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529 News

Recent Federal News

Inflation adjustment affecting college savers

(October 31, 2014) - In Revenue Procedure 2014-61 the IRS sets forth several inflation adjustments for 2015. The adjustments affecting college savers include the following:

- The kiddie tax threshold increases from $2,000 unearned income to $2,100 unearned income.

- The income phase-out for the Lifetime Learning Credit increases from $54,000 to $55,000 ( from $108,000 to $110,000 for a joint return).

- The income phase-out range for qualified education savings bonds increases to $115,750 - $145,750 for joint returns and $77,200 - $92,200 for all other returns.

- The lifetime exemption for gift and estate tax purposes increases from $5.34 million to $5.43 million. (The gift-tax annual exclusion remains at $14,000.)

For more information, click here.

Student loan interest rates headed upward

(May 23, 2014) - Federal student loan interest rates will be higher for the 2014-15 school year compared to 2013-14. The rate on new direct subsidized and unsubsidized loans for undergraduate students is increasing from 3.86% to 4.66%.

The rate on direct unsubsidized loans for graduate/professional students is increasing from 5.41% to 6.21%, while the rate on PLUS loans for parents and graduate/professional students is increasing from 6.41% to 7.21%.

Federal student loans are fixed-rate loans.

Congress to consider bill improving 529 plans

(March 31, 2014) - Rep. Lynn Jenkins (R-KS) has introduced a bill into Congress (H.R. 4333) that would make 529 plans even more attractive. The bill would add computer technology to the list of qualified higher education expenses even when not required by the school, and it would allow four investment changes per year. These two changes have been part of previous bills.

The bill would also allow a 529 account owner to re-deposit withdrawn funds to the 529 account within 60 days if the beneficiary leaves college and receives a refund from the college. This change could help avoid tax and penalty when tuition and other expenses are paid in advance but then refunded due to the student leaving school.

Also, up to $25,000 in leftover 529 funds could be rolled to a Roth IRA under the bill provided the funds were in the 529 plan for at least 10 years.

Finally, the bill would eliminate the aggregation requirement in connection with 529 withdrawals from multiple plans. This would ease the administrative burden on 529 program managers.

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