How Starting a 529 Plan Now Can Make College More Affordable Later

 Posted on October 30,2025 in Uncategorized

If you have ever looked at the price of college tuition, you know how intimidating those numbers can be. The average cost of attending a four-year university continues to go up every year, and while scholarships and financial aid can help, most families still need to cover a large portion of the bill themselves. 

That is where 529 plans come in. These state-sponsored investment accounts make it easier for parents and even students to save for future education costs, tax-free.

Whether you are a parent trying to give your child a head start or a high school student already thinking about your future, understanding how 529s work can make a huge difference in how manageable college costs are later on. Learn a little more about 529 plans here and check out our other helpful information for college students. 

What Exactly Is a 529 Plan?

A 529 plan is an education savings account designed to help families pay for qualified expenses. You can use the funds for tuition, fees, books, supplies, and even room and board. In recent years, 529 rules have become more flexible. You can now use the money for trade schools, certain apprenticeship programs, and even up to $10,000 in student loan repayments.

There are two main types of 529 plans:

1. College Savings Plans, which work like investment accounts. You contribute money, choose how it is invested, and the account grows over time.

2. Prepaid Tuition Plans, which allow you to lock in tuition costs at today’s rates for future use at specific schools (mostly public universities).

All 50 states offer at least one type of 529 plan.

Why Saving With a 529 Plan Makes a Huge Difference Later On

The biggest advantage of a 529 plan is time. The earlier you start, the more your money can grow through compound interest.

For example, let’s say you start saving when your child is born and contribute $200 a month to a 529 plan that earns an average of 6 percent annually. By the time your child turns 18, the account would be worth around $77,000.

If you waited until your child was 10 years old to start saving, you would have to contribute nearly $600 a month to reach the same amount by age 18. Starting early allows your investments to do the heavy lifting.

And here is another benefit: All the earnings in a 529 plan grow tax-free as long as they are used for qualified education expenses. That means more of your money goes directly toward tuition, books, and living expenses instead of taxes. 

What If You Get Scholarships or Do Not Need All the Money in Your 529 Plan?

A common concern for parents and students is what happens if the student earns scholarships or decides not to go to college. The good news is that 529 plans are flexible.

If your child receives a scholarship, you can withdraw an amount equal to the scholarship without paying the usual 10 percent penalty (though you will still owe income tax on the earnings portion). You can also transfer the 529 account to a sibling, grandchild, or even yourself without penalty.

With the cost of graduate school, continuing education, and student loan repayment options now eligible for 529 use, there are more ways than ever to make sure the money gets put to good use.

Start Saving for Your Child’s Education Now

The best time to start saving for college was yesterday, but the second-best time is today. Even if you can only afford a small amount each month, small amounts grow over time. If you are a parent, consider setting up a 529 plan this month. If you are a student, talk to your family about starting one together. Every dollar saved now is a dollar you will not have to borrow later.

Got more questions about college? Contact our team today.