Giving Kids the Gift of College-For Free

The idea for this article started with a terrible college gifting option. Instead of people going for an expensive option to give the gift of college savings (for the holidays, birthdays, new baby, or other occasions) I wanted to pull together a consolidated list of college gifting options by state.

The Expensive College Gifting Option

I was online searching for articles on “Saving for College” the other day, and noticed an article about a company that lets you give a gift card for college savings. At first I thought it sounded interesting – a gift card for college? Sounds like a good gift! But then I wondered how they make money, and started doing some digging on their site. And WOW did this sound expensive.

  • Activation fee – for a credit card it ranges from $3 all the way up to $12. By E-Check it’s a flat $3 fee.
  • Want a physical card? That’s another $3-$25, depending on mailing method
  • Recipient doesn’t cash the card? Inactivity fee of $5 after a year, and another $5 if the funds revert to the bank
  • Paper transaction history? That’ll be another $3
  • Tax deductible? No!

I also read an article in US News and World Report that talks about options to gift college savings, and one of them is a gift card sold at Toys R Us and Babies R Us that costs $6!

So what’s the selling point? Apparently it’s that you don’t need to know the recipient’s 529 account information to make a contribution.

Giving kids the gift of college savings

Giving the Gift of College Savings – For Free

You may be asking yourself, isn’t there an easier, less expensive way to do this? Why yes, reader, there sure is. You could give cash to the parents and ask them to make the 529 deposit – downsides to that approach being that you can’t take the tax deduction (if applicable), and you need to trust the parents to make the deposit.

But many 529 plans have what’s called an eGift option, or other online gifting, where the parent can set up the plan to send an e-mail with online and mailing contribution options. And it’s free! And tax deductible to you, if applicable for your state and the plan. Every birthday and Christmas, I send out a gifting invitation to relatives for my three boys. All those small contributions over time (as little as $25!) will add up to a lot compounded over the years.

What options do you have for a 529 gift?

  • You can open a new 529 in the recipients name
  • Gift to an existing 529 held by the parents or another account holder
  • You can also open a new 529 in your own name and transfer it to the recipient when they graduate high school, if you want to keep it a surprise.

If you’re an account owner with children, and you’re interested in getting college savings as a gift? Check out my easy one-stop college gifting guide to see what 529 gifting options are available for your account.

Looking to see what’s available in your state, or the beneficiary’s state? Look no further! Here’s a handy-dandy list for you last minute, financially conscious gifters.

Note – I didn’t include advisor sold funds here. Buying direct is much less expensive. Also note that the tax information comes from Saving for College (link at the end of the chart) and is for 2016, it may change in the future. Insert disclaimer of consulting a tax professional for more on your specific situation applies here.

