In a nutshell, whats a Section 529 plan?
A Section 529 plan (the name comes from the U.S. Internal Revenue Code section that authorizes these plans) is a state-sponsored savings account set up, in most states, through a financial institution. The account is set up for the purpose of saving in order to pay for most qualified higher education expenses (tuition, room, board, supplies, etc.) at eligible institutions. Amounts accumulated in a Section 529 plan may be used for expenses at in-state or out-of-state colleges, universities and certain technical schools. The big attraction: There are a number of tax breaks associated with setting up a Section 529 plan. There is also another kind of Section 529 plan, usually referred to as a prepaid tuition plan. These are state-offered plans that are not savings accounts but, rather, contract-based arrangements that lock in in-state tuition costs at current tuition rates. (In some cases amounts in these plans may be transferred to cover expenses at out-of-state institutions.
