College Savings Options: The Best Way to Save for College for 2025

Student Finance & Loan Expert

As families and students plan for the future, finding the best ways to save for college becomes more critical than ever. According to the National Center for Education Statistics, the average tuition and fees for the 2023-2024 academic year reached over $10,000 for in-state public institutions and nearly $40,000 for private colleges.

To help students better prepare for higher education, I used my decades of experience in academic and career planning and put together this guide. This guide explores the best college savings options for 2025 and discusses effective strategies for families to save for college and cut costs if needed.

Key Things You Should Know About the Best College Savings Options for 2025

The average total savings goal for college is around $55,342.
30% of families in the United States are utilizing a college savings fund, such as a tax-deductible 529 plan.
The average balance in a 529 plan is around $27,741.
According to a 2023 report, the total value of UGMA/UTMA accounts is projected to reach $5.4 trillion by 2028.
The annual contribution limit for a Coverdell ESA is $2,000 per beneficiary.
54.4% of tuition costs are covered by the income and savings of students and their families.

The Best College Savings Options for 2025
How do you choose the best college savings options?
When should you start saving for college?
What are the best strategies for saving for college?
What are some tips for reducing college costs?
What are the benefits of automatic contributions to a college savings plan?
Aside from saving for college, how can you use financial aid to cover college costs?
What are some common investment mistakes to avoid when saving for college?
What are some college savings options for adults returning to school?
How are trade schools and vocational programs funded without traditional college savings?
How can part-time students manage college costs effectively?
How can parents with bad credit access affordable education financing?
How can I secure a last minute student loan for unexpected college expenses?
Do college savings options affect financial aid eligibility?
Should I consider private student loans to supplement college savings?
Can self-paced online learning reduce overall education costs?
What impact do college majors have on long-term financial success?
Are online trade degrees a cost-effective alternative for traditional college education?
Can short-term online associate degrees enhance career readiness?
Other Things You Should Know About College Savings Options

The Best College Savings Options for 2025

1. 529 Plan

A 529 plan is a tax-advantaged investment account that is specifically intended to be used to save for future educational expenses. It is an increasingly popular option for families that are budgeting for college expenses due to its numerous advantages. Additionally, certain state tax benefits may apply. Numerous 529 plans provide a diverse array of investment options, enabling you to select a risk tolerance consistent with your savings objectives and timeframe.

Pros:

Tax-Sheltered Growth: Contributions grow tax-free and qualified withdrawals are exempt from federal and potentially state taxes, maximizing your savings potential.
Investment Choice: Choose from various investment options to match your risk tolerance and savings goals.
High Contribution Limits: Save substantial amounts over time with contribution limits exceeding $100,000 in many states.

Cons:

Investment Risk: The value of your investments can fluctuate with the market, potentially leading to losses.
State-Specific Plans: Benefits and fees can vary depending on the state's plan you choose. Consider fees and investment options before enrolling.
Long-Term Commitment: The ideal scenario is to use the funds for college expenses. If your child doesn't pursue higher education, changing the beneficiary comes with tax implications.

Best for:

A 529 plan is an excellent choice for families who have a long time to save for educational expenses (at least 10 years), since the plan allows contributions to grow tax-free. Families saving up for education of multiple children can also use a 529 plan, which can be used for more than one beneficiary.

2. Mutual Funds

Mutual funds are investment vehicles that pool funds from numerous investors to acquire a diversified portfolio of stocks, bonds, or other securities. Mutual funds, which are overseen by professional fund administrators, provide individual investors with access to a diverse array of assets. This can assist in the diversification of risk and the potential for higher returns than individual investments.

Some mutual funds are designed specifically for education savings, with the asset allocation adjusted based on the child’s age. These funds gradually shift from aggressive investments to more conservative ones as the child approaches college age.

Pros:

Risk Management: Mutual funds invest in a wide range of securities, including stocks, bonds, and other assets, which helps to spread risk. Diversification reduces the impact of poor performance by any single investment.
Easy Access: Mutual fund shares can typically be bought and sold on any business day. This liquidity allows investors to access their funds relatively easily if needed for college expenses.
Expertise: Mutual funds are managed by professional portfolio managers who have the knowledge and experience to make strategic investment decisions. This can be especially beneficial for individuals who may not have the time or expertise to manage their investments actively.

Cons:

Market Risk: Mutual funds invest in the stock market, which fluctuates in value. There is no assurance that your investment will increase in value, and you may incur losses if you are required to withdraw funds during a market downturn. This can be risky when you have a specific deadline like college tuition.
No Tax Advantages: Contributions to a conventional investment account that contains mutual funds are not tax-deductible, in contrast to 529 plans. Capital gains taxes may also be due on the profits when you sell mutual fund shares at a profit.
Management Fees: Professional management fees are typically associated with mutual funds. These fees can accumulate over time and diminish your overall return.

Best for:

If you have a long time horizon (more than 10 years) for your college savings goals and a higher risk tolerance, mutual funds within a taxable investment account can offer the potential for higher returns compared to traditional savings accounts. Mutual funds are also a great option for saving up for nonqualified college expenses, like a car or extracurricular activities.

3. Custodial accounts under UGMA/UTMA

Custodial accounts, which are financial accounts established by an adult (typically a parent or guardian) for the benefit of a juvenile, are those established under the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA). These accounts enable minors to possess assets, which are overseen by the custodian until the minor reaches the age of majority, which is typically 18 or 21, depending on the state.

UGMA accounts typically allow the transfer of financial assets, including mutual funds, equities, bonds, and cash. In contrast, UTMA accounts can store a wider variety of assets, such as real estate, art, and other valuable property, in addition to financial assets. UGMA/UTMA account funds are not specifically restricted to education expenses; however, they may be utilized to cover college tuition, fees, books, supplies, room and board, and other associated expenses.

Pros:

Broad Use of Funds: Unlike 529 plans and Coverdell ESAs, UGMA/UTMA accounts are not limited to education expenses. Funds can be used for any purpose that benefits the minor.
Diverse Investment Choices: UGMA/UTMA accounts can hold a variety of assets, including stocks, bonds, mutual funds, ETFs, and even real estate in the case of UTMA accounts. This allows for a diversified investment portfolio.

Cons:

Market Risk: Mutual funds invest in the stock market, which fluctuates in value. There is no assurance that your investment will increase in value, and you may incur losses if you are required to withdraw funds during a market downturn. This can be risky when you have a specific deadline like college tuition.
No Tax Advantages: Contributions to a conventional investment account that contains mutual funds are not tax-deductible, in contrast to 529 plans. Additionally, capital gains taxes may be due on the profits when you sell mutual fund shares at a profit.
Management Fees: Professional management fees are typically associated with mutual funds. These fees can accumulate over time and diminish your overall return.

Best for:

4. Qualified U.S. Savings Bonds

Qualified U.S. Savings Bonds, such as Series EE and Series I bonds, are government-issued securities that can be used to finance education expenses. The interest earned on these bonds may be tax-free if used for qualified educational expenses and if certain conditions are met, including income limits and the age of the bondholder at the time of purchase.

Pros:

Tax Advantages: Interest earned on savings bonds may be tax-free if used for qualified education expenses, provided certain conditions are met.
Low Risk: Backed by the U.S. government, savings bonds are considered a safe investment with a guaranteed return.
No State Taxes: Interest from U.S. savings bonds is exempt from state and local taxes.

Cons:

Lower Returns: Compared to other investment options, the potential returns on savings bonds are relatively low.
Eligibility Requirements: There are income limits for tax-free interest benefits, which may exclude some families.
Limited Use: The tax advantages apply only if the bonds are used for qualified educational expenses.

Best for:

Qualified U.S. Savings Bonds are ideal for conservative investors seeking a low-risk, government-backed savings option. They are particularly beneficial for families with moderate to lower incomes who can take advantage of the potential tax advantages. These bonds are a great choice for individuals looking for a straightforward, low-maintenance way to save for education expenses, offering peace of mind through guaranteed returns and inflation protection with Series I bonds.

5. Roth IRA

A Roth IRA is an individual retirement account that allows for tax-free withdrawals if certain conditions are met. While primarily designed for retirement savings, Roth IRA funds can also be used for qualified educational expenses without incurring early withdrawal penalties, making it a versatile savings vehicle.

Pros

Tax-Free Growth: Earnings grow tax-free, and withdrawals are tax-free if conditions are met.
Flexible Withdrawals: Contributions can be withdrawn at any time without penalties, providing flexibility.
Dual Purpose: Can be used for both retirement and education savings, offering versatility.

Cons

Contribution Limits: Annual contribution limits are relatively low compared to other savings vehicles.
Income Limits: High earners may be ineligible to contribute directly to a Roth IRA.
No Immediate Tax Benefit: Contributions are made with after-tax dollars, offering no immediate tax deduction.

Best for:

A Roth IRA is best suited for individuals looking for a flexible savings option that can serve both retirement and education needs. It appeals to those who value the benefits of tax-free growth and withdrawals. Savers who can manage the lower contribution limits and are mindful of the potential impact on their retirement funds will find the Roth IRA an excellent choice for balancing long-term savings goals with the immediate needs of funding education.

6. Coverdell ESA

A Coverdell Education Savings Account (ESA) is a tax-advantaged savings account designed to help families save for education expenses. Contributions to a Coverdell ESA are made with after-tax dollars, but the earnings grow tax-free, and withdrawals are tax-free if used for qualified education expenses.

Pros

Tax-Free Growth: Earnings and withdrawals are tax-free if used for qualified education expenses.
Broad Use of Funds: Can be used for a wide range of educational expenses, including K-12 and college.
Investment Flexibility: Allows investment in various assets, such as stocks, bonds, and mutual funds.

Cons

Low Contribution Limit: Annual contribution limit of $2,000 per beneficiary, which may not be sufficient for long-term education savings.
Income Limits: Contributions are restricted by the contributor’s income level, limiting eligibility.
Age Restrictions: Funds must be used by the beneficiary’s 30th birthday, or they will be subject to taxes and penalties.

Best for:

The Coverdell ESA is ideal for families who want to save for a broad range of educational expenses, including private school tuition and college costs. It especially benefits those who prefer more investment options for their education savings. This account suits savers who do not exceed the income limits and can manage the relatively low contribution cap, providing a tax-advantaged way to grow and use funds for a child's education from kindergarten through college.

Here's What You Should Know About Graduates Who Used the Best College Savings Options

"Juggling work, parenthood, and going back to school for my nursing degree was a whirlwind. Thanks to my 529 plan, I didn't have to worry about the financial burden of textbooks and tuition. Every dollar saved through the tax advantages of the plan felt like a weight lifted, allowing me to focus on my studies and ultimately land my dream job in pediatrics. Now, I can give my own children the same chance at a bright future." - Elyse

"My family wasn't wealthy, but consistent contributions to a mutual fund specifically designed for college savings made a world of difference. The lower fees compared to other options helped stretch our budget further. While scholarships and grants played a role, the growth in the mutual fund allowed me to graduate debt-free and pursue a career path that may not have offered the highest salary but brought immense satisfaction." - Hailee

"My family knew I was passionate about science and technology camps throughout my childhood. Thankfully, the Coverdell ESA allowed them to contribute towards these enriching experiences, which ultimately fueled my desire to pursue an engineering degree. The tax-free withdrawals for qualified educational expenses, including these early programs, not only helped fund my college education but also laid the groundwork for my future career path." - Colin

How do you choose the best college savings options?

Choosing the best college savings options involves evaluating several key factors. Doing so will help you determine which plan best fits your financial situation and goals.

Evaluate tax benefits. Look into savings options that offer tax advantages. 529 plans, for example, provide tax-free growth and withdrawals for qualified education expenses. Coverdell (ESAs) also offer tax-free withdrawals for educational costs.
Assess contribution limits and fees. Different plans have varying contribution limits and fees. Ensure you understand these details, as they can affect the growth of your savings. 529 plans generally have high contribution limits, while ESAs have lower ones.
Investment options and flexibility. Examine the investment options available within each savings plan. Some plans offer a wide range of investment choices, while others are more limited. Consider how much flexibility you want in managing the investments.
State-sponsored plans and incentives. If you are considering a 529 plan, check if your state offers its own plan with additional incentives, such as state tax deductions or matching grants.

30% - percentage of US families who use a college savings fund

When should you start saving for college?

