What’s the best way to save for college?
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When it comes to saving money for college, there are many options available—each with their own set of benefits. The best option for you depends on multiple factors, like your savings goals, risk tolerance and investment preferences.
Bright Start 529 may check all the right boxes
529 plans are one of the most popular ways families choose to save for college. Other common methods include Roth IRAs or a standard bank savings account.*
Bright Start 529
1 - yes checkmark Can reduce your Illinois state taxable income up to $20,000 if married filing jointly 4
- yes checkmark Tax-deferred growth
- yes checkmark Tax-free withdrawals for qualified education expenses
- yes checkmark Investment options
- yes checkmark No income restrictions
- yes checkmark No age restrictions for withdrawals
- yes checkmark High annual contribution limits
Roth IRA2
- no x No state tax deductions
- yes checkmark Tax-deferred growth
- potential question mark Potential tax-free withdrawals **
- yes checkmark Investment options
- no x Income restrictions
- no x Age restrictions for withdrawals
- no x Lower contribution limits
Bank Savings Account3
- no x No state tax deductions
- no x No tax-deferred growth
- no x No tax-free withdrawals
- no x No investment options
- yes checkmark No income restrictions
- yes checkmark No age restrictions for withdrawals
- yes checkmark High annual contribution limits
Moreover, money saved in a 529 does not disqualify students for financial aid. 529 assets are typically treated as belonging to the parent (or grandparent, etc.) and count less in the Student Aid Index (SAI) calculation than assets held in the child’s name.
Learn more at https://studentaid.gov/ or check with the schools you are considering.
Why choose Bright Start 529
- Bright Start 529 offers a tax deduction to Illinois taxpayers—up to $20,000 for joint filers or $10,000 for single filers.4
- With Bright Start 529, any growth you see over time won’t be subject to taxes down the line if used for qualified higher education expenses.
- Bright Start 529 savings do not disqualify students from financial aid and count less in the SAI than assets held in the child’s name.5
Have any questions about ways to save for education? We have answers.
Bright Start 529 compares favorably to other ways to save. A 529 plan can mean more flexibility and growth potential, including:
- Tax-free qualified withdrawals
- Illinois state tax deduction
- Low fees and expenses
- Easy-to-choose investment options
- Favorable financial aid treatment
- Use for a wide range of education expenses and programs—in Illinois and around the world
Get more details and compare savings options.
No. Your Bright Start 529 funds can be used at any eligible university in the country—and even some abroad. This includes public and private colleges and universities, apprenticeships, community colleges, graduate schools and professional schools.1 Up to $10,000 annually can be used toward K-12 tuition (per student).1 In addition, your 529 can be used for student loan repayment up a $10,000 lifetime limit per individual.1 Review a list of qualifying expenses and the state tax treatment of withdrawals for these expenses in the Plan Description.
Footnotes
- 1Withdrawals for tuition expenses at a public, private or religious elementary, middle or high school can be withdrawn free from federal tax. For Illinois taxpayers, these withdrawals may include recapture of tax deduction, state income taxes well as penalties. Withdrawals for registered apprenticeship programs and student loans can be withdrawn free from federal and Illinois income tax. If you are not an Illinois taxpayer, these withdrawals may include recapture of tax deduction, state income tax as well as penalties. You should talk to a qualified professional about how tax provisions affect your circumstances.↩
When you contribute to a Bright Start 529 Plan account, any earnings are federal and Illinois income tax-deferred until withdrawn. Then withdrawals used to pay for qualified education expenses are federal and state income tax-free.
Yes, Illinois taxpayers can reduce their state taxable income up to $20,000 if married filing jointly ($10,000 filing single) for contributions made into Bright Start 529.1
Footnotes
- 1An individual who files an individual Illinois state income tax return will be able to deduct up to $10,000 per tax year (up to $20,000 for married taxpayers filing a joint Illinois state income tax return) for their total, combined contributions to the Bright Start Direct-Sold College Savings Program, the Bright Directions Advisor-Guided 529 College Savings Program and College Illinois! during that tax year. The $10,000 (individual) and $20,000 (joint) limit on deductions will apply to total contributions made without regard to whether the contributions are made to a single account or more than one account. The amount of any deduction previously taken for Illinois income tax purposes is added back to Illinois taxable income in the event an account owner makes a nonqualified withdrawal from an account. If Illinois tax rates have increased since the original contribution, the additional tax liability may exceed the tax savings from the deduction.↩