The best gift for your child's future? A college savings plan | Earnest

The best gift for your child’s future? A college savings plan

By Sarah Netter | Published on October 21, 2025

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David Kiner has already started saving for his children’s college education even though his daughter is just 2 years old and his second child hasn’t even been born yet.
“It is our hope that we will be able to help our children financially with their higher education costs so that when they graduate, they will not be burdened with tremendous debt,” said Kiner, adding that he and his wife are still paying off student loans at age 35.

There are countless ways to save for college, including savings accounts, traditional investment portfolios, long-term Certificates of Deposit (CDs), and savings bonds. But 529 education savings plans are a hot topic among parents with kids still in diapers—and with good reason.

Parents say ‘no student debt’ for their kids

Unlike other savings accounts, 529 education savings plans allow you to grow your money tax-free and then spend it, also tax-free, on education-related expenses. Those qualified education-related expenses include tuition, room and board, books, computers, and software. You can also spend up to $10,000 per year per child on elementary and secondary school tuition.

Additionally, changes to the 529 College Savings Plans in 2024 allow for tax- and penalty-free rollovers of up to $35,000 of unused 529 funds into Roth individual retirement accounts under certain conditions.

And as of December 2023, there were approximately 16.4 million 529 plan accounts, an increase of 2.5% from the previous year according to Investment Company Institute. The combined assets of all Section 529 plans reached $471.2 billion—that’s an average account size of about $28,750.

Start your 529 plan as early as possible

Parents who set up 529 plans for their newborns will likely reap the greatest rewards when their children are college-aged since their savings have had almost two decades to grow.

“I set up a fund for my now 6-year old daughter within a month of her being born,” said Meryl Ravitz, a chief financial officer from New York City. “I used the NY 529 direct plan and picked a few funds.”

Though her daughter is entering first grade this fall, Ravitz is looking much farther into the future.
“I felt it was important to start saving early as college costs just keep increasing,” she said.

And as of the third quarter of 2024, total student loan debt in the United States reached $1.77 trillion, with the average federal student loan debt per borrower at $38,375. Which is one of the reasons why Ravitz and other parents are looking to give their children the best chance possible to afford a college education without taking on debt.

Even if you can’t save enough to cover the full cost of college, a combination of savings, scholarships, and loans can help ease the financial burden. Some families choose to use 529 savings to pay for the first few years of college while supplementing with loans for the remaining balance. Parents should explore all their options, including federal and private lending products, to determine what works best for their financial situation.

We break down what you should know about opening a 529 college savings plan.

Do your research on 529 college savings plans

Though 529 college savings plans are operated by each state, you do have a few options to choose from. Some states have more than one offering and you can buy out of state plans (though you’d miss out on the in-state contributor benefits that many states offer).

Kiner, an employee with the Connecticut Department of Labor, said their state program offered financial incentives, including a sign-on matching bonus, that made it an easy pick.
The program offers a “one-time $100 contribution to an individual CHET Direct Plan Account opened by a child’s first birthday or within the first year after the adoption of a child.”

You also have a few different options for buying in. You can purchase a plan directly from the state, which is called a “direct-sold” plan. You can also sign up through your financial advisor, though this option may cost you more in broker fees since you are going through a middleman of sorts.

Read the fine print

Due to recent changes to the rules of 529 plans, they may have initial fees, so it’s important to compare plans carefully.

According to the Securities and Exchange Commission, fees could include:

These fees vary based on your investment options. While state sponsors do charge some fees, you will generally be charged additional fees if you choose to open a 529 through a broker.

Set your budget and contribute to your college savings plan frequently

College may be mind-bogglingly expensive but your contributions don’t have to break your budget to add up.

Amanda H., a mom of two from Louisiana, started saving when she was pregnant with her children, now 9 and 12 years old, and then set up their 529 plans through the state when they were babies.
“Louisiana actually has a great plan,” she said. “Contributions can be deducted from state income tax and even at a high income, the state matches 2%.”

She and her husband automate their payments monthly to take advantage of that matching incentive. Their diligence is paying off. Their daughter now has about $30,000 in her 529 plan, which won’t pay the full bill, but “it gives us options,” she said.

Ravitz makes her 529 contributions before the money even hits her bank account by having a set amount taken directly out of her paycheck each month and put into the 529.
“It’s forced savings,” she said. “I don’t even think about it.”

Consider prepaid tuition plans

Natasha Wiest, a quality engineer in Florida, set up 529 education savings plans for her daughters, now 3 and nearly 6, as soon as they had social security numbers.
She and her husband contributed diligently for several years. But when Wiest and her husband moved to Florida earlier this year, they decided to open a Florida 529 prepaid tuition plan for each child so their daughters’ tuition will be paid in full by the time they start college.

529 prepaid tuition plans offer similar tax benefits as 529 education savings plans, but they do come with one major bonus—you can lock in tuition prices at current rates. Prepaid tuition plans do have additional restrictions, however, such as residency requirements and guidelines on where you can use the money—typically public and/or in-state institutions.

The Wiests are now letting the 529 education savings plans grow without further contributions while they contribute monthly automated payments to the prepaid tuition plans.
“College is a major life purchase and it’s important to plan for it,” Wiest said, “We want our kids to be able to graduate college debt-free and be able to start adulting with a clean slate.”

Explore more ways to afford college

Saving for college is a long-term commitment but it doesn’t have to be the only option in your toolkit.

If you’ve exhausted all savings accounts, scholarships, and federal student loan options, another approach for parents is to consider whether cosigning a student loan could make college more accessible for their child. This option may help students qualify for better interest rates or higher loan amounts, but it comes with a risk—parents are equally liable for repayment if their child defaults. Families should have an open conversation about the shared responsibility before committing to this route.

Parents may also look into federal Parent PLUS loans, which are specifically designed to help parents cover education expenses. Unlike cosigned loans, these loans are entirely in the parent’s name, meaning the borrower is solely responsible for repayment. While they offer flexible repayment plans and deferment options, they typically carry higher interest rates than federal student loans taken out by the student.

For families who need additional funding for college, exploring flexible student loan options can make higher education more attainable. Whether you’re considering cosigning a loan, taking out a Parent PLUS loan, or looking for refinancing options, Earnest offers personalized tools to help you make the best choice for your family’s needs.

Visit Earnest to learn more about how our student loan products can support your college funding journey—and help your child graduate with fewer financial worries.