The best time to start saving for college is as early as possible. Here are some reasons why starting early is beneficial:

Compounding interest. The earlier you start saving for college, the more time your money has to grow through compound interest. Even small contributions can grow significantly over time.
Reduced financial burden. Starting early allows you to spread out your savings over many years, reducing the financial burden as your child approaches college age.
More investment options. With a longer time horizon, you can choose more aggressive investment options, which typically offer higher returns over the long term.
Flexibility. Early savings give you more flexibility to adjust your contributions based on changes in your financial situation or college cost estimates.
Increased savings potential. Consistent, long-term saving increases the total amount you can accumulate, which can reduce the need for student loans or other financial aid.

Based on a recent report, the total assets in all Section 529 plans, designed to help save for higher education expenses, reached $471.2 billion. This marks a 14.6 percent increase from the end of 2022. The chart below presents an annual overview of the total amount of savings plans in the US:

What are the best strategies for saving for college?

Saving for college can be challenging, but with the right strategies, you can make it more manageable. Here are some effective tips on how to save for college:

Start early. The earlier you start saving, the more time your money has to grow. Consider opening a 529 savings plan when your child is born.
Set a goal. Determine how much you need to save by the time your child starts college. This will help you create a realistic savings plan.
Automate savings. Set up automatic transfers from your checking account to your college savings account to ensure consistent contributions.
Take advantage of tax benefits. Use tax-advantaged accounts like 529 plans or Coverdell ESAs, which offer tax-free growth on your investments.
Look for scholarships. Encourage your child to apply for scholarships and grants, which can significantly reduce the amount you need to save.
Reduce expenses. Cut unnecessary expenses and allocate that money towards your college savings.
Invest wisely. Choose a mix of investments that balance growth and safety, adjusting your strategy as your child gets closer to college age.

54.4% - percentage of tuition covered by the income and savings of students and their families

What are some tips for reducing college costs?

Reducing college costs can make higher education more affordable and lessen the financial burden on students and their families. Here are some effective tips for cutting down on college expenses:

Enroll in community college first.

Community colleges often have significantly lower tuition rates compared to four-year institutions. Completing general education requirements at a community college before transferring can save a substantial amount of money. Many community colleges have agreements with four-year universities to ensure a smooth transfer process.

Choose in-state public universities.

In-state public universities typically offer lower tuition rates for residents compared to out-of-state or private institutions. Investigate the residency requirements for in-state tuition to ensure you qualify.

Live off-campus or at home.

When budgeting for college, it's important to understand the room and board meaning, as it encompasses the costs of housing and meals while attending college. However, living off-campus or with family can be more affordable than campus housing. Consider shared apartments or commuting from home to reduce costs. While off-campus living can be cheaper, budget for utilities, groceries, and other living expenses.

Go for work-study programs and part-time jobs.

Participate in work-study programs or find part-time jobs to earn money while attending school. Many universities offer on-campus jobs that are flexible with class schedules. Look for paid internships related to your field of study. They provide valuable experience and financial benefits.

Take advanced placement (AP) or dual enrollment courses.

AP or dual enrollment courses can earn college credits while still in high school, potentially reducing the number of credits needed to graduate from college. Accumulating college credits in high school can shorten the time required to complete a degree, saving on tuition and fees.

Apply for scholarships and grants.

Start looking for scholarships and grants as early as possible and continue searching throughout college. Many organizations offer scholarships based on merit, need, or specific talents.

The chart below shows the average government grant and scholarship aid received by students across different family income levels.

What are the benefits of automatic contributions to a college savings plan?

There are several benefits to making automatic contributions to a college savings plan. By setting up automatic contributions, families ensure that money is regularly deposited into the savings account, reducing the temptation to skip or delay contributions. This consistency helps accumulate funds over time, leveraging the power of compound interest to grow the savings more effectively than sporadic, larger deposits might.

When contributions are automated, families can also plan their finances with the knowledge that their college savings goal is being met systematically. This can alleviate the pressure of having to make manual contributions each month and helps in maintaining a steady saving rhythm without constant reminders or additional effort.

Furthermore, automated contributions can be aligned with payday schedules, making it easier to manage cash flow and ensuring that savings are prioritized before discretionary spending.

Aside from saving for college, how can you use financial aid to cover college costs?

