Comparison of College Savings Options

This chart illustrates some of the key differences between the three main options for college savings.

Characteristic 529 College Savings Plans Prepaid Tuition Plans Coverdell Education Savings Accounts
Annual Contribution Limit Annual gift tax exclusion, with option of 5-year gift-tax averaging Annual gift tax exclusion, with option of 5-year gift-tax averaging $2,000 per year (total) from all sources
Aggregate Contribution Limit Varies by state. Based on projected cost of 5-7 years of postsecondary education, typically about $350,000 (range of $235,000 to $450,000) Varies by state. Based on projected cost of 5-7 years of in-state public college education. No limit, other than 17 years of the annual limit ($34,000)
State Income Tax Deduction/Credit on Contributions 35 states (including DC) 13 states None
Investment Options Limited selection of mutual funds (including age-based asset allocation options), no investment direction No investment direction Flexible investment options, including investment in individual stocks, bonds, mutual funds, ETFs, money market accounts, certificates of deposit, etc. Investments in life insurance contracts are not permitted.
Beneficiary Age Limit (Contributions) No age limit No age limit Contributions must occur before the beneficiary reaches age 18, except for special needs beneficiaries
Beneficiary Age Limit (Distributions) No age limit No age limit Distributions must occur before the beneficiary reaches age 30, except for special needs beneficiaries or if the designated beneficiary dies before age 30
Income Phase Outs on Contributions No phase outs No phase outs Based on contributor adjusted gross income (AGI)
Income Phase Outs on Distributions No phase outs No phase outs No phase outs
Eligible Institutions All colleges, universities and vocational schools that are eligible to participate in the student aid programs administered by the U.S. Department of Education All colleges, universities and vocational schools that are eligible to participate in the student aid programs administered by the U.S. Department of Education All public, private or religious elementary and secondary schools (K-12). Colleges, universities and vocational schools that are eligible to participate in the student aid programs administered by the U.S. Department of Education
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