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What is a 529 college savings plan?

A 529 college savings plan is a state-sponsored investment plan that enables you to save money for a beneficiary and pay for education expenses. You can withdraw funds tax-free to cover nearly any type of college expense. 529 plans may offer additional state or federal tax benefits.

529 Investment Options

What are some benefits of a 529 college savings plan?

A 529 college savings plan can help finance a college education in a variety of important ways:

  • It enables you to save for education expenses.
  • You can make tax-free withdrawals to pay for eligible expenses.
  • It has a low minimum contribution amount.
Save for educational expenses
Save for educational
expenses
Tax-free withdrawals when used for eligible expenses
Tax-free withdrawals when used for eligible expenses
Low minimum contribution
Low minimum
contribution

What are the types of 529 college savings plans?

There are two major types of 529 plans: 529 tax advantage and 529 prepaid plans

  • 529 tax advantage. This is the most popular 529 plan and has strong tax advantages. Your investments grow tax-free, and you also withdraw funds tax-free for education expenses, such as tuition, room and board and assigned textbooks. You can use withdrawals from education savings plan accounts at any college or university, and some trade schools. You can also use your education savings plan to pay up to $10,000 per year, per beneficiary, for tuition at any public, private or religious elementary or secondary school.

Understanding 529 college savings plans

Here are some common questions about 529 college savings plans:

  • Which states offer 529 plans?

    Every state except Wyoming offers a 529 college savings plan.

    Refer to a complete list of 529 college savings plans, listed by state.

  • Can I invest in 529 plans outside of my state?

    You can invest in any 529 plan from any state. But before you invest, see if the plan offers any additional in-state benefits for the state where you or your beneficiary resides. Your state might offer a plan that is beneficial to you or your beneficiary, or another state’s plan might include your state as a recipient of favorable treatment.

  • Can a 529 plan be used at schools outside of my plan’s state?

    You can use plan assets at any eligible school (one accredited for financial aid) around the country and abroad. That includes K-12, two- and four-year colleges, graduate schools (including law and medical) and vocational and technical schools.

  • Is there an earnings limit to investing in a 529 plan?

    There are no income limitations for a 529 plan. In fact, through “accelerated gifting,” an account owner can apply up to five years of annual gift tax exclusion from a single lump sum contribution in a single year, without incurring a gift tax.1 However, contribution funding limits vary and are established by each plan.

  • Will I lose the money I’ve invested in my 529 plan if my child doesn’t go to college?

    No, a 529 account owner always controls the account.  If your child doesn’t go to college, you can:

    • Name another eligible member of your family as a beneficiary (subject to plan rules)
    • Use the funds for your own qualified education expenses
    • Take a non-qualified withdrawal

    A non-qualified withdrawal subjects earnings to a 10% federal penalty and applicable federal, state and local income tax. Your assets in a 529 plan account can grow in perpetuity; there are generally no time or age limits on your use or distribution of plan assets.2

  • Is a 529 plan only for kids?

    Anyone of any age can use a 529 plan to save for education. In fact, you can be your own account beneficiary. If your chosen school is eligible, you can use 529 assets to pay for education expenses — even if you’re not attending full-time.

  • Can you use 529 plan assets for expenses other than tuition?

    529 savings can be used to pay for many college expenses, including:

    • Tuition
    • Fees
    • Applicable room and board costs
    • Any supplies required by the school (e.g. computers)
  • Does investing in a 529 plan lower my child’s chance of qualifying for financial aid?

    A 529 plan has a relatively small impact on federal financial aid eligibility because 529 plan assets are considered assets of the account owner, rather than the beneficiary. When the parent is the account owner, 529 plan assets are factored into the expected family contribution rate, the same as any other parental asset. Consult with a financial professional to learn more about the expected impact of your 529 plan on financial aid.

  • If my child receives a scholarship, will I lose the money I’ve invested in my 529 plan?

    If a beneficiary receives a scholarship, 529 plan assets up to the amount of the scholarship can be returned to the account owner. While this is regarded as a non-qualified withdrawal, the 10% federal penalty will be waived in this instance. But earnings will be subject to any federal, state and local income tax. Alternatively, you can change the beneficiary to another eligible member of your family.

  • Who can be a 529 plan account owner?

    With a few exceptions, there are no limitations on who can be an account owner or beneficiary for a 529 plan.3 Parents, grandparents, aunts, uncles, friends — almost anyone can be an account owner. Trusts, corporations and custodial accounts with valid Tax ID numbers may also be account owners.

  • Who can contribute to a 529 plan?

    For most 529 plans, anyone can contribute. There can only be one account owner per account, but others – family members and even friends – can contribute.

Download the full list of questions

What to think about before investing in a 529 college savings plan

Before investing in a 529 college savings plan, consider:

  • How much to save. 529 college savings plan funds can subsidize part or all of a student's education expenses. Use our College Savings Estimator to determine how much money you need to invest.
  • When to begin. The sooner you invest, the more likely your 529 plan account will gain in value and grow – through gains and continued investment – to the amount needed to cover most, if not all, college expenses.
  • Tax benefits and how they vary. While 529 plans usually enable investors to defer federal taxes, state-level tax benefits vary and may depend on where the account owner and beneficiary reside (“in-state” vs. “out-of-state” plans).
  • Fees. Carefully evaluate the fee structure of each 529 plan you’re considering, as fees may ultimately impact earnings.
  • Timing of withdrawals. Choose whether to use 529 plan savings for undergraduate costs, defer for graduate studies or use for other eligible education expenses. For instance, some states allow 529 plan assets to be used for K-12 tuition expenses.
  • Taxes and penalties. If you withdraw funds for anything other than qualified expenses, you can incur penalties and will be subject to applicable state and/or federal taxes. By transferring 529 plan assets to another beneficiary, you typically can avoid penalties and continue to enjoy any tax benefits.
  • Inherent investment risks. As with any other type of investment, 529 plans carry some risk. As 529 plans invest across asset classes, they may be negatively impacted by market losses.

Tools for planning college savings

We offer two useful tools to help you plan for college costs:

Determine approximately how much you need to save to pay for college.
Look at different plans to see which is the best option for you.

BlackRock investment options for
529 college savings plans

BlackRock offers two 529 plans, available to qualifying investors in all 50 states:

BlackRock CollegeAdvantage 529 plan portfolios include mutual funds and ETFs from BlackRock, iShares and other leading asset managers. The plan also has tax advantages for multiple states, with added benefits for Ohio residents.

Service #866-529-8582

Plan features

  • Plan is based in Ohio, but available in all states.
  • Ohio residents and tax-parity state4 residents get an additional tax benefit.
  • Investors can select from target date age-based portfolios, static risk-based portfolios and single investment strategies.
  • Low minimums: Get started with a $25 contribution per investment option.

Go to the BlackRock CollegeAdvantage 529 plan

The iShares 529 plan, composed of iShares ETFs, has tax advantages for multiple states, with added benefits for Arkansas residents.

Service #888-529-9552

Plan features

  • Plan is based in Arkansas, but available in all states.
  • Arkansas residents and tax-parity state4 residents get an additional tax benefit.
  • Select from targeted asset class exposures, target year-of-enrollment portfolios, static risk-based portfolios and individual iShares portfolios.
  • Low minimum: Get started for a $500 lump sum or $50 a month / $150 a quarter through an automated investment program.

Go to the iShares 529 plan

Additional 529 plan FAQs

Did we answer all of your 529 college savings plan questions? Access our FAQ page for additional information about beneficiaries, investment options and more.

529 plan FAQs