Though having a savings account for college is helpful, financial aid can prove to be crucial for covering the cost of a college education. The first step to getting financial aid from federal sources is completing the Free Application for Federal Student Aid (FAFSA). This application assesses your financial situation to determine eligibility for federal grants, loans, and work-study programs. Filling out the FAFSA early is important, as some aid is awarded on a first-come, first-served basis. States and colleges also use FAFSA information for their own financial aid.

Grants and scholarships are desirable forms of financial aid since they don't need to be repaid. Federal grants like the Pell Grant are based on financial need and can significantly reduce tuition costs.

Scholarships, which can be merit-based, need-based, or awarded for specific talents, are available from various sources, including colleges and private organizations. Applying for multiple scholarships can substantially cover college expenses, and researching each school's offerings is essential.

Student loans, which must be repaid with interest, are another common form of financial aid. Federal student loans usually have lower interest rates and more flexible repayment options than private loans. Subsidized federal loans do not accrue interest while you're in school.

72% - percentage of undergraduates who received some type of financial aid during their school year

What are some common investment mistakes to avoid when saving for college?

When saving for college, avoiding common investment mistakes can help safeguard your funds and maximize growth potential.

Below, I've listed several pitfalls to steer clear of:

Neglecting risk tolerance. One common mistake is investing too aggressively or conservatively based on your risk tolerance. Aggressive investments may offer higher returns but also carry higher risk of loss, which can be detrimental if the market declines before you need the funds. On the other hand, overly conservative investments may not generate enough growth to keep pace with college inflation.
Ignoring time horizon. Investing without considering your time horizon can lead to inappropriate asset allocation. Short-term goals, such as funding college tuition within a few years, typically require more conservative investments to protect the principal. Longer-term goals may allow for more aggressive investments to potentially achieve higher returns.
Not diversifying. Failing to diversify investments across different asset classes (e.g., stocks, bonds, real estate) and sectors can increase portfolio risk. Diversification helps spread risk and mitigate losses from a decline in any single investment. It’s essential to balance investments based on your risk tolerance and financial goals.
Chasing performance. Trying to time the market or chasing past performance of investments can be risky. Investments that have recently performed well may not continue to do so in the future. It’s crucial to focus on the long-term strategy rather than short-term gains.
Overlooking fees and expenses. High investment fees and expenses can significantly erode returns over time. It’s important to understand the costs associated with each investment option, including management fees, transaction fees, and expense ratios, and choose investments with reasonable costs.

What are some college savings options for adults returning to school?

Adults returning to school have several college savings options to consider, tailored to their unique financial situations and goals.

In my research, I found several options that adult students can explore for saving for their education:

Traditional and Roth IRAs. While primarily retirement accounts, IRAs can be used to save for education expenses under certain conditions. Withdrawals from a traditional IRA before age 59½ are subject to income tax and a 10% penalty, but there are exceptions, including for qualified education expenses. Roth IRAs allow penalty-free withdrawals of contributions (not earnings) for education expenses.
Employer tuition assistance programs. Many employers offer tuition reimbursement or assistance programs as part of their benefits package. Adults returning to school should explore these options with their employer to potentially reduce out-of-pocket costs for education.
Scholarships and grants. Adults returning to school may qualify for scholarships and grants based on various factors such as academic achievement, field of study, financial need, or demographic criteria. Many organizations and institutions offer scholarships specifically for adult learners.
Student loans. While not a savings option, federal and private student loans are available to help cover educational costs for adults returning to school. Federal student loans typically offer lower interest rates and more flexible repayment options compared to private loans.
Personal savings and investments. Adults returning to school can also use personal savings, investments, or other assets to fund their education. This may include savings accounts, CDs, stocks, bonds, or real estate investments.

How are trade schools and vocational programs funded without traditional college savings?

Trade schools and vocational programs have grown in popularity as viable alternatives to traditional four-year colleges, offering specialized training at a fraction of the cost. For students who haven't utilized traditional college savings plans or are seeking alternative funding pathways, there are several strategies available.

Federal financial aid is one option, as many programs qualify for aid through completing the FAFSA. Grants, such as the Pell Grant, can often be applied to vocational training if the institution is accredited. Additionally, some trade schools offer institutional scholarships, reducing the need to rely solely on savings.

