By Tim Gorrell, Executive Director, Ohio Tuition Trust Authority

December 8, 2020

You know the saying, “It’s never too late…” Truly, it’s never too late to save for your child’s college education in a 529 plan, even if it’s their senior year of high school. Why? 529 plans offer many benefits to enhance the growth of funds placed aside for future college costs—even if the future is 2021.


529 Plan Tax Benefits

The first benefit is tax-free earnings. If you are saving for college in a regular savings account, then you’re doing a good thing to support your child’s future. However, you’re missing the advantage of the tax-free earnings available with a 529 plan. The nominal earnings on a regular savings account are taxed yearly but 529 investments grow tax-free at the federal and state level, ensuring that every dollar of growth is yours to use.

The second tax benefit is tax-free withdrawals for qualified expenses. These include costs that are required to attend two-year or four-year colleges, vocation or trade schools, or an apprenticeship program. The costs include tuition; room and board (based at least half of a full-time academic workload enrollment); mandatory fees; computer equipment and related technology as well as internet services; and books, supplies and equipment related to enrollment and class schedule. Room and board costs can also include rent for off-campus residency and groceries (non-taxable items), provided these costs are equal to or less than the same room and board allowances from the accredited educational institution. Starting in 2020, 529 plans can now be used to pay for apprenticeship costs such as fees, textbooks, supplies and equipment like required tools. Not all states programs yet recognize apprenticeship expenses as qualified expenses under state law. Please verify with your state’s program if your 529 can be used for apprenticeship costs.

Most state college savings programs offer state income tax deductions or credits for residents of the state who contribute to their state’s 529 plan. If your state offers a state tax deduction or credit, this could provide you a state tax benefit even as you’re saving for next school year or next semester. To see what your state offers, check out CSPN’s Comparisons Tool.


529 Plans Can Be Used Nationwide

Your child may already know what school they’d like to attend. Your 529 plan can be used nationwide at any federally accredited educational institution— whether for an associate, bachelor’s, graduate or vocational degree. Remember, just because you save in your state’s 529 plan, your child isn’t limited to only attending a post-secondary education program in your state.


Ask For Gifts Towards A Higher Education

For your child’s high school graduation party, their birthday, or even this holiday season, you can ask for gifts toward their higher education. Check with your 529 program about their online gifting platform or other gifting options so grandparents, family members and friends can contribute to your child’s 529 plan. Even small gifts can add up to big savings.

Even if you are getting a late start with your college savings, a 529 plan is how forward-thinking parents make college doable. A 529 plan is an excellent alternative to student loan debt. Any funds you can set aside in a college savings account is money your child won’t have to borrow for their education. And that’s truly a gift.


About the Author

Tim Gorrell is the executive director of Ohio Tuition Trust Authority. For more than 30 years, Ohio Tuition Trust Authority has sponsored and administered Ohio’s 529 College Savings Program, CollegeAdvantage. Ohio’s 529 Plan oversees more than 653,000 accounts and over $13.5 billion in assets as of Sept. 30, 2020. Visit or call 1-800-AFFORD-IT (233-6734) for more information.