A 529 College Savings Plan is an education savings plan operated by a state or educational institution that can help you set aside funds for future college costs. Texas offers a 529 plan that can be used to meet the cost of qualified colleges both in-state and out-of-state.
A 529 Plan (named after Section 529 of the Internal Revenue Code) provides special tax benefits including both federal and state benefits, simplified tax reporting and flexibility. You can maintain control over your own funds and the amount you can put into a 529 plan is substantial. In addition, there are no income limitations or age restrictions.
529 plans may be either prepaid or savings plans.
• Savings Plans work like a 401K or IRA. Your contributions are invested in mutual funds or other investments. Your account will go up or down in value based on the performance of the particular investments.
• Prepaid Plans allow you pre-pay all or part of the costs of an in-state public college education. They may also be converted for use at private and out-of-state colleges. The Independent 529 Plan is a separate prepaid plan for private colleges.