Saving for College
— High School and
Returning Students

On the savings chart, you see that even small amounts can add up to a good savings for college. However, you probably noticed that when the money was put in a regular savings account, you don't earn much in interest. A savings account is very safe-and you don't want to risk your college dollars-but it is not the only choice.


If possible, look into a 529 college savings plan. You, your parents, or some other responsible adult may want to set up one of the following:

529 College Savings Plan/Prepaid Tuition Plan. 529 plans are a way to save for an individual's college education and gain a tax advantage. Returning adult students also can set up their own 529 plan; however, like all savings plans, the sooner you start, the more you'll have for college. There are two types of 529 plans: college savings plans and pre-paid tuition plans. All 50 states and the District of Columbia have at least one type of 529 plan. Some private colleges and universities also sponsor a pre-paid tuition plan. The chart below highlights the differences between the two plans:

Prepaid Tuition Plan College Savings Plan
Locks in tuition prices at eligible public and private colleges and universities. No lock on college costs.
All plans cover tuition and mandatory fees only. Some plans allow you to purchase a room & board option or use excess tuition credits for other qualified expenses. Covers all "qualified higher education expenses," including:
  • Tuition
  • Room & board
  • Mandatory fees
  • Books, computers (if required)
Most plans set lump sum and installment payments prior to purchase based on age of beneficiary and number of years of college tuition purchased. Many plans have contribution limits in excess of $200,000.
Many state plans guaranteed or backed by state. No state guarantee. Most investment options are subject to market risk. Your investment may make no profit or even decline in value.
Most plans have age/grade limit for beneficiary. No age limits. Open to adults and children.
Most state plans require either owner or beneficiary of plan to be a state resident. No residency requirement. However, nonresidents may only be able to purchase some plans through financial advisers or brokers
Most plans have limited enrollment period. Enrollment open all year.

Source: Smart Saving for College, FINRA®

Before setting up a 529 plan, make sure you know how the plans work and the fees and expenses associated with them.

To learn more about 529 plans, visit An Introduction to 529 Plans and 509 Plans.


Saving for College: High School and Returning Students

Savings Bonds. U.S. Series EE savings bonds or Series I saving bonds offer tax advantages for college savers. The interest from these bonds often is tax-free (depending on income) if used for higher-education costs. EE bonds now earn a fixed rate of interest (currently 1.40%) and paper bonds are sold at half the face value. For example, a $100 EE savings bond will cost $50. Series I bonds are sold at face value. A $100 I savings bond will cost $100. The interest you would earn with an I bond is tied to the rate of inflation. Savings bonds can earn interest for up to 30 years. However, if the bonds are redeemed in less than five years, the person will pay a penalty. Click here to learn more about the Education Savings Bond Program.

Other Savings Options. There are other savings vehicles available. Some of them are lower risk (certificates of deposit [CDs] and money market accounts) and some are higher risk (stocks, stock mutual funds, etc.). Lower risk often means lower long-term earnings—but you'll rarely lose money. Higher risk may mean greater long-term earnings—but losing is a real possibility. If you're in high school or an adult planning on going to college, you don't have a lot of time to recover from a losing bet, so look into safe college investments. Click here to learn more about safe places to save your money.