Putting money away for school for yourself or a future student? If so, having a goal or estimate of how much you need to save is helpful. If you haven’t started saving yet, it is never too late to begin. Even small savings today are better than no savings at all.
Cwqs`aweollege savings plans—especially 529 plans—have morphed into pretty flexible, tax-friendly vehicles to help pay for education. With benefits like generous contribution limits, tax-deferred growth, and an expanding roster of qualified expenses, these plans are stepping up to tackle a wider range of education-related costs. Given how steep tuition and fees have gotten (private four-year schools now average over $43,000 a year just for tuition and fees), starting early and sticking with a 529 plan can really ease the financial pressure of higher education down the line.
College Savings Plans: 2025 Guide
These days, budgeting for college is more of a must than a maybe. If you’re looking at ways to handle rising education bills, College Savings Plans—especially the familiar Section 529 Plans—offer a pretty solid route. Backed by the state and loaded with tax perks, these plans have changed a bit recently, giving families even more wiggle room and benefits than before.
Estimated Future College Costs by Child’s Current Age (2025)
It is important to plan ahead given the typical rise in cost for college education. The following chart visualizes the estimated future cost of attending college—both private and public—for a child, based on their current age. These projections help families understand how the cost of college increases the younger the child is today, reflecting the impact of tuition inflation over time. A great savings plan can help you tackle these costs over time.
| Child’s Current Age (Years) | Private College Cost (USD) | Public College Cost (USD) |
| 1 | $257,543 | $118,312 |
| 3 | $234,164 | $107,571 |
| 6 | $202,753 | $93,140 |
| 9 | $174,918 | $80,353 |
| 12 | $150,580 | $69,173 |
| 15 | $130,558 | $59,975 |
| 18 | $123,884 | $56,909 |
- These figures are based on interpolated estimates using recent data and reflect the total projected cost of attending college when the child reaches college age.
- The trend demonstrates that the younger the child is today, the higher the expected future cost due to ongoing tuition inflation.
Getting to know 529 College Savings Plans
A 529 plan is, in essence, a special account built to help you save for school—all while cutting you some tax slack. Its name comes right out of Section 529 of the tax code, but really, it mixes tax benefits, control, and the kind of flexibility you need when planning ahead.
They catch on for a few reasons:
- They’re open to nearly everyone, regardless of income or age.
- They work not only for your kids but can also help out grandchildren, nieces, nephews, or even get back to you.
- Taxes take a backseat here: earnings build tax-free, and withdrawals for qualifying education costs aren’t taxed either.
- Contribution limits are quite generous, which means there’s room to craft some serious college-funding strategies.
And don’t forget, new rules like those in the SECURE 2.0 Act from December 2022 have stretched these benefits even further, letting you use 529 funds for more than just typical college expenses.
Facing Up to Today’s College Costs (2024-2025)
It really helps to have a feel for what college costs look like right now. For the 2024-2025 school year, you’ll see that average costs—tuition, fees, plus room and board—have been creeping up across the board. For example:
- Public four-year in-state programs run about $11,610 for tuition and fees (and roughly $13,310 extra for living on campus),
- Public four-year out-of-state programs hit around $30,780 just for tuition and fees,
- Public two-year in-district options are nearly $4,050 for tuition and fees,
- And private nonprofit four-year schools demand roughly $43,350 for tuition and fees.
Notably, private four-year institutions saw the heftiest increase—up about $1,610 from previous years. This steady rise really underscores why planning and saving early is so important.
Different Types of College Savings Plans
Prepaid Tuition Plan
One option to consider is a Prepaid Tuition Plan. With these, you essentially buy credits at today’s prices to be used later at certain colleges. Typically sponsored by state agencies, these plans aim to lock in current tuition rates—a neat trick if costs keep climbing. That said, there’s a catch: full benefits usually kick in only if the student attends an in-state public college; choosing an out-of-state or private option might only return part of the original investment.
529 Education Savings Plan
Then there’s the 529 Education Savings Plan, which works more like an investment account. Instead of buying credits, you put money into mutual funds or similar products, and the account’s value ebbs and flows with the market.
The plus side? These plans offer much greater freedom in school choice—usable at almost any accredited college or university. They also present more investment options to suit your personal risk appetite and can cover a broader range of costs beyond just tuition and fees.
Of course, higher potential returns come with the usual investment risks. And don’t worry about being boxed in by geography; while most states sponsor their own 529 plans, you can invest in a plan from another state regardless of where you live or where the beneficiary will eventually go.
Contribution Limits and Tax Benefits for 2025
Annual Contribution Limits Vary by State
Unlike retirement accounts such as 401(k)s or IRAs, 529 plans don’t come with a set federal cap on annual contributions. Instead, each state sets its own overall contribution limit per beneficiary.
For instance, in states like Georgia and Mississippi, the cap is around $235,000, while Arizona allows contributions up to $575,000.
