EDUCATION SAVINGS PLANS

Build a Plan

Now that you know the number, create a plan to reach it. Read through the product comparisons below to determine the option that best meets your needs. Remember to be realistic with your savings based on your current budget, knowing the plan can be adjusted over time.

Want to Talk to Someone?

Registered State Farm® agents are ready to help you with your education plan. Find an agent near you and set up an appointment today.

How Others Are Planning

Not sure which products might be right for you? Read other's stories below and see how they are planning their futures.

Family Getting Started

This couple is in their late twenties and are the parents of a three-year-old. They're both employed with a household income of $85K, which helps them pay down their student loan debt and credit card debt.

Here's their education plan:

Financial Goals

Short Term

  • Pay off credit card debt
  • Save for first home
  • Reduce student loan debt

Long–Term

  • Save for retirement
  • Save for daughter's college

Family with Multiple Goals

This couple is in their late thirties with two kids: a ten-year-old and a six-year-old. The family is a single-income household earning $90K to take care of the family and to help pay down their mortgage. They have taxable savings and tax-advantaged retirement savings (401(k) and IRA).

Here's their education plan:

Single Parent Family with Multiple Goals

Single parent is 50 years old with two kids: a 17-year-old and a 12-year-old. She's self-employed with an income of $180K to help pay down the remaining balance in her mortgage. She has taxable savings, 529 Plans for her children, life insurance, and tax-advantaged retirement savings (401(k) and IRA).

Here's her education plan:

Research for Yourself

Take time to review each of the product options below. The link at the bottom of each column will direct you to more information about each specific plan. Once you're ready to select a plan, download the plan's form and fill in your information online.

Savings Options

Coverdell ESA State Farm College Savings Plan (529) UGMA/UTMA
Highlights

A tax advantaged trust or custodial account for any child under 18 years of age.

  • Save up to $2,000 each year for:
    • Elementary education
    • Secondary education
    • Post-secondary education (i.e. four-year university, community college, etc.)

A tax advantaged college savings plan open to any individual who has a valid Social Security number.

  • There are no state residency requirements or income restrictions.
  • Investors from any state can invest in the State Farm Savings Plan (529) — sponsored by the state of Nebraska.
  • If the beneficiary decides not to pursue post-secondary education, an individual may:
    • transfer the balance to an account for another beneficiary who is a qualified member of the family, or
    • withdraw the principal and investment earnings in a non–qualified withdrawal.

A custodial account allowing gifts or transfers of property to a child under a certain age2 without setting up a trust.

  • Funds are not required to be used for education expenses.
  • Transfers are considered an irrevocable transfer to the named minor.
  • Establish an account for a child under either* the:
    • Uniform Gift to Minors Act (UGMA)
    • Uniform Transfer to Minors Act (UTMA)
Contribution Limit

Up to $2,000 per child (under 18 yrs. old)

  • Up to $2,000 each year for contributors with a modified adjusted gross income (MAGI)1 less than $190,000, if filing jointly, or $95,000 for single filers.
  • The maximum contribution amount is reduced and gradually phased out for contributors with a modified adjusted gross income between $190,000 and $220,000 (joint filers), or between $95,000 and $110,000 (single filers).

Individual contributions of up to $70,000 ($140,000 for married couples) per beneficiary are allowed in a single year with no federal gift tax.

  • The total amount of all contributions to all accounts maintained within the Nebraska Educational Savings Plan Trust for the same beneficiary may not exceed $360,000.
  • No additional contributions may be made for a single beneficiary when the fair market value of all accounts maintained within the Nebraska Educational Savings Plan Trust for that beneficiary plus any current contribution exceed $360,000.

None

  • Each donor may generally make gifts of $13,000 per year, per child without federal gift-tax consequences. (Consult your tax advisor regarding your individual circumstances.)
Financial Aid Impact

Assets held within an ESA may affect your child's access to financial aid.

  • If the account is owned by the parent, it is considered an asset of the account owner (parent), not the beneficiary (child). This may have a lower impact on financial aid eligibility.
  • If the account owner is the student, this may have a high impact on financial aid eligibility.

Assets held within a 529 Plan may affect your child's access to financial aid.

  • If the account is owned by the parent, it is considered an asset of the participant (parent), not the beneficiary (child). This may have a lower impact on financial aid eligibility.
  • If the account owner is the student, this may have a high impact on financial aid eligibility.

Assets held within an UGMA/UTMA may affect your child's access to financial aid.

  • