HomePlanCollege savings

College, 4 to 18 years out.

Tuition inflation runs ~5% per year. Compound growth runs ~7%. The math works only if you start now.

You need to save
$425/mo
4-yr cost: $313,000
Years until college13
Year-1 tuition then$66,000
Total contributions$66,300
529 growth$246,700
The 529 plan

Tax-free growth for college costs.

A 529 is a state-sponsored education savings vehicle named after IRC §529. Contributions go in post-tax (no federal deduction, but most states allow a state deduction or credit). Earnings grow tax-free. Qualified withdrawals — tuition, fees, room & board, books, computers, K-12 tuition up to $10k, student loan repayment up to $10k — come out tax-free. The SECURE 2.0 Act (effective 2024) added a Roth IRA rollover option for unused balances, capped at $35,000 lifetime.

Year-1 cost = today's cost × (1 + tuition inflation)years to enrollment
4-year total = year-1 cost × [(1+i)4 − 1] ÷ i
  • i — tuition inflation (5% historical average)
  • r — 529 portfolio return (6-7% on age-based glide path)
2025-26 College Board data

Sticker prices, all-in.

SectorTuition + feesR&BTotal
Public 4-yr in-state$11,610$13,310$24,920
Public 4-yr out-of-state$30,160$13,310$43,470
Private nonprofit 4-yr (avg)$43,350$15,460$58,810
Elite private (Ivy / top liberal arts)$60,000–$70,000$18,000–$22,000$80,000–$95,000

Net price (after grant aid) is materially lower at most schools — the published "list price" is what fewer than half of students actually pay. Tuition inflation has averaged ~5% historically per BLS CPI-Tuition, but actual sticker growth at publics has slowed to 2-3% per year through 2025.

Worked example

Funding for a 5-year-old, public in-state.

Scenario · Child age 5, public 4-yr in-state, 13 years to enrollment

Lina starts at age 5. Public in-state today is $25,000/year. Plans 7% return, 5% tuition inflation.

Year-1 cost in 13 years. $25,000 × (1.05)13 = $47,140.
4-year total (with continuing inflation). $47,140 × [(1.05)4 − 1] ÷ 0.05 ≈ $203,000.
Required monthly to fully fund. Solving the PMT formula at 7% return / 13 years: ~$650/month. Total contributions over 13 years: ~$101,400. 529 growth: ~$101,600.
One-third rule alternative. Save 1/3 = ~$67,000 target. Required monthly: ~$215. Plan to pay 1/3 from cash flow during college, finance the remaining 1/3.
Full-fund $650/mo or one-third $215/mo. Most planners pick the partial number to leave retirement contributions intact.
Common mistakes

Where college planning goes wrong.

Retirement first, college second

Parents can borrow for college; kids can't borrow for retirement. If choosing between a 529 contribution and a 401(k) contribution that captures employer match, the match always wins. The standard sequence: emergency fund → 401(k) match → high-APR debt → Roth IRA → max 401(k) → 529. The "one-third rule" exists because saving 100% of college cost typically over-prioritizes the kid at the expense of parents' retirement.

Over-funding the 529

Funds withdrawn for non-qualified expenses owe ordinary income tax PLUS 10% federal penalty on the earnings portion. SECURE 2.0's $35k Roth rollover softens this materially, but only after meeting the 15-year hold period. Don't aggressively over-fund — partial funding plus the rollover safety net is usually the better play.

Avoid advisor-sold 529s with high loads

Direct-sold 529s (Utah's my529, NY 529 Direct, Nevada Vanguard, California ScholarShare) charge 0.10-0.30% all-in. Advisor-sold ('Class A,' 'Class C') 529s often layer 4-5% upfront sales loads or 1%+ annual 12b-1 fees on top of fund expenses — eroding decades of compounding. Morningstar's annual 529 ratings call out the worst offenders. Always compare the direct-sold option in your home state plus Utah/Nevada before signing with an advisor-sold plan.

Methodology

What's behind the projection.

Assumptions
  • Today's annual cost grows at user-supplied tuition inflation rate compounded annually until enrollment.
  • Once in college, costs continue to inflate each year — the 4-year total reflects this.
  • Portfolio return user-supplied. Default 7% reflects historical 60/40-ish glide-path performance net of fees.
  • Calculation assumes no scholarships, no financial aid, no income contributions during college — pure 529-funded scenario for comparison.
  • State tax deductions/credits not modeled — varies by state from 0% (TX, FL, etc.) up to 6.85% (NY) on capped contribution amounts.
  • FAFSA Student Aid Index treatment: parent-owned 529 assessed up to 5.64% as parent asset.
  • This is general information, not personalized tax/financial advice (YMYL). Confirm specifics with your state plan and a CFP.

Sources: College Board "Trends in College Pricing 2025" report; IRC §529 (qualified tuition programs); SECURE 2.0 Act §126 (529-to-Roth rollover); IRS Pub 970 (Tax Benefits for Education); FAFSA Simplification Act 2020 (effective 2024-25); Morningstar Annual 529 Plan Ratings; Vanguard / Fidelity / Schwab capital market expectations 2024-2034.

