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Types of college savings plans

If you’re starting to save for college costs, there are a variety of accounts with special tax structures you could consider that could help your savings grow. Remember that it’s never too early (or too late) to start saving, and saving little by little over time can really add up. Here are a few examples of tax-advantaged college savings accounts.

529 college savings plans

529 savings plans are flexible, tax-advantaged accounts designed specifically for education savings. Earnings on contributions grow federal income tax deferred, and withdrawals taken to pay for qualified higher education expenses such as tuition, fees, and room and board are free from federal income taxes. 
With a 529, you may also be able to offer family and friends a simple way to gift contributions for your child

Uniform Gifts to Minors Act/Uniform Transfers to Minors Act (UGMA/UTMA)

UGMA/UTMAs are custodial accounts that let parents (and others) make an irrevocable gift to a minor that can be used for college or any other purpose. For federal tax purposes, investment earnings are generally taxed at the minor’s tax rate, which is usually lower than a parent’s rate. 

Coverdell Education Savings Account (ESA)

Coverdell ESAs allow you to save for college and withdraw money for qualified higher education expenses federal income tax deferred. However, the annual contribution limit is only $2,000 per beneficiary and higher income households may not be eligible.

Save and invest for college

Open a flexible, tax-advantaged 529 college savings plan.

More to explore

The UNIQUE College Investing Plan, U.Fund College Investing Plan, DE529 Education Savings Plan, AZ529, Arizona's Education Savings Plan, and the Connecticut Higher Education Trust (CHET) 529 College Savings Plan - Direct Plan are offered by the state of New Hampshire, MEFA, the state of Delaware, and the state of Arizona with the Arizona State Treasurer's Office as the Plan Administrator and the Arizona State Board of Investment as Plan Trustee, and the Treasurer of the state of Connecticut respectively, and managed by Fidelity Investments.

If you or the designated beneficiary is not a New Hampshire, Massachusetts, Delaware, Arizona or Connecticut resident, you may want to consider, before investing, whether your state or the beneficiary's home state offers its residents a plan with alternate state tax advantages or other state benefits such as financial aid, scholarship funds and protection from creditors.

Units of the portfolios are municipal securities and may be subject to market volatility and fluctuation.

Please carefully consider the plan's investment objectives, risks, charges, and expenses before investing. For this and other information on any 529 college savings plan managed by Fidelity, contact Fidelity for a free Fact Kit, or view one online. Read it carefully before you invest or send money.

This information is general in nature and provided for educational purposes only.