Private funding is another avenue to explore. Specialized loans targeted at vocational training and trade school education are available. For instance, students can consider leveraging "student loans for trade schools" to cover tuition and related expenses, provided they carefully compare loan terms and interest rates.

Employer-sponsored tuition assistance programs may also be an option, particularly for adults returning to school to advance their careers. Many companies provide financial support to employees enrolling in job-relevant training programs, reducing out-of-pocket costs.

Lastly, state-sponsored workforce development grants and scholarships are increasingly being directed toward trade education initiatives, aligning with labor market demands for skilled workers. Researching options specific to your state can uncover additional financial support opportunities.

How can part-time students manage college costs effectively?

Part-time students often face unique financial challenges compared to their full-time counterparts, such as balancing work and family obligations while pursuing education. To effectively manage college costs, leveraging flexible financial aid options becomes indispensable.

One avenue for part-time students is exploring federal student aid programs by completing the Free Application for Federal Student Aid (FAFSA). While some federal grants and loans are available only to full-time students, many part-time students still qualify for financial aid, including Pell Grants and subsidized loans, depending on their enrollment status and financial need.

Another strategy involves tapping into tailored loan options specifically designed for part-time students. For example, researching "part time student loans USA" can provide insights into financing options with more flexible repayment terms and competitive interest rates for those studying part-time in the country.

Employers can also play a significant role in reducing education costs for part-time students. Employer-sponsored tuition assistance programs often offer financial support in exchange for commitments to stay with the organization post-graduation. Additionally, local or state scholarships and grants targeted at non-traditional students provide further financial relief, particularly for part-time enrollees.

Finally, effective budgeting is crucial. Creating a detailed monthly expense plan that factors in tuition, books, and living expenses can help part-time students manage limited resources. Pairing a strict budget with part-time jobs and internships, especially those aligned with their field of study, can substantially offset education costs while improving career prospects.

How can parents with bad credit access affordable education financing?

Parents with lower credit ratings can explore specialized financing options that assess factors beyond conventional credit scores, enabling a more flexible approach to funding education. Many lenders focus on alternative criteria, such as stable income and repayment history, to offer competitive terms. Researching dedicated programs and comparing offers can help ensure that funding supplements college savings without impractical cost burdens. For tailored options, evaluate student loans parents bad credit to find solutions that align with your financial profile.

How can I secure a last minute student loan for unexpected college expenses?

When unforeseen expenses arise and your available savings are depleted, evaluating emergency financing options becomes essential. A last minute student loan may bridge funding gaps if planning or external aid falls short. Analyze lender requirements, repayment structures, and associated fees carefully to ensure the solution supports your long-term financial strategy without compromising your credit standing.

Do college savings options affect financial aid eligibility?

Different college savings vehicles are assessed differently in financial aid formulas. For instance, assets held in a 529 plan typically receive a more favorable treatment compared to custodial accounts, potentially reducing the overall aid award reduction. In contrast, some tax-deferred accounts may be viewed more stringently when determining aid eligibility. Understanding these nuances can inform your savings strategy to optimize both your long-term investment returns and financial aid outcomes. Consider exploring options such as cheap online colleges that accept FAFSA in Texas to further balance savings with eligibility criteria for federal aid.

Should I consider private student loans to supplement college savings?

Private student loans can bridge funding gaps when savings and aid prove insufficient, yet they necessitate a rigorous comparison of loan terms and repayment options. Evaluate interest rates, fees, and repayment flexibility to ensure the selected option aligns with your financial profile. It is crucial to contrast private offers with federal loans to determine the most cost-effective and risk-mitigated approach. For an in-depth analysis of a competitive alternative, consider the SoFi student loan.

Can self-paced online learning reduce overall education costs?

Self-paced online learning can significantly lower overall education expenses by eliminating costs typically associated with on-campus programs, such as housing, transportation, and ancillary fees. Additionally, these flexible programs enable students to accelerate their learning pace, potentially reducing the total time—and tuition—required to complete a degree. Many self-paced programs offer competitive pricing without compromising academic rigor, making them an attractive option for non-traditional students balancing work and family commitments. For further insights into innovative, cost-effective learning strategies, consider exploring options available through an online self paced college.

What impact do college majors have on long-term financial success?

When evaluating college savings strategies, it is important to consider how the chosen field of study affects future earnings and debt management. A major with high lifetime earning potential can better justify higher savings and investment in education, and may also open access to exclusive scholarships and advanced funding options. Analyzing long-term financial outcomes helps refine savings goals and offers insight into which academic paths may yield optimal returns. For a comprehensive overview of academically and financially rewarding disciplines, review the best majors in college.

Are online trade degrees a cost-effective alternative for traditional college education?

Research shows that pursuing technical certifications and skill-based training through online platforms can significantly reduce tuition expenses while providing timely access to industry-relevant competencies. Many learners find that programs offering online trade degrees not only cut costs on ancillary fees and transportation but also offer flexible scheduling to align with work or family commitments. This cost-effective educational pathway enables students to quickly enter the workforce with practical skills, often resulting in faster career advancement and reduced reliance on traditional student loans.

Can short-term online associate degrees enhance career readiness?

Short-term online associate degrees offer an accelerated pathway to gaining marketable skills that align with current industry standards. These programs typically require fewer months to complete compared to traditional degrees, allowing students to enter the workforce sooner while managing overall education expenses. They provide focused, career-oriented training that can lead to immediate employment opportunities and competitive salary prospects. Exploring options such as top 6-month associate degree programs online can help prospective students evaluate programs that deliver both cost efficiency and rapid career progression.

Key Findings

Around 50% of families with students heading to college report having specific savings for college.
Families aim to save approximately $55,342 in total for college expenses.
The typical balance in a 529 savings plan is about $27,741.
By 2028, the total value of UGMA/UTMA accounts is expected to reach $5.4 trillion, according to a 2023 report.
Families can contribute up to $2,000 per beneficiary annually to a Coverdell Education Savings Account (ESA).
30% of families in the U.S. are using college savings funds, such as tax-deductible 529 plans.
54.4% of tuition costs are funded by the income and savings of students and their families.

Other Things You Should Know About College Savings Options

What is the best account for college savings?

The 529 Plan is often considered one of the best accounts for college savings due to its tax advantages. Contributions grow tax-free, and withdrawals for qualified education expenses are also tax-free at the federal level (and often at the state level too). Many states offer additional tax benefits for contributions to their own 529 plans.

What happens to 529 if kid doesn't go to college?

If the beneficiary (the child for whom the 529 plan was established) does not go to college or pursue higher education, you have several options for handling the funds in a 529 plan:

Change beneficiary. You can change the beneficiary to another eligible family member without incurring taxes or penalties. Eligible family members typically include siblings, parents, grandparents, aunts, uncles, and even first cousins of the original beneficiary.
Hold for future use. You can leave the funds in the 529 plan account in case the beneficiary decides to attend college later. There is no age limit for using the funds, so they can remain invested and grow tax-free indefinitely until needed.
Withdraw the funds. You can withdraw the funds from the 529 plan. However, if the withdrawals are not used for qualified education expenses, the earnings portion of the withdrawal may be subject to federal income tax and a 10% penalty.

What is better, UTMA or 529?

Deciding between a UTMA account and a 529 plan depends on your specific financial goals and circumstances:

529 Plan. Generally, a 529 plan is better suited for college savings due to its tax advantages. Contributions grow tax-free, and withdrawals for qualified education expenses are tax-free. Many states offer additional tax benefits for contributions.
UTMA/UGMA Account. UTMA/UGMA accounts offer flexibility in terms of how the funds can be used, as they are not restricted to educational expenses. However, they do not provide tax advantages for education savings. Income generated in UTMA/UGMA accounts may be subject to taxes each year, depending on the amount and type of income.

In summary, a 529 plan is typically the preferred choice for college savings due to its tax benefits and specific focus on educational expenses. UTMA/UGMA accounts may offer more flexibility in how funds are used but do not provide the same tax advantages for educational savings.

References:

EducationData.org. (2023). College savings statistics. Education Data Initiative.
EducationData.org. (2023). Scholarship statistics. Education Data Initiative.
Internal Revenue Service. (2023, April 7). Topic No. 310, Coverdell education savings accounts. IRS.
Investment Company Institute. (2023). 529 plan data. Investment Company Institute.
National Center for Education Statistics. (2024). What’s new? Press releases. NCES.