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College Savings Plans

There are two kinds of plans:

  • 529 Savings Plan- This works like an IRA or 401(k) retirement account. You can invest in your choice of mutual funds without worry of being penalized for taxes when you cash it in to pay for school.
  • Prepaid Plans - These allow you to make contributions toward tuition and fees over time. Prepaid plans can be converted for use at schools in other states and private colleges.

The quality of these plans varies from state to state. Fortunately, you are free to invest in any state's plan, no matter where you live. And if you move to a new state, you can continue investing in the same plan.

For information on Florida's College Savings Plans, visit the Florida Prepaid College Board's website.

Financial Aid Availability

A College Savings Plan does not affect the beneficiary's eligibility for financial aid or if the beneficiary receives a scholarship. It remains an asset of the account holder and not the beneficiary. These accounts do have strict limitations on what they can be used for, including tuition, fees, books and equipment required for class. The money may be used for room and board only if the beneficiary attends school at least half the time and the amount is dictated by what the educational institution uses to compute the cost of attendance.

An investor can start a college savings plan for any child, relative or unrelated person. The investor can change the beneficiary at any time. So if you start a plan for one of your children who later decides not to attend college, you can designate that money to be used by any other college-bound child.

Coverdell Education Savings Accounts

You can contribute up to $2,000 a year to a Coverdell education savings account for your child. For more information on this type of savings account please visit https://www.irs.gov/taxtopics/tc310.


The Secure Act Law expanded uses for 529 College Savings Accounts, including saving for K-12 educational expenses, being able to repay student loans and pay for apprenticeships. See this article for more information.