Compare College Savings Plans

Compare College Investment Products

This page provides information on eligibility, taxation and impact on financial aid of the three different investment vehicles that may be used to save and invest for college expenses.

Before investing in or contributing to a college investment product, consider your or your designated beneficiary's investment objectives, risk tolerance and time horizon.

Which college savings account is right for you? Explore your choices.

Merrill Edge® offers different options to help you plan for college. Choose the account that best meets your college savings needs.
A state-sponsored, tax-advantaged college savings plan that offers contribution limits as high as $250,000 annually to help you pay for college expenses
A taxable custodial account invested on behalf of a minor that can be used for any expense that benefits that minor

May be a good move for...

  • Investing for a college education
  • Tax-deferred growth
  • Withdrawing money federal (and often state) tax-free for qualified higher education expenses1,3
  • Using funds at any accredited U.S. college or university and at some foreign schools
  • Investing on behalf of a minor
  • Ability to use funds for any expense
  • Allowing a minor to own assets at vesting age
  • Accessing a full range of investment choices
  • Enjoying the flexibility of a cash managed account

What's covered?

Qualified higher education expenses include:1
  • Tuition, fees, room and board2
  • Books and supplies
  • Expenses for the purchase of a computer or peripheral equipment, computer software, or Internet access and related services
  • Certain expenses in the case of a special needs beneficiary
  • No restrictions on where funds can be used as long as they benefit the minor

Who manages the account?

  • Owner controls the account, the beneficiary is the person using the funds for higher education expenses — usually a child. Friends and family can also open an account or contribute to an existing account on behalf of a child
  • Custodian controls the account until the minor reaches the
    vesting age

Can I change the beneficiary?

  • Yes—beneficiary can be changed to another family member with no tax consequences6
  • No—beneficiary cannot be changed

Tax advantages

  • Any earnings have the opportunity to grow tax-deferred and withdrawals are federal (and often state) tax-free when used for qualified higher education expenses1
  • Contributions are considered completed gifts and are removed from your taxable estate for estate tax purposes
  • Contribute up to $14,000 ($28,000 for couples) annually or up to $70,000 ($140,000 for couples) gift tax-free in a five-year period4
  • In 2017, the first $1,050 of a child's income generally is tax-exempt, the next $1,050 of unearned income generally is taxed at the child's tax rate, and unearned income over $2,100 generally is taxed at the parent's tax rate if the child is under age 19 (or is a full-time student under age 24) at the end of the year
  • Contribute up to $14,000 ($28,000 for married couples) gift tax-free annually4

Impact on financial aid eligibility

  • More favorable in determining the Expected Family Contribution (EFC)—treated as parental asset5
  • Less favorable in determining the Expected Family Contribution (EFC)—treated as minor's asset


How much can I contribute?

  • Most plans allow contributions in excess of $250,000 per beneficiary. Gift tax restrictions apply4
  • Can only be funded with cash contributions
  • Contribute up to $14,000 ($28,000 for married couples) gift tax-free annually.4 No statutorily imposed maximum contribution amounts

What are the income limits?

  • None
  • None

What are the age limits on contributions?

  • No age limit
  • No age limit

What are the age limits on withdrawals?

  • No age limit
  • No age limit

Withdrawals and taxes

  • Earnings portion of nonqualified withdrawals is subject to federal and state income tax, plus a 10% additional federal tax7
  • In 2017, the first $1,050 of a child's income generally is tax-exempt, the next $1,050 of unearned income generally is taxed at the child's tax rate, and unearned income over $2,100 generally is taxed at the parent's tax rate if the child is under age 19 (or is a full-time student under age 24) at the end of the year
  • Annual tax return may have to be filed for any earnings in the account

Investment options

  • Varies by plan. Most plans offer investment portfolios consisting of underlying mutual funds or individual mutual fund options
  • Investment options typically range from age-based options, in which the asset allocation mix adjusts based on the age of the beneficiary, to fixed allocation portfolios that range from conservative to aggressive
  • No restrictions other than those imposed by the relevant state UGMA/UTMA laws
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Please remember there's always the potential of losing money when you invest in securities.

Before you invest in a Section 529 plan, request the plan's official statement from your Financial Solutions Advisor and read it carefully. The official statement contains more complete information, including investment objectives, charges, expenses and risks of investing in the 529 plan, which you should consider carefully before investing. You should also consider whether your home state or your beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's 529 plan. Section 529 plans are not guaranteed by any state or federal agency.

Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

1 To be eligible for favorable tax treatment afforded to any earnings portion of withdrawals from Section 529 accounts, such withdrawals must be used for "qualified higher education expenses," as defined in the Internal Revenue Code.

For withdrawals from Coverdell ESAs, expenses must be "qualified higher education expenses" or "qualified elementary and secondary education expenses," as defined in the Internal Revenue Code.

Any earnings withdrawn that are not used for such expenses are subject to federal income tax and may be subject to a 10% additional federal tax, as well as applicable state and local income taxes.

2 The beneficiary must be attending an accredited institution as least half time for room and board to be considered an eligible expense.

3 Section 529 plans are established by various states and are offered to residents of all states. Depending on the laws of the customer's home state, favorable tax treatment for investing in a Section 529 plan may be limited to investments made in a Section 529 plan offered by the customer's home state. Neither Merrill Lynch, Pierce, Fenner & Smith Incorporated nor any of its subsidiaries are tax or legal advisors. We suggest you consult your personal tax or legal advisor before making tax or legal-related investment decisions.

4 For 2017, individuals can gift up to $70,000 ($140,000 for married couples filing jointly) per beneficiary in a single year without incurring gift tax. Contributions between $14,000 and $70,000 ($28,000 and $140,000 for married couples filing jointly) made in one year can be prorated over a five-year period without subjecting you to gift tax or reducing your federal unified estate and gift tax credit. If you contribute less than the $70,000 ($140,000 for married couples filing jointly) maximum, additional contributions can be made without you being subject to federal gift tax, up to a prorated level of $14,000 ($28,000 for married couples filing jointly) per year. Gift taxation may result if a contribution exceeds the available annual gift tax exclusion amount remaining for a given beneficiary in the year of contribution. For contributions between $14,000 and $70,000 ($28,000 and $140,000 for married couples filing jointly) made in one year, if the account owner dies before the end of the five-year period, a prorated portion of the contribution may be included in his or her estate for estate tax purposes.

5 Financial aid rules may change, and the rules in effect at the time the beneficiary applies may be different. For more complete information visit the Department of Education Web site at

6 The account owner can change the beneficiary to another member of the family of the original beneficiary, without penalty. Please refer to the Internal Revenue Code definition of "member of the family." If assets are contributed from an UGMA/UTMA account, the custodian may not change the designated minor, except as permitted by applicable law.

7 The 10% additional tax does not apply to withdrawals as a result of the designated beneficiary receiving a scholarship or the designated beneficiary's attendance at a U.S. military academy provided the withdrawals do not exceed the amount of the scholarship or value of attendance at the academy. The 10% additional tax also does not apply as a result of withdrawals made due to the death or disability of the designated beneficiary.

8 Merrill Edge Roadmap® participation requires a Merrill Edge Advisory Center™ account.