Smart Saving for College

Plan Comparison

 

College Savings Plan Comparison Chart *


  College Savings Plan Prepaid Tuition Plan ESA Custodial Accounts Savings Bonds
Ownership/Control Contributor Contributor Contributor Custodian until child reaches age of majority Contributor
Investment Choices Typically, plans provide several investment options. None No restrictions No restrictions Savings bonds
Age Limits None Plan may set age or grade limits. Except for special needs children, no contributions can be made after a child reaches age 18, and withdrawals must be made before beneficiary reaches age 30. Minor child Owner must be at least 24 before the bond's issue date (not purchase date).
Expenses Covered Besides Tuition and Fees Qualified education expenses for post-secondary education With a few exceptions, only tuition and mandatory fees for post-secondary education are covered. Qualified elementary and secondary education expenses or qualified higher education expenses No restrictions on types of expenses Tuition and mandatory fees for post-secondary education and contributions to 529s and ESAs
Contribution Limit Varies from plan to plan. Majority of plans permit total contributions in excess of $200,000 per beneficiary. Fixed by terms of contract you purchase Contributor: $2,000 per beneficiary per year

Beneficiary: $2,000, does not matter how many ESAs are set up.
No limit No limit
Federal Tax Advantages Earnings grow tax-deferred and are tax-free if used for qualified education expenses. Earnings grow tax-deferred and are tax-free if used for qualified education expenses. Earnings grow tax-deferred and are tax-free if used for qualified education expenses. $950 in earnings are tax-free. Interest grows tax-deferred and is tax-free if used for qualified education expenses.
State Tax Advantages Varies from state to state, but some states provide tax deduction for contributions, tax-free earnings growth and tax-free withdrawals for qualified education expenses. Varies from state to state, but some states provide tax-deduction for contributions, tax-free earnings growth and tax-free withdrawals for qualified education expenses. None None Interest is usually tax-exempt from state and local taxes.
Income Phase-Out None None Single filers:
$95,000–$110,000

Joint filers:
$190,000–$220,000
None Single Filers:
$69,950–84,950

Joint Filers:
$104,900–134,900
Penalties for Non-Qualified Withdrawals Earnings are taxed as ordinary income and may be subject to 10-percent penalty. Earnings are taxed as ordinary income and may be subject to 10-percent penalty. Withdrawals that exceed the beneficiary's education expenses for the year may be taxable. None Interest earned is taxed as income.


* Filing information as of 2009. See IRS Publication 970 for 2010 updates.

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