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If you find yourself intimidated by the ever-rising price of higher education, then a 529 college savings plan might be a key component in saving for a college education. A 529 college savings plan is a tax-advantaged way to save for college and pay for higher education expenses. Unlike some other savings vehicles, a 529 college savings plan may allow you to make sizeable contributions. The funds may generally be used for any qualified college or higher education expense, including tuition, room, board, fees, books, supplies, and equipment. Tax benefits may be subject to certain restrictions.

Types of 529 Plans

Although many details of 529 college savings plans vary by state, they generally come in two forms:

College savings plansallow you to invest your money in an account to pay for the student's higher education expenses. Students can use the funds for qualified expenses at accredited institutions in the U.S. and abroad.

Prepaid tuition plans—allow you to lock in tuition rates at eligible colleges or universities with a lump-sum investment or monthly payments. In other words, since you are paying in advance, you are avoiding potential tuition inflation down the road.