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Saving for College with 529 Plans

Oct 1, 2012

There is a rise in college student debt as people are finding it difficult to arrange funds for higher education. The debt manages to pile up on the students if they are unable to repay the student loans on time. This article is all about saving for college so you don’t have to take out student loans that may transform into huge debt over a period of time.

The 529 plans have come up as a great solution to the problems that parents generally face as they try to arrange funds for their children’s higher education. These plans are quite similar to the 410(k) programs that help in saving money for retirement. It is reported that there have been investments worth billions of dollars into the 529 plans. There are positive hopes when it comes to future contributions in these plans. The coming decades are going to see a rise in the amount of investments in these attractive plans that have come to solve the problems of children looking to get into college.

529 plans


It was the year 1996 when the Section 529 plans were created by Congress. It didn’t have much of a role to play in saving money for college and was mostly related to the Small Business Job Protection Act. A year later, the law on these plans was refined by the Taxpayer Relief Act. Further modifications were done by the Economic Growth and Tax Relief Reconciliation Act and Pension Protection Act in 2001 and 2006 respectively.

The federal law states the Section 529 plans as qualified tuition programs. The reason behind using the name ‘529 plan’ is the Internal Revenue Code section 529. This section is responsible for governing the operation of this plan. 

Knowing the 529 plans better


A 529 plan is a way to save money for college. It offers federal tax advantages. The 529 plans are categorized in two types:

  • College savings plans 
  • Prepaid tuition plans 

These two plans offer similar federal tax advantages. Nevertheless, there are significant differences between these two plans.

Using the 529 plans


It is important that you make an extensive use of the 529 plans. This way you won’t have to take out student loans. It is important to remember that not repaying the loans on time is going to put you under mountainous debt and damage your credit. Carry out some research work to know more about the 529 plans.

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