savings plans are tax-advantaged investment accounts operated by a state’s educational authority that offer their own benefits and features.1
- Open a 529 plan from any state
- Use the money to pay for qualified education expenses at any eligible school1,2
- Choose from a wide range of college savings plans
- Choosing a college savings plan requires some decisions
- Using money for non-education expenses may incur tax penalties
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.
- Withdraw savings tax-free for school expenses
- Use savings to pay tuition at trade schools, private grade schools, etc.
- Restricted by yearly contribution limits
- Ability to contribute phases out for families with higher incomes
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).
- Pay for expenses outside of education
- Does not offer the same tax advantages as other college savings plans
- Assets are in the child’s name and may have a larger impact on financial aid
Compare College Savings Plans
|Savings Accounts||529 College Savings Plans||Coverdell ESAs||Custodial Accounts (UGMA/UTMA)|
State and Federal Tax Benefits
Low Impact to Financial Aid
No Contribution Limits
Investment Earnings Potential
For Eligible Education Expenses Only
How Upromise Can Boost Your College Savings Plan
No matter which college savings plan you use, Upromise can help you ace your savings with cash back earnings on the things you already do and buy such as booking travel, going out to eat, and shopping online. Request a check and contribute your cash back earnings to any savings account you’d like—or link your GoalSaver account or eligible 529 college savings plan to have your cash back deposited automatically.3
Don’t miss out on money that can help you save and pay for college.