Question 1

What is a 529 plan and how does it work?

Accepted Answer

A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. Contributions grow tax-free, and withdrawals are tax-free when used for qualified education expenses. Many states offer tax deductions or credits for 529 contributions.

Question 2

How much should I save for college?

Accepted Answer

College costs vary by type: public colleges average $25,000/year, private colleges $55,000/year, and Ivy League schools $80,000/year. Our calculator projects future costs with inflation and helps you determine how much to save based on your children's ages and college type preferences.

Question 3

What is the difference between a 529 plan and Coverdell ESA?

Accepted Answer

529 plans have higher contribution limits ($300,000+ per beneficiary) and can be used for K-12 and college expenses. Coverdell ESAs have lower limits ($2,000/year) but offer more investment flexibility. Both offer tax-free growth for qualified education expenses.

Question 4

How does saving for college affect financial aid?

Accepted Answer

529 plans owned by parents are assessed at up to 5.64% for financial aid purposes, while student-owned assets are assessed at 20%. Grandparent-owned 529s don't count in FAFSA but distributions count as student income. Our calculator helps optimize savings strategies to minimize financial aid impact.

Question 5

Can I use 529 plans for multiple children?

Accepted Answer

Yes! You can change the beneficiary of a 529 plan to another family member. If one child doesn't use all the funds, you can transfer the remainder to another child. Our calculator helps plan for multiple children with different college timelines and costs.

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