The ABC’s of 529 College Savings Plans

The following is a post from our sponsor, Fidelity Investments, manager of the MEFA® U.Fund® College Investing Plan.

Whether you’ve got toddlers, teenagers, or even grandchildren, one thing is certain—paying for college seems to get more expensive every year. In fact, the average annual cost (tuition, fees, and room and board) for a four-year, in-state public college is already $17,860 for the 2012–2013 tuition year, and $39,518 per year for a fouryear private college.1 It’s no surprise that college expenses can be overwhelming. There may be no better way to start saving than by opening and contributing to a 529 college savings plan account.


What’s a 529 plan?

Designed specifically to help pay for qualified costs associated with higher education, a 529 college savings plan is a state-sponsored, tax-advantaged account that allows for distributions to pay for things like tuition, fees, books, supplies, and any approved equipment a student may need, to study at an accredited institution.

What are the advantages of saving in a 529 account?

• Potential tax benefits. There are no federal income taxes on investment earnings for money in a 529 used to pay for qualified higher education expenses. This alone is a significant benefit, but there are other tax benefits as well.

• Minimal impact on financial aid. Many families worry that saving for college will hurt their chances of receiving financial aid. Since 529 college savings plan assets are considered parental assets, they are factored into federal financial aid formulas at a maximum rate of about 5.6%. This means that only about 5.6% of the 529 assets are included in the Expected Family Contribution (EFC) calculated during the federal financial aid process. That’s far lower than the 20% rate that is assessed on student assets, such as assets in an UGMA/UTMA (custodial) account.

• Greater flexibility. In many ways, a 529 college savings plan has fewer restrictions than other college savings plans. 529 plans have no income or age restrictions and have no upper limit on contributions.

• Great gift idea. Anyone with children or grandchildren who will likely go to college, whether they are now babies or teenagers, may want to consider investing in a 529 college savings plan. The sooner you start, the longer you have to take advantage of the tax-deferred growth and generous contribution limits.

How do I get started?

Call 800-544-2776 to talk with a Fidelity college planning representative about opening a MEFA U.Fund College Investing Plan account. Or, learn more about the benefits online now.

To read the full article, "The ABC's of 529 College Savings Plans," please visit Fidelity Viewpoints.


1. Trends in College Pricing, 2012. College Board Advocacy and Policy Center. Increase is from the 2001–2002 to the 2012–2013 college tuition year.

The U.Fund College Investing Plan is offered by MEFA and managed by Fidelity Investments. If you or the designated beneficiary is not a Massachusetts resident, you may want to consider, before investing, whether your state or the designated beneficiary's home state offers its residents a plan with alternate state tax advantages or other benefits.

MEFA is a not-for-profit self-financing state authority that works to make higher education more accessible and affordable for students and families in Massachusetts through community education programs, college savings plans, and low-cost financing options.

Units of the portfolios are municipal securities and may be subject to market volatility and fluctuation. Please carefully consider the plan's investment objectives, risks, charges, and expenses before investing. Contact Fidelity for this and other information on any 529 college savings plan managed by Fidelity, call or write to Fidelity for a free Fact Kit, or view one online. Read it carefully before you invest.

MEFA, MEFA UFUND MASSACHUSETTS 529 PLAN and U. FUND are registered service marks of the Massachusetts Educational Financing Authority. The Fidelity Investments and Pyramid design logo, Turn here and the Navigational Line and Directional design are service marks of FMR LLC.

Investing involves risk, including risk of loss.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917


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