Plan State 2016 Morningstar Rating Gifting Option & Link Tax Benefits
College Counts 529 AL Bronze Available online Up to $5k individual/$10k joint
T Rowe Price College Savings Plan AK Silver Mailing only
Fidelity Arizona College Savings Plan AZ Bronze Online gifting available Up to $2k individual/$4k joint
Arizona site
The Gift College Investing Plan AR Available online or through the mail Up to $5k individual/$10k joint
Scholar Share CA Silver Available online or through the mail
College Invest CO Bronze Available online or through the mail Contributions are deductible (not rollovers)
Connecticut Higher Educational Trust CT Bronze Available online or through the mail Up to $5k individual/$10k joint (contributions only, not rollovers)
Delaware College Investment Plan DE Bronze Online gifting available
Delaware site
DC College Savings Plan DC Mail or phone contribution, or you can open an account Up to $4k individual/$8k joint, but only for account owner
Florida Prepaid or 529 FL Mailing only
Path 2 College 529 GA Available online or through the mail Up to $2k per beneficiary individual/$4k per beneficiary joint (not rollovers)
Hawaii 529 HI Available online or through the mail
iDeal Idaho College Savings Program ID Available online or through the mail Up to $4k individual/$8k joint
Bright Start College Savings IL Bronze Mailing only Up to $10k individual/$20k joint (principal only for rollovers)
College Choice 529 IN Bronze Available online or through the mail 20% credit on up to $5k in contributions (not rollovers)
College Savings Iowa IA Bronze Available online or through the mail Up to $3,188k individual/$6.376k joint, but only for the account owner
Learning Quest KS Available online or through the mail Up to $3k per beneficiary individual/$6k per beneficiary joint for KS and non-KS plans (not rollovers)
Kentucky Education Savings Plan Trust KY Available online or through the mail
Start Saving for College LA Mailing only Up to $2,800 per beneficiary individual/$4,800 per beneficiary joint
Next Gen ME Bronze Mailing only Matching gifts available
Up to $250 per beneficiary per year to ME and non-ME plans (income limits apply)
Maryland College Investment Plan MD Silver Mailing only Up to $2,500 per beneficiary individual/$5,000 per beneficiary joint
Massachusetts 529 Plan MA Bronze Online gifting available Up to $1k individual/$2k joint
MA site
Michigan Education Savings Program MI Silver Available online or through the mail Contributions are deductible, but not rollovers
Minnesota College Savings Program MN Available online or through the mail
Mississippi Affordable College Savings MS Available online or through the mail Up to $10k individual/$20k joint
Missouri MOST MO Silver Available online or through the mail Up to $8k individual/$16k joint to MO and non-MO plans, but only for account owner (except for spouses filing jointly)
Achieve Montana MT Available online or through the mail Up to $3k individual/$6k joint to MT and non-MT plans, but only for account owner, owners spouse, or owners custodian/parent
NEST NE Bronze Available online or through mail Up to $10k ($5k married filing separately) , account owner only
Vanguard 529 College Savings Plan NV Gold Available online or through the mail
UNIQUE College Savings Plan NH Bronze Online gifting available
NH Site
NJ Best 529 NJ Mailing only
The Education Savings Plan NM Mailing only Contributions are deductible
NY’s 529 College Savings Program NY Silver Available online or through the mail Up to $5k individual/$10k joint (account owner or account owner spouse only)
NC’s National College Savings Program NC Mailing only
College SAVE ND Available online or through the mail Up to $5k individual/$10k joint
College Advantage 529 OH Silver Available online or through the mail Up to $2k per beneficiary per year
Oklahoma College Savings Plan OK Available online or through the mail Up to $10k individual/$20k joint
Oregon College Savings Plan OR Bronze Available online or through the mail Up to $2,310 individual/$4,620 joint
Pennsylvania 529 PA Available online or through the mail Up to $14k per beneficiary per year individual/$28k per beneficiary per year joint to PA and non-PA plans (not rollovers)
College Bound 529 RI Silver Available online or through the mail Up to $500 individual/$1000 joint (not rollovers)
Future Scholar 529 SC Bronze Available online or through the mail Contributions are deductible
College Access 529 SD Negative Mailing only
Gift Certificate
TN Stars TN Available online or through the mail
Gift Certificate
Texas College Savings Plan TX Available online or through the mail
Utah Educational Savings Plan UT Gold Available online or through the mail Max credit $95 per beneficiary individual/$190 per beneficiary joint. Account must have been established when beneficiary is under 19. Contributions from non-account owners are credited to the account owner.
Vermont Higher Education Investment Plan VT Available online or through the mail Up to $2,500 per beneficiary per year individual/$5k per beneficiary per year joint (account owner or account owner spouse only)
Virginia 529 Invest VA Gold Mailing only Up to $4k per account per year (fully deductible over 70). Contributions from non-account owners are credited to the account owner.
GET 529 (prepaid) WA No gifts until 2017
Smart 529 WV Negative Mailing only Contributions are deductible
Edvest College Savings Plan WI Bronze Available online or through the mail Up to $3,100 per beneficiary per year
None WY N/A

Looking to learn more, about 529’s or research how much of a tax deduction you might get? Here’s a handy set of resources for you to learn more:

Check out more about saving for college in my post about my college compact with my kids, why sometimes the advice that you can get loans for retirement but not college is wrong, or my thoughts on the How America Pays for College study by Sallie Mae.

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chiefmomofficer

IT professional, MBA, working mother of three, avid reader, geek and personal finance nerd

3 thoughts on “Giving Kids the Gift of College-For Free

  • January 1, 2017 at 8:24 am
    Permalink

    Goodness – saving for college is really complicated in the US! We are very lucky in my country. Our main Universities are funded by the State and are free. No tuition fees at all. We just need to pay for books and consumables. Kids tend to live at home and commute, so no major living expenses either. It’s a big relief, frankly. Makes saving a lot easier.

    Reply
    • January 1, 2017 at 11:27 am
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      That would be so nice! What country are you from? Unfortunately here it’s pretty much funded by the parents-especially if you make a good income.

      Reply
      • January 1, 2017 at 1:42 pm
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        I live in Malta, Europe. We have state funded education and health. It’s a great weight off our mind not to have to worry about saving for our kids’ education or having to pay insurance. That said, we do not have the tax incentives you have when it comes to saving for retirement – so I guess there are pros and cons 🙂

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