How exactly does a 529 College Savings Plan work?

A 529 plan enables your family - including grandparents and other relatives - to put aside money for a child's college tuition and related college expenses. The "529" refers to the section of the federal tax code that created these college savings plans, allowing earnings to grow tax-deferred.

A 529 savings plan is generally offered by a state and managed by a professional investment firm, offering a variety of stock, bond, and money market mutual funds. With 529 plans, the minimum contribution is often low, allowing families to save more easily. Minimum contribution limits may vary from plan to plan. For example, the minimum contribution for the UA College Savings Plan is $50/month or $250.

Better still, earnings in a 529 plan aren't taxed each year. And when funds are withdrawn to pay for tuition, room and board, books, fees, or other qualified educational expenses, they're not subject to federal taxes.

Find out more about specific advantages of the UA College Savings Plan.

If you are not an Alaska resident, you should compare this Plan with any 529 college savings plan offered by your home state or your beneficiary's home state and consider, before investing, any state tax or other benefits that are only available for investments in the home state's plan. You can call 1-866-277-1005 or visit the forms section of our site to request a Plan Disclosure Document, which includes investment objectives, risks, fees, charges and expenses, and other information that you should read and consider carefully before investing. T. Rowe Price Investment Services, Inc., Distributor/Underwriter.