Stop Burying Your Head: A Parent's Guide to 529 Plans

Tuition isn't waiting — and neither should you

An ostrich burying its head doesn't stop the lion from getting hungry. And yet, when the topic of college savings comes up, most parents do exactly that — they look away, hoping the ticking clock of tuition costs will somehow sort itself out. It won't. There are plenty of tools available to help you fight back: UGMA/UTMA accounts, Coverdell accounts, brokerage accounts, scholarships, and student loans, to name a few. But one of the most powerful and flexible options available is the 529 plan — and most people don't realize it actually comes in two very different forms.

Introduced in 1996 with the Small Business Job Protection Act, the 529 has evolved significantly over the past 30 years. Tax-deferred growth, tax-free withdrawals for qualified expenses, and an ever-expanding list of eligible uses have made it a cornerstone of education planning. But choosing between its two variations — the savings plan and the prepaid tuition plan — is a decision worth understanding deeply, because they protect you against very different risks.

The savings plan works much like a 401k. Your money goes in, grows tax-deferred, and comes out tax-free when used for qualified expenses. You choose the investments, you bear the risk, and you reap the rewards. All 50 states offer at least one savings plan, and contribution limits are generous — up to $19,000 per year per contributor, or $38,000 if both parents utilize the split-gift strategy. Recent legislation has sweetened the deal further. The 2025 tax bill doubled the annual K–12 usage limit from $10,000 to $20,000, meaning families can now tap these funds earlier and more aggressively than before. There's also a safety net for the common fear of over-saving: if your child doesn't use the remaining balance, up to $35,000 can be rolled into a Roth IRA in the beneficiary's name — a significant wealth-building opportunity. There are conditions, of course. The 529 account must have been open for at least 15 years, rollovers can't exceed annual Roth IRA contribution limits ($7,500 in 2026), and the beneficiary must have earned income equal to at least the amount being rolled over. The primary downside of the savings plan is straightforward — market risk is yours to carry. If the portfolio takes a hit the year before tuition is due, there's no cushion.

The prepaid tuition plan works on an entirely different premise. Rather than investing money and hoping the market cooperates, you're purchasing tuition credits at today's prices — locking in the current rate regardless of what college costs in a decade or more. If in-state tuition runs $15,000 today and climbs to $30,000 by the time your child enrolls, you've already paid for it at the old price. That's a meaningful hedge against both tuition inflation and investment volatility, and for the right family, it's an incredibly powerful guarantee. The tradeoff is flexibility. Only 17 states currently offer prepaid plans, they're typically restricted to in-state public institutions, and the expansive tax benefits and rollover options available in the savings plan generally don't apply here.

So which lion are you more afraid of — market volatility or tuition inflation? That's the real question at the heart of this decision. If you're comfortable choosing investments, want the flexibility to use funds across a wide range of institutions, and like the idea of a potential Roth IRA backstop, the savings plan is likely your best fit. If the thought of watching your college fund swing with the market keeps you up at night, and you happen to live in one of the 17 states that offers a prepaid option, that plan deserves a serious look — especially if your child is likely to attend an in-state school.

Either way, the worst move is no move at all. The lion doesn't care which plan you choose — it only cares that you kept your head in the sand. Both types of 529 plans offer real, meaningful advantages over doing nothing, and the best one is simply the one you'll actually start. Keep in mind the CURO team can help you see the landscape around  you, dial in the details, pick your strategy, and let time do the heavy lifting. Your future self — and your kid's future tuition bill — will thank you.

The fees, expenses, and features of 529 plans can vary from state to state. 529 plans involve investment risk, including the possible loss of funds. There is no guarantee that an education-funding goal will be met. In order to be federally tax free, earnings must be used to pay for qualified education expenses. The earnings portion of a nonqualified withdrawal will be subject to ordinary income tax at the recipient’s marginal rate and subject to a 10 percent penalty. By investing in a plan outside your state of residence, you may lose any state tax benefits. 529 plans are subject to enrollment, maintenance, and administration/management fees and expenses.