Borrowing Money for School

Choosing The Right 529 Education Savings Plan

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In Brief...

Since its creation under the Small Business Job Protection Act of 1996, the Section 529 plan has become much more popular than other education-saving vehicles such as education savings bonds and the Coverdell Education Savings Account. Eligible education institutions include any college, university, vocational school or other post-secondary educational institution eligible to participate in a student aid program administered by the Department of Education; this includes virtually all accredited public, nonprofit and proprietary (privately owned, profit-making) post-secondary institutions. College Savings Plan Under a college savings plan, amounts are contributed up to the dollar limit of the plan. Prepaid Tuition Program Under a prepaid tuition program, eligible expenses for a fixed period of time or a fixed number of credits are prepaid at an eligible educational institution. Unlike the assets in the college savings plan, which can be used to pay qualified expenses at any eligible educational institution, assets in a prepaid tuition program are usually used toward expenses at a predetermined educational institution, or an educational institution from a predetermined list.

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