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Have a question about the T. Rowe Price College Savings Plan? You can find the answer here. Please choose a topic below for related questions.
Named for Section 529 of the Internal Revenue Code, these are plans operated by a state or educational institution that help individuals and their families save for college, graduate, or vocational school tuition and education-related expenses in a tax-advantaged way. Contributions to the plan are made with after-tax dollars, but any earnings are tax-deferred while invested in the plan and tax-free if used to pay for qualified educational expenses. There are many differences between various programs, including participation requirements, investment options, state tax advantages, use of contributions, and other benefits offered.
The T. Rowe Price College Savings Plan is a highly rated plan by Morningstar that provides an excellent way to help a child, grandchild, or any other loved one save for college. You contribute to an account that you control on behalf of a specific beneficiary, and the money can be withdrawn free of federal taxes as long as it's used to pay qualified educational expenses at any eligible public or private college, university, graduate, or vocational school anywhere in the U.S.
The T. Rowe Price College Savings Plan offers you more flexibility and advantages than many other alternatives.
With T. Rowe Price, your best interest is our only interest. Since 1937, our experts have helped clients around the world achieve their long-term financial goals. You can count on T. Rowe Price to deliver investment management expertise and leading no-load mutual funds to help meet your college savings goals.
Assets can be used toward qualified educational expenses at any eligible private or public college, university, graduate school, or vocational school anywhere in the U.S.
Some international schools may qualify as well.
You have a choice of 13 professionally managed portfolios specifically designed for saving for college expenses.
When you save, and use distributions toward qualified educational expenses, you don't have to pay tax on any earnings. That means you could have more tax-free money to use toward college.**
It's easy to save—you can get started for as little as $50 a month. In addition, we'll waive the annual account fee when you invest through Automatic Monthly Contributions.
**Please note that the availability of tax or other benefits may be conditioned on meeting certain requirements such as residency, purpose for or timing of distributions, or other factors, as applicable.
The plan can be used for tuition, fees, room and board, books, supplies, computer technology, and equipment required by a qualified institution of higher education, as well as certain expenses for special needs students. For more information, check IRS Publication 970.
Money in a 529 plan is generally considered to be an asset of the parent, as opposed to the student/beneficiary. Enrollment in the plan may affect the expected family contribution calculations used for financial aid. For more information, refer to the Financial Aid FAQs below.
Any U.S. resident, including the account holder, can be a beneficiary. The beneficiary must be an individual, not a trust or corporation. There are no income limitations, age restrictions, or state residency requirements. In fact, if you're thinking of going back to school, you can even open an account for yourself.
Only one person—referred to as the account holder—can open and control an account. If the account holder is a minor, a custodian must act on the minor's behalf. Each account may have only one account holder and only one beneficiary (future student), but you can open as many accounts for as many beneficiaries as you want.
You can request a distribution, as a nonqualified withdrawal, or change the beneficiary to an eligible family member.
The new beneficiary must be a relative of the previous beneficiary as defined by the IRS. A family member includes the beneficiary's spouse and the following other relatives of the beneficiary:*
*Earnings on nonqualified distributions are subject to income taxes and a 10% penalty. State tax treatment varies.
There are several options available if your beneficiary cannot use all of his or her account due to scholarship or lower-than-expected higher education costs to avoid paying an income tax penalty for non-education-related expense withdrawal:
The minimum initial contribution is $250. If you invest through Automatic Monthly Contributions (AMC), the minimum is $50 per month.
To make the most of investment opportunities, it’s important to get an early start. The sooner you begin saving, the more time your money has for potential growth.
There are no age requirements to opening a T. Rowe Price College Savings Plan account. You can start saving even before your baby arrives. In fact, opening an account today not only means you'll have one less thing to remember to do later, but it will give your investment more time to potentially grow. Open the account with an adult family member as the beneficiary and update this at a later date once the new arrival joins your family.
Any one with a U.S. address who is a U.S. citizen or resident alien who wants to help a beneficiary pay for the rapidly rising costs of higher education can start an account. Account holders can include parents, grandparents, aunts or uncles, friends, or employers as well as trusts, corporations, and other organizations. You can even open an account for yourself. There are no income limitations, age restrictions, or state residency requirements for either account holders or beneficiaries.
No. You can open an account for a beneficiary regardless of his or her age.
Yes, multiple accounts can be opened for one beneficiary. For example, a parent and a grandparent can each open an account for a beneficiary. Each account must be set up in the names of only one account holder and one beneficiary. However, the total balance for a single beneficiary cannot exceed $400,000.
No. Only one person can be named as the account holder on an account. The account holder is the only person who can make decisions regarding that account, including changing beneficiaries, choosing investment options, etc. You can, however, add a successor account holder to your account.
Yes, but the earnings portion of a nonqualified distribution may be subject to federal and state income taxes, in addition to a 10% federal tax penalty. A distribution is exempt from the 10% penalty (but not the taxes) in the following situations:
The earnings portion of the distribution may be subject to federal and state income taxes plus a 10% federal penalty. There are cases, such as in the event of a scholarship, appointment to a military academy, disability, or death of the beneficiary, where the earnings portion of the distribution would not be subject to the 10% penalty but may be subject to income taxes.
Prospective students can reduce college costs through federal grants and college scholarships or by applying for a wide variety of privately offered scholarships. Go to the Federal Student Aid Information Center website, or call 1-800-433-3243 and check programs offered by your state or your school.
Students can also defer college costs through student loans. There are college loan programs to fit almost any type of family financial situation. The interest payments on certain loans may be subsidized by the federal government while the student is in school, and many students or their families can deduct the student loan interest they pay from federal income taxes.
When you’re trying to calculate what your costs are likely to be, it’s beneficial to focus on the assets you already have and not to include any expectation of financial aid. That way you can minimize the risk of underestimating the amount you need to save for the future.
An EFC measures your family’s financial strength and is used to determine your eligibility for federal student aid during one school year. You receive an EFC based on information you provide on the Free Application for Federal Student Aid (FAFSA).
Calculating a true EFC is a valuable step in the financial aid process. An EFC assumes the following general guidelines:
In general, assets in the parents’ names (such as 529 plan accounts or taxable accounts) may improve your chances of receiving aid, since a smaller percentage of their value is included in the EFC calculation. In contrast, a larger percentage of assets in a student’s name (such as UGMAs/UTMAs) are counted in the EFC calculation and as such could reduce your potential aid package.
However, parents need to weigh the impact of financial aid against other considerations, including the tax benefits of various choices and ownership issues.
Not from federal taxes. In some cases, they may be deductible from state income tax. For example, Pennsylvania, Maine, Arizona, Kansas, Montana, and Missouri provide for state tax parity, whereby contributions to any 529 plan are eligible for the state's income tax deduction. Consult your tax professional for more information.
Distributions used to pay for qualified educational expenses are exempt from federal taxes and, in some states, from state taxation. T. Rowe Price does not withhold taxes.
Depending on who receives the distribution, either the beneficiary or the account holder is responsible for taxes. There is a 10% federal penalty on the earnings of all distributions for nonqualified expenses.
College savings accounts are free of federal taxation* when used to pay for qualified educational expenses, so any earnings can grow at a much greater rate than those in a taxable account. Over time, the difference may be considerable. Visit Compare College Savings Options for an in-depth comparison of 529 plans versus other college savings vehicles.
*Please check with your state or a tax advisor regarding the specific tax rules for your state.
Our college savings plan is an excellent estate planning tool. You can significantly reduce the value of your taxable estate by funding a 529 plan. Gifts to an individual that exceed $14,000 in a single year are subject to the federal gift tax. However, for 529 plans, gifts of up to $70,000 ($140,000 for a married couple) can be made in a single year and can be exempted when averaged over five years of tax returns. Also, unlike many other kinds of gifts, you can retain control over your gifted assets.
The maximum account balance for a particular beneficiary is $400,000 (regardless of the number of contributors or accounts). Once the maximum is reached, you will no longer be able to make contributions; however, the account balances can still grow based on investment selections and market conditions.
AMC is a convenient way to save consistently with contributions transferred automatically
from your checking or savings account to your T. Rowe Price College Savings Plan account. You can start with as little as $50 per month, and the annual account fee of $10 is waived when you sign your account up for AMC.
Our college savings plan offers you a broad range of professionally managed investment options. You can choose among Enrollment-Based Portfolios that periodically adjust to reflect your beneficiary's investing time horizon as he or she gets closer to expected college entry. Or you can choose from five Static Portfolios, which maintain a consistent investment allocation over time. If you or your beneficiary's goals change, you can switch portfolios, but you are limited in the number of times you can make a change per calendar year. Visit the Portfolio Options section to learn more about your investment options.
Your investment earnings depend on the market's overall performance and the specific investment portfolio that you choose. Each account fluctuates based upon market conditions.
Yes. Each time you contribute to an account, you may select a different portfolio. You are allowed two reallocations between investment options in your 529 plan per calendar year. If you have already made two reallocations on your account this year, you cannot make another change until next year.
No. The investment options for 529 accounts are only for portfolios composed of mutual
If you’re currently saving with an UGMA or UTMA account, you may redeem that money to fund your 529 plan. While any gains may be taxed upon redemption of the UGMA or UTMA, your 529 assets can be used to pay eligible college expenses free from federal taxes. Consult with your tax professional for details.
There is a $10 annual account fee, prorated across your accounts for the same beneficiary. That fee, however, is waived:
A 0.13% annualized program management fee is charged to each portfolio, except the Total Equity Market Index Portfolio. A 0.11% annualized program management fee is charged to the Total Equity Market Index Portfolio. Each portfolio bears its share of the expenses of the underlying mutual funds in which it invests. The program management fee and underlying mutual fund expenses are reflected in each portfolio's unit price. As with most investments, the portfolio also reflects some of the costs of the funds it invests in.
Transfers between 529 plans for the same beneficiary are limited to one transfer every 12 months, but there is no restriction on the frequency of transfers between 529 plans if the beneficiary is changed to another family member in the process of the transfer.
Assets may also be moved from an UGMA/UTMA account to a 529 account; however, you will not be permitted to change your existing beneficiary to a new beneficiary. Also, the distribution from an UGMA/UTMA may be subject to taxes.
Consolidating all your educational accounts can simplify your planning and cut down on your paperwork. For more information on making transfers, please call a T. Rowe Price College Savings Specialist at 1-800-369-3641 or complete the Rollover form.
Yes, you can transfer your account assets to a relative of the beneficiary as defined by the IRS. A family member includes the beneficiary's spouse and the following other relatives of the beneficiary.*
*Earnings on nonqualified distributions are subject to income taxes and a 10% penalty. State tax treatment varies.
Yes. However, please remember that the earnings on any nonqualified distributions will be subject to a 10% federal penalty. Although taxes may still apply, exceptions for the 10% penalty include:
Student loans are not considered a qualified educational expense by the IRS, so any distribution taken can be used but will result in a 10% federal penalty on the earnings portion.
You can open an account online, over the phone by calling our dedicated account holder line at 1-866-521-1894, or by completing our New Account Agreement. The minimum initial contribution is $250. You do not need to make an initial contribution if you establish an account with Automatic Monthly Contributions or payroll deduction of at least $50.
If you need additional information about the T. Rowe Price College Savings Plan, you can also request an Enrollment Kit that includes everything you need to get started with the plan, including our Plan Disclosure Document.
If you’d like to link a bank account to your T. Rowe Price College Saving Plan account, you can do so over the phone by calling 1-888-521-1894. Additionally, you can link your bank account via your online access by completing the following:
Once completed, you will need to complete the challenge deposits verification process in which small deposits will be placed in your checking account for you to validate the amounts. Once the challenge deposits are confirmed and the amounts are verified, your bank account will be added to your account and monthly contributions can be established.
Alternatively, you can complete the Automatic Contributions form. Please attach a voided check or a letter signed by the bank on bank letterhead that confirms the name(s) on the account, the routing number, and the account number.
SmartVideo is a personalized approach to your T. Rowe Price College Savings Plan account. Not all accounts have SmartVideos as they are generated based on key milestones based on your beneficiary’s age.
The video includes:
If you have a SmartVideo available, you will receive a notification in your Account’s Message Center to view at troweprice.com/my529video.
Friends and family may certainly contribute to your 529 account. A check can be paired with our Gift Contribution Slip to direct the funds into your account. Our Gift Contribution Slip is available on the T. Rowe Price College Savings Plan website.
A tax form is not issued to document contributions into a college savings plan account. If your state offers any tax benefits for making contributions into a college savings plan account, you can document contributions by using your year-end statement.
If you took a distribution during the tax year, an IRS Form 1099-Q will be sent to you. It will be mailed in late January for any distributions taxable to the student. If you have detailed tax questions, please consult with your tax advisor.
In order to change ownership on your T. Rowe Price College Savings Plan account, you will need to complete an Account Holder Change form to authorize the registration change. If the account balance is greater than $50,000, the form will need to bear a Medallion Signature Guarantee stamp.
If they have not already done so, the new account holder will need to complete a New Account Agreement to establish the updated account registration.
You can change the beneficiary on your account by completing our Beneficiary/Portfolio Change form. The new beneficiary must be a relative of the current beneficiary as defined by the IRS. The Plan Disclosure Document outlines a beneficiary’s immediate family members with regard to a beneficiary change.
In order to process a rollover from your existing 529 plan into your T. Rowe Price College Savings Plan account, please submit a completed Rollover form. Please check with your current plan to determine if they require a Medallion Signature Guarantee. One rollover is permitted for the same beneficiary once every 12 months.
You can request a distribution online, over the phone by calling 1-866-521-1894, or by completing a Distribution form. Please allow up to two weeks for processing and mail time. To request a distribution online, please:
We do not require receipts of qualified educational expenses. It is the taxpayer's responsibility to substantiate a qualified distribution to the IRS. Therefore, it is important for you to maintain accurate records concerning your distributions, which could include receipts and other documentation.
You can request a distribution of your full account balance online, over the phone by calling 1-866-521-1894, or by completing a Distribution form. A closed account with a zero balance will remain in our systems for a period of time for recordkeeping purposes. It is possible to hide the closed account from view online.