college

Comparing education savings plans

Savings plans
Coverdell Education
Savings Account
Prepaid Tuition
Plan
529 Savings
Plan
Tax BenefitEarnings in the account grow tax-free until withdrawn. Withdrawals are tax-free if they do not exceed the beneficiary's qualified education expenses for the tax year.Earnings in the account grow tax free. Withdrawals are tax free as long as the money is used for higher education.Earnings in the account grow tax free. Withdrawals are tax free as long as the money is used for higher education.
Financial-aid impactThese investments are treated as parental assets and reduce your child's eligibility for federal student aid by a maximum 5.64 percent of their value at the time of application.A prepaid tuition plan is considered a resource of the parent if the parent owns the account. This was clarified by a 2004 ruling from the Department of Education.Money in a 529 plan is considered a parent's asset, and financial-aid officers expect parents to contribute 5.6 percent of the money toward college expenses each year.
Can account be rolled over?Yes. Any amount can be withdrawn and rolled over into a Coverdell account for another family member. There are no tax consequences as long as the new beneficiary is under the age of 30.Money in the account may be transferred tax free to the prepaid tuition plan of a family member.Money in the account may be transferred tax free to the 529 plan of a family member.
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