COLLEGE SAVINGS PLANS

	Section 529 Plans	Coverdell ESA	Series 1 Savings Bonds	Mutual Funds	Saving Accounts	Variable Universal Life
Tax Benefits on Earnings	Federal + state income tax deferred + federal income tax free, if withdrawals used for qualified higher education expenses	Income tax free, if used for qualified education expenses (elementary, secondary + higher)	State + local income tax free, federal income tax deferred. For qualified taxpayer, earnings full or partially deductible from FIT, if used for qualified higher education expenses	No special benefits: earnings taxed in year realized – unless municipals or tax-managed funds used	No special benefits: earnings taxed in year realized	Earnings are tax deferred. However they can be withdrawn or borrowed without taxation
Qualified Higher Education Expenses	Tuition, fee books, supplies, room & board, + equipment	Tuition, fees, books, supplies, room & board, + equipment	Tuition + fees only	Any expense	Any expense	Any expense
Investment Limitation?	Varies by state. Some states allow lifetime account balances up to $265,620	Up to $2,000/year	Up to $30,000/year	No limit	No limit	No limit
Income restriction?	NO	Yes	No/on purchases. However there is income restriction on excluding earnings from FIT	No	No	No
Financial Aid Treatment – treated as:	Savings plans: parents’ assets: prepaid plans may reduce aid $ for $	Student’s assets	Parents’ assets if education expenses are for a child. Student’s assets if education is for self	Parents’ assets	Owner’s assets	Assets are not considered in figuring Financial Aid
Investment Decisions?	State sponsor with input from program manager	Owner	Guaranteed returns	Owner	Owner	Owner
Withdrawals/ Redemptions	Earnings on non-qualified withdrawals taxed at distributee’s rate plus 10% penalty	Earnings on non-qualified withdrawals taxed at distributee’s rate plus 10% penalty	Can be redeemed after 6 mos. A 3-mos. earnings penalty if redemption is within 5 years of issuance	Money can be withdrawn at any time for any purpose.	Money can be with- drawn at any time for any purpose	Money can be withdrawn at any time for any purpose.
Impact on Hope of Lifetime Tax Credits	Education expenses used to support tax-free distributions may not be used to claim Hope or LTC	Education expenses used to support tax-free dis- tributions may not be used to claim Hope or LTC	Education expenses used to support tax-free distributions may not be used to claim Hope or LTC	None	None	None
Is the value of the account excluded from the owner’s taxable estate	No	No	No	No	No	No