Which College Savings Plan Is Best for Me?

To make your decision easier, here are the highlights for the most widely recognized plans.

529 plan

A popular choice for college savings is a 529 plan. Earnings grow tax-deferred and may be eligible for state tax deductions, there are no minimum contributions and you can make an unlimited number of tax-free withdrawals for educational expenses.


  • $350,000 limit per beneficiary
  • No minimum contribution
  • Contributions can't exceed the beneficiary's needed qualified education expenses
  • There may be gift-tax consequences if your contributions, plus any other gifts, exceed $14,000 a year
  • You can name anyone as a beneficiary—a relative, friend or even yourself

Roth IRA

Although a Roth IRA is mostly thought of for retirement savings, many financial experts recommend them for educational expenses. If you're using the funds to pay for college expenses, you can make withdrawals at any time without paying a tax penalty. Plus, contributions to your Roth IRA grow tax-free and can be used in combination with a 529 plan.

With a Roth IRA, there are annual contribution limits based on your age and income. Visit the IRS website(opens in a new tab) for the current year's contribution limits.


  • Flexibility to save for educational expenses and retirement
  • Earnings for qualifying education expenses can be withdrawn without the 10% penalty
  • Limits on both annual contributions and income

Coverdell Education Savings Account (ESA)

With a Coverdell ESA, you can save up to $2,000 per beneficiary each year until they reach the age of 18, unless they have special needs. However, there are salary caps based on your modified adjusted gross income (MAGI): $110,000 for single filers and $200,000 for married couples filing jointly. Taxpayers with MAGI above $110,000 and $220,000, respectively, can't contribute to a Coverdell ESA.

Learn more about tax benefits for education and how to calculate your MAGI from the IRS Publication 970 (PDF).(opens in a new tab) 


  • Flexibility to choose your investments, including CDs, savings accounts and brokerage options
  • Ability to pay for K-12 educational expenses, not just college
  • Smaller annual contribution limits

The bottom line

With costs rising every year, practically everyone needs to save for college. Weigh your options and choose the plan that makes the most sense for your situation.

Interested in college savings plans?

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The information provided is not intended to be legal, tax, or financial advice. BB&T hopes you find this information useful but we cannot guarantee that it is accurate, up to date, or appropriate for your situation. You should consult with a qualified attorney or financial advisor to understand how the law applies to your particular circumstances or for financial information specific to your personal or business situation.

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