529 Basics

Dream big with 529 plans

There’s more than one pathway to career success, but all require training and education. Paying out of pocket can be a challenge, and loans can saddle you or your child with substantial debt. 529 plans can help you start saving today.

Understanding 529 Plans

A 529 savings plan is a type of investment account that can be used for education savings. These accounts can be opened by almost anyone, there are no income limits, and anyone can contribute. A 529 account works much like a Roth IRA by investing your after-tax contributions into investment portfolios like a mutual fund.

529s are also very flexible, allowing you to use your savings at in-state, out-of-state, public, or private schools. This includes community colleges, trade schools, graduate programs, and some international schools. You can even use a 529 plan to save for K-12 tuition, registered apprenticeship programs and certain student loan repayment.

Education savings made simple

529 plans provide a flexible and affordable way to save for the future. The top reasons to save with a 529 plan include:

Tax benefits help your savings grow faster

Save for education and save on your taxes. Earnings grow free from state and federal taxes and are never taxed when used for qualified higher education expenses.

The money you save is always yours

If your plans change, or your student earns a scholarship, you can withdraw your original investment, although you may be subject to taxes or penalty on investment earnings.

Minimal impact on financial aid

A 529 account will generally affect federal financial aid, but the overall impact is usually minimal and will vary based on who owns the account.

Save for more than just tuition

Use your account for many other qualified higher education expenses like housing, meal plans, books, computers and much more.

Save early, save often

The sooner you start, the more your savings can grow. Saving $100 a month could yield nearly $40,000 after 18 years. Waiting just one year to begin saving could reduce your account by $4,000. Delaying five years could cost you $16,000!

Saving $100 per month¹

529 FAQs

Does a 529 plan affect eligibility for federal financial aid or scholarships?

Typically, having a 529 plan doesn’t impact merit-based financial aid, like academic or athletic scholarships, and may be used to pay for qualified expenses not covered by a scholarship or retained for future years, for either undergraduate or graduate school. But, like any non-retirement investment or savings account may affect eligibility for need-based financial aid – however the impact is minimal. For accounts owned by parents and dependent students, the Free Application for Federal Student Aid (FAFSA) assesses 529 assets at a maximum of 5.64 percent of the value when calculating the Expected Family Contribution (EFC) for financial aid eligibility. Accounts owned by other parties will impact eligibility differently. For more information, consult Studentaid.gov or an educational financial aid advisor.

Can I use 529 plans for K-12 tuition?

Yes. Some states allow a 529 plan to be used to cover tuition costs for private and religious K-12 education, up to $10,000 per child per calendar year. 

My student is already in high school. Is it too late to open a 529 account?

 It’s never too late to open a 529 account. Children or adults of any age can enroll in most 529 savings plans. Although, some restrictions may apply depending on the specific plan.

Can I have more than one account?

Yes. Many families choose to enroll in multiple accounts, however, there are maximum contribution limits. For example, the maximum contribution for Virginia529 is $550,000 across all accounts for a single student.

Do I have to open a 529 plan in my home state?

Most 529 plans do not have residency requirements. For example, you do not have to be a Virginia resident to open an Invest529 account (except the Tuition Track Portfolio). Most plans cover expenses for out-of-state schools, but rules may vary by plan.

Who can open a 529 account?

Generally, anyone can open a 529 account as long as they are 18 years of age or older and a U.S. citizen or legal U.S. resident, while the student must be a U.S. citizen or legal U.S. resident to be named to an account. The account owner may also be a U.S. trust,  corporation, partnership, nonprofit organization, custodian, guardian or other entity.

What happens if my student doesn’t go to college?

529 plans don’t need to be exclusively used for college! Because of the flexibility, a 529 plan can be used towards any eligible professional or vocational school and even for registered apprenticeship programs. If higher education isn’t in your student’s immediate plans, you can hold the funds in the account for their future use. Alternatively, you can change the student on the account to an eligible family member or even yourself for your own education. The money in the account is always yours. You can withdraw your original investment, although you may be subject to taxes or penalties on investment earnings or non-qualified expenses.

Learn more about 529s

Tax Benefits

Learn about the tax benefits of 529 accounts

Explore tax benefits

Qualified Expenses

Review the ways that 529 accounts can be used

View qualified expenses

Online Webinars & Tutorials

View a live or previously recorded webinar to learn more about Invest529

View Smart Savers Academy

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¹This chart is for illustrative purposes only and is not intended to reflect actual performance of any specific investment. Assumes interest rate of 6.25 percent compounded monthly. The value of your Virginia529 account will vary depending on market conditions and the performance of the investment option you select, and it may be more or less than the amount you deposited. You could lose money – including the principal you invest – or not make money if you invest in one of these programs. Past performance of investments is not an indicator of future returns.