Basics of 529 College Savings Plans

The plans are named after Section 529 of the Internal Revenue Code.

A 529 plan is a tax-advantaged education savings plan designed to encourage families to save for future  education expenses.

There are two different types of 529 plans: investment plans and prepaid tuition plans.

Investment plans allow you to invest in a variety of investment options (or portfolios) which typically include varying combinations of mutual funds. You can decide how much you want to invest or contribute, how often, and in what type of portfolio. Savings in this type of 529 plan can be used for a variety of education expenses including tuition, fees, room and board, course-specific fees, books and other supplies.

Prepaid tuition plans allow you to lock-in (pre-purchase) tuition amounts at current contract rates to cover higher-education expenses when your child is of college age. These accounts are designed to be used towards tuition and mandatory fees at accredited two-year and four-year colleges and universities.

In Maryland, we offer the Maryland College Investment Plan.

As of June 1, 2023, the Maryland Prepaid College Trust is no longer accepting new enrollments.

Benefits of Saving with a 529 Investment Plan

It's affordable. Initial investment options can fit most family budgets.

It's flexible. With an investment plan it's up to you how often and how much to invest within the broad limits of the plan.

It offers tax advantages on the State and federal level.

Beneficiaries are still eligible for financial aid.

Saving early and regularly in a 529 plan may provide the potential for long term growth.

Have additional questions? Visit 529 Basics FAQ.