Glossary

529 vocabulary.

529 plan
State-sponsored education savings under IRC §529. Tax-free growth, tax-free qualified withdrawals.
Qualified expenses
Tuition, fees, R&B, books, equipment, K-12 tuition (≤$10k), student loan repayment (≤$10k).
Beneficiary
The student the funds are designated for. Can be changed without tax consequence to qualified family.
Owner
The account holder who controls contributions and withdrawals. Usually parent or grandparent.
Age-based portfolio
Glide-path investment option that auto-shifts equity to bonds as enrollment nears.
SECURE 2.0 rollover
Up to $35k of unused 529 funds rollable to beneficiary's Roth IRA, with 15-yr account-age and 5-yr contribution-age conditions.
FAFSA SAI
Student Aid Index — post-2024 replacement for EFC. 529 counted at 5.64% as parent asset.
Direct-sold vs advisor-sold
Direct = low fees (Utah, NY, NV). Advisor = layered loads and ongoing 12b-1 fees.
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FAQ

Questions, asked plainly.

Per College Board "Trends in College Pricing 2025": public 4-yr in-state $24,920 all-in; public out-of-state ~$43,470; private nonprofit ~$58,810; elite privates $80,000-$95,000. Net price (after grant aid) is materially lower at most schools — published "list price" is what fewer than half actually pay.

State-sponsored education savings under IRC §529. After-tax contributions (no federal deduction; 30+ states offer state deduction/credit). Earnings grow tax-free. Qualified withdrawals — tuition, R&B, books, computers — tax-free at federal. Each state runs its own; you can use any state's plan, but in-state often gives a state tax deduction. Owner controls assets; beneficiary uses funds. Beneficiaries changeable to qualified family without tax consequence.

Effective 2024 under SECURE 2.0 §126: unused 529 funds rollable to a Roth IRA in the beneficiary's name, up to $35,000 lifetime. Constraints: 529 must be 15+ years old, contributions must be 5+ years old, annual rollover capped at the year's Roth contribution limit ($7,000 in 2026), beneficiary must have earned income equal to rollover. No taxes, no penalties. Effectively makes 529 over-contribution a hedge.

Per IRC §529(e): tuition + required fees; books, supplies, computers, internet for educational use; R&B if ≥half-time enrolled (capped at school's published cost-of-attendance); special-needs services; K-12 tuition up to $10k/yr (SECURE 2.0); apprenticeships; student loan repayment up to $10k lifetime per beneficiary AND $10k per sibling. NOT qualified: transportation, sports fees, health insurance.

Parent-owned 529: counted at up to 5.64% in the Student Aid Index (post-2024 EFC replacement). Student-owned: usually 5.64% as parent asset, sometimes 20% as student. Under FAFSA Simplification (2024-25), grandparent-owned 529 distributions no longer count as student income — major change making grandparent funding much more aid-friendly. CSS Profile (~200 private schools) treats grandparent 529s differently.

Three options: (1) Change the beneficiary to another qualified family member tax-free. (2) Roll up to $35k to a Roth IRA (SECURE 2.0). (3) Withdraw — earnings taxed at ordinary income rates plus 10% federal penalty; contributions return tax-free. The 10% penalty is waived for scholarship amounts (up to scholarship value), military academy attendance, beneficiary death, or disability.

Yes, in deduction states. NY deducts up to $5k/$10k MFJ at 6.85% = $342/yr per filer. Illinois up to $10k/$20k MFJ. Pennsylvania uniquely allows deduction for any state's 529. Seven no-tax states + California offer no benefit. Standard advice: use the in-state plan for the deduction unless its expense ratios are materially worse than alternatives like Utah's my529, NY 529 Direct, or Nevada's Vanguard 529.

529 wins for college-specific savings. UTMA/UGMA is custodial — child legally owns at age 18-21, can spend on anything, FAFSA assesses at 20% as student asset (vs 5.64% for parent 529). Major drawbacks unless the goal is genuinely "asset for the kid, not specifically college." For tax-efficient college savings, 529 is structurally better in nearly every dimension.

For multi-decade horizon in 529's age-based option: 6-7% nominal is standard. Vanguard, Fidelity, Schwab capital-market expectations through 2034 cluster at 6-7% for 60/40 portfolios. If child is 0-5 years old, 100% equity supports 7-8% expected. Within 5 years of enrollment, glide path drops equity below 30% and expected return falls to 4-5%. Calculator's 7% default is reasonable for ages 0-10; lower to 5-6% for 12+.

Most planners recommend the "one-third rule": save 1/3 of projected cost, plan to pay 1/3 from current income during college, finance the remaining 1/3 (loans, work-study, scholarships). Aiming for 100% over-funds the 529 at the cost of retirement savings — and parents can borrow for college, but kids can't borrow for retirement. SECURE 2.0's Roth rollover gives even partial under-saving a soft landing.