CCP 4.3 Key terms
college savings plan
A plan in which a student's family saves money for college by investing funds in the stock market. It offers several investment options, and the value goes up or down based on the market performance of the option selected.
529 plan
A tax-advantaged savings plan designed to encourage saving for future college costs. Legally known as qualified tuition plans, they are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.
prepaid tuition plan
Also known as a guaranteed tuition plan. This plan allows a family to prepay all or part of the costs of an in-state public university education. The plan may also be converted for use at private and out-of-state colleges.
Coverdell Education Savings Account
An education savings account for K through 12 and college expenses. There is a yearly maximum contribution limit. Contributions are taxed up front, but the account is not taxed as it grows, and withdrawals are tax-free.
Coverdell ESA
age limit for disbursement of funds
prepaid tuition plan
allows only pre-purchase of tuition
college savings plan
available every state
529 plan
contributions not taxed up front
Coverdell ESA
contributions taxed up front
college savings plan
covers all qualified higher-education expenses
college savings plan
does not lock college costs
college savings plan
enrollment open year-round
529 plan
fewer investment choices
accredited post-secondary schools the 529 plans can use
four-year colleges and universities community colleges certain vocational schools certain foreign institutions
coverdell ESA
funds can also be used for K-12
529 plan
funds only for college expenses
prepaid tuition plan
limited enrollment period
prepaid tuition plan
locks tuition prices
Coverdell ESA
more investment choices
529 plan
no age limit for disbursement of funds
college savings plan
no state residency requirement
529 plan
no yearly maximum contribution limit
prepaid tuition plan
not available in every state
prepaid tuition plan
state residency requirement
coverdell ESA
yearly maximum contribution limit