New Hampshire tops out at approximately $569,123, Utah at $560,000, and a group of states—Alaska, Connecticut, Missouri, Vermont, Virginia, and West Virginia—hover near the $550,000 mark.
These caps represent the total amount you can contribute to a 529 account for one beneficiary under that state’s program.
Gift Tax Rules and Superfunding Strategy
529 contributions may also trigger gift tax considerations. For 2025, individuals can contribute up to $19,000 per beneficiary per year without incurring gift tax. For married couples filing jointly, this rises to $38,000.
There’s also the “superfunding” option, which allows donors to front-load five years of contributions. That equates to $95,000 for individuals or $190,000 for couples in 2025, all without triggering reporting requirements.
Tax Benefits of 529 Plans
529 plans offer several tax advantages:
- Tax-deferred growth on investment earnings
- Tax-free withdrawals when used for qualified education expenses
- Estate tax benefit, as contributions are excluded from the donor’s taxable estate
- State tax incentives, with many states offering deductions or credits for contributions (benefits vary by state)
Expanded Use Under the SECURE 2.0 Act
Recent updates via the SECURE 2.0 Act have expanded how 529 funds can be used:
- Up to $10,000 per year for K–12 tuition
- Up to $10,000 lifetime for student loan repayment
- Qualified apprenticeship program expenses
- Rollover to a Roth IRA up to $35,000, if the 529 account has been open for at least 15 years
These changes increase flexibility, especially if the original beneficiary doesn’t use all funds for traditional college expenses.
Choosing the Right 529 Plan
When comparing 529 plans, consider the following:
- State tax benefits for using your home state’s plan
- Investment options that align with your risk tolerance and time horizon
- Plan fees, which can erode long-term savings
- Historical performance as an indicator of fund management quality
- Extra features such as matching grants, scholarship links, or easy-to-use online tools
Choosing a plan with strong features and benefits can help you maximize savings and simplify management.
Using a College Savings Calculator
- First, review some basic terminology below to understand what information is required for accurate results.
- Once you’re comfortable, check out our calculator to estimate how much you need to save to meet college costs.
- You can modify your monthly contribution amount to see how much your savings can compound and grow over time. Also, you can modify your savings interest rate to see how different types of investments could perform.
Calculator Terminology
- Total Savings for College
- Total amount of money for total college costs (including tuition and other expenses). This is not a year by year estimate. Estimate the full cost of the four or two years.
- Ex: $25,000 for 4 years (including room and board and living expenses).
- Total amount of money for total college costs (including tuition and other expenses). This is not a year by year estimate. Estimate the full cost of the four or two years.
- My Current Savings
- Amount of money you currently have saved.
- Ex: $10,570 saved so far in a checking account that will be invested.
- Also, for your savings make sure to include any confirmed scholarships, grants or other familial assistance that will offset costs.
- Ex: $10,570 saved so far in a checking account that will be invested.
- Amount of money you currently have saved.
- Savings Interest Rate
- Is the money being kept in a traditional savings or checking account? If so, a typical interest rate will be between 1-3% APY. But if the savings funds are kept in an investment account, like a 529 Savings Plan or Roth IRA, it is possible to see greater returns per year. It will depend on market performance, but it is possible interest rates could be 5% or more per year — or lower in the event of a financial downturn.
- Ex: 529 Savings Plan @ 5% APY.
- Is the money being kept in a traditional savings or checking account? If so, a typical interest rate will be between 1-3% APY. But if the savings funds are kept in an investment account, like a 529 Savings Plan or Roth IRA, it is possible to see greater returns per year. It will depend on market performance, but it is possible interest rates could be 5% or more per year — or lower in the event of a financial downturn.
- Additional Amount I Save Each Month
- Amount of money you intend to save and put into above account each month. The more you can contribute, the more interest you will accumulate and compound to reach your savings goal faster.
- Ex: $250 per month.
- Amount of money you intend to save and put into above account each month. The more you can contribute, the more interest you will accumulate and compound to reach your savings goal faster.
- Number of Years Until College
- If you plan to enroll in school (whether undergraduate, graduate or other) simply enter the number of years until you plan to enroll.
- Ex: 6 years.
- If you plan to enroll in school (whether undergraduate, graduate or other) simply enter the number of years until you plan to enroll.
Hypothetical Saving Example #1
Using the information above, here is my sample savings plan from the calculator:
According to the calculator, I met my savings goal. To play devil’s advocate here, this calculator does not currently account for future tuition increases. Still, I will be roughly $10,000 above my goal amount which should account for any tuition increases within a three year period.
Remember, this is only a ball-park estimate for school costs. This is why it is so important to make sure you increase your monthly contributions over time or find a higher-yield investment account.
Hypothetical Savings Example #2
Same information as above, except attending school in three years as opposed to six years. In other words, saving later as opposed to earlier.
Instead of saving for six years, three years doesn’t quite get me to my goal. I fell $3,034.90 short of the $25,000 target. Again, this stresses the importance of starting as soon as you can and making savings a habit.