Top 10 Myths about Saving for College

See the myths and learn the facts about how the 529 plan can help you save for college

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On average, the cost of college doubles every nine years according to, a comprehensive source of student financial aid information, advice and tools. To combat tuition inflation families have turned to 529 college savings plans, a state sponsored tax advantaged education savings plan that allows account holders to save money for a designated beneficiary (your child, niece, nephew, grandchild etc.) to pay for future college costs. Although 529 plans have been around for nearly 15 years, common misconceptions and misguiding information persist. The College Savings Plan Network (CSPN), a non-profit source for state-operated college savings programs, is working to debunk those myths.

1. MYTH: 529 plans are only for wealthy investors.
FACT: 529 plans have much lower required minimum contribution amounts than many other investments, making them accessible and convenient for families of any income level. Families can usually start a plan with as little as $15 to $25 per month.

2. MYTH: I can just take out loans to pay for college, or my child will get financial aid.
FACT: Approximately 60 percent of federal financial aid comes in the form of student loans, and all loans represent debt that a family must incur. Any savings, even in small increments, that a family can put away will offset the final amount of debt it must take on to pay for college.

3. MYTH: Due to the recession and state budget gaps, investors in prepaid 529 plans have lost all of their investment.
FACT: There are currently 13 states that offer a Prepaid Tuition or Guaranteed Savings Plan that allow for the pre-purchase of tuition based on today’s rates to be paid out at the future cost when the beneficiary is in college. While some states needed to rectify budget gaps created by the recent financial crisis, to date, a prepaid tuition plan has never run out of money to pay back investors.

4. MYTH: 529 plans are only for young children.
FACT: There is no maximum age for a 529 plan. Assets may be used at eligible schools offering adult career training or advanced degrees, including part-time programs.

5. MYTH: If I save now, my child won’t be eligible to receive as much financial aid later.
FACT: The Deficit Reduction Act of 2005 specifies that funds saved in 529 plans are generally considered to be parental assets, which means that only about six percent of these assets are currently counted towards the family’s expected contribution in federal need-based financial aid calculations.

6. MYTH: A 529 plan can only be used at schools in my home state.
FACT: Assets from 529 plans may be used at any school that is accredited and eligible to accept federal financial aid. This includes nearly all public and private colleges in the United States and many trade and technical schools as well. It even includes some colleges located outside of the US.

7. MYTH: The tax advantages of 529 plans will expire.
FACT: The Pension Protection Act of 2006 repealed the 2010 sunset of the federal tax exemption for Section 529 plans and ensures that money saved for higher education in 529 plans can continue to be used tax-free to help pay for college.

8. MYTH: A 529 plan can only be used for a four-year college.
FACT: Assets from 529 plans may be used at any eligible school, including two- and four-year colleges, graduate schools and vocational and technical schools. Funds may be used for tuition, fees, certain room and board costs, and in 2010, computers and course-related software.

9. MYTH: If my child doesn’t go to college, I will lose my money.
FACT: A 529 account holder can change the plan’s beneficiary to another eligible “member of the family,” such as siblings or even oneself with no tax penalty.

10. MYTH: Opening a 529 plan is complicated.
FACT: Most 529 plans allow account holders to open an account online or through a financial advisor.

These myths were provided by the College Savings Plan Network (CSPN)

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