Education Savings Accounts

Invest in your child’s future

Simplify saving for college with a 529 plan or Coverdell ESA

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Both 529 plans (also called Qualified Tuition Plans) and Coverdell Education Savings Accounts (ESAs) offer tax benefits and a simple, easy way for you and your family to save for college tuition and other education costs.

Contributions to education savings accounts are not tax deductible. However, the earnings are not subject to federal income taxes (or state taxes, in most cases) as long as you use the withdrawals for qualified education expenses.

Before you choose an education savings account, it’s a good idea to talk with a financial professional. They can help you choose the account that meets your family’s needs.

529 plan

Best for families who want to contribute more than $2,000 per year

Coverdell ESA

For K-12 or higher education and families who meet the annual income limits
Qualified uses May be used only for higher education expenses in some states Can be used for K-12 or higher education expenses in all states
Contribution limits None, but contributions may be considered gifts for tax purposes Up to $2,000 per year
Income limits None For more information about income limitations, talk with your financial professional.
Age limitations None The student must use the funds before their 30th birthday
Investment Options Choose one or more investment portfolios offered by the plan Customize your portfolio, choosing investments on your own
Get in Touch Get in Touch
Qualified uses
Contribution limits
Income limits
Age limitations
Investment Options

529 plan

Best for families who want to contribute more than $2,000 per year
Qualified uses
May be used only for higher education expenses in some states
Contribution limits
None, but contributions may be considered gifts for tax purposes
Income limits
None
Age limitations
None
Investment Options
Choose one or more investment portfolios offered by the plan
Get in Touch

Coverdell ESA

For K-12 or higher education and families who meet the annual income limits
Qualified uses
Can be used for K-12 or higher education expenses in all states
Contribution limits
Up to $2,000 per year
Income limits
For more information about income limitations, talk with your financial professional.
Age limitations
The student must use the funds before their 30th birthday
Investment Options
Customize your portfolio, choosing investments on your own
Get in Touch

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Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

That depends on your situation, and there are many variables that could affect your decision. That’s why it’s a good idea to talk with a financial professional before you choose an education savings account.

However, keep in mind that you must meet specific income limitations to contribute to a Coverdell ESA. For more information about income limitations, talk with your financial professional.

Just about anyone can contribute to an education savings account, including parents, grandparents, other relatives, and friends, as well as the child (or beneficiary) of the account.

The rules for education savings accounts can be complex, so it’s best to discuss your options with a financial professional.

If your child doesn’t go to college, you still have options for accessing the money in your education savings account:

  • Withdraw the money and pay taxes and a 10% penalty on the just the earnings. You don’t need to pay taxes or penalties on your original contributions.
  • Use the money to pay for trade school, community college, or a certificate program. Any postsecondary institution that’s eligible to participate in federal student aid programs can qualify.
  • Name another child or grandchild as the beneficiary on the account, and use the money for their education.

In most cases, education savings accounts owned by a parent or dependent student are considered parent assets when your child applies for financial aid. However, the tax benefits of saving through an education savings account often outweighs any reduction in financial aid.

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