Are 529 Plans Only for My State’s Public Colleges?

There’s a misconception that state-sponsored 529 plans only cater to families that send their children to a state college. That’s just not true!

You can use a 529 plan from any state to pay for an eligible college in any state. This includes any public or private college, including community colleges. 

Additionally, 529 plans can be used to pay for vocational and trade schools. Qualified apprenticeship programs are covered as well.

Since January 1, 2018, you can also use your 529 plan savings to pay for private, public, or religious k-12 tuition, up to $10,000 per year per beneficiary.

In terms of funding a 529 plan, there are two general types of 529 plans:

  1. Savings programs
  2. Prepaid programs

1. 529 Savings Plans

529 savings plans are tax-advantaged savings accounts used to pay for qualifying education expenses. When contributing to a 529 plan, your money is typically invested in various investment options to grow your savings. When you have qualifying expenses, you can make tax-free qualified withdrawals to cover tuition or other costs.

Not only can you use a 529 plan to pay for tuition, but you can also use plan funds to pay for qualified higher education expenses as well. This includes books, supplies, room and board, computers, and more.

2. 529 Prepaid Tuition Plans

Prepaid tuition plans offer the opportunity to make advance payments for upcoming college tuition and mandatory fees at the present rate by purchasing units or credits. You can either pay each unit as a one-time lump sum or opt for periodic installments to fund the plan gradually. After making this purchase, the plan administrator invests the money on your behalf. Once your child is ready for college, you can access these funds, ensuring a guaranteed source to cover their tuition expenses.

States offering prepaid tuition contracts covering in-state tuition will allow you to transfer the value of your contract to private and out-of-state colleges. However, depending on the particular state, you may not get full value.

The tax law now permits higher education institutions to offer their own 529 prepaid programs. These will allow you to target your tuition prepayment to the sponsoring institution (or group of institutions). The Private College 529 Plan is the only such program currently in operation, and you must check to see what restrictions they may place on the colleges covered by the plan.

A good place to start:

See the best 529 plans, personalized for you

Facebook icon Twitter icon Print icon Email icon

About the author Editorial Team The Editorial Team consists of current and past contributors, including Mark Kantrowitz, Martha Kortiak Mert, Marc Suhr, and others listed on our Authors page. We have dozens of years of experience with 529 plans and college savings and have published hundreds of articles empowering families with the knowledge to save wisely for college.

College Savings 101