The chart below provides a snapshot of the similarities and differences between the different education savings plans. Consult your tax advisor or financial advisor for advice on choosing the right plan(s) for you and your family.
Criteria |
529 College Saving Plans |
Pre-Paid Tuition Plans |
Coverdell ESAs |
College Costs |
No lock on college costs |
Locks in current tuition prices at certain
colleges and universities |
No lock on college costs |
Ownership |
Contributor |
Contributor |
Contributor |
Investment Choices |
Depends on plan investment options |
None |
No restrictions |
State Guarantee |
No state guarantee; most investments subject
to market risk |
Many plans are guaranteed or backed by state |
No state guarantee; most investments subject
to market risk |
Age Limits |
No age limits; open to adults and children |
Plan may set age or grade limits |
No contributions after 18; no withdrawals
after 30 |
Expenses Covered |
Covers all qualified education expenses (tuition,
room & board, mandatory fees, books, computers) |
All plans cover tuition and mandatory fees
only; some states offer a room & board option |
Qualified education expenses for K-12 and
college |
Contribution Limits |
Varies by plan; typically in excess of $200K
per beneficiary |
Most plans set limits prior to purchase based
on age of beneficiary and tuition years |
Contributor: $2K per beneficiary; beneficiary:
$2K for all ESAs |
Federal Tax Advantages |
Earnings grow tax deferred and are tax-free
for covered expenses |
Earnings grow tax deferred and are tax-free
for covered expenses |
Earnings grow tax deferred and are tax-free
for covered expenses |
State Tax Advantages |
Varies by state; tax deduction for contributions,
tax-free earnings growth, and tax-free withdrawals |
Varies by state; tax deduction for contributions,
tax-free earnings growth, and tax-free withdrawals |
None |
Residency Requirements |
No residency requirement; some plans require
nonresidents purchase through broker |
Most plans require either investor or beneficiary
to be a state resident |
No residency requirement |
Income Phase-Out |
None |
None |
Single filers: $95K-$110K; joint filers:
$190K-$220K |
Penalties for Non-Qualified Withdrawals |
Earnings are taxed as ordinary income and
may be subject to 10% penalty |
Earnings are taxed as ordinary income and
may be subject to 10% penalty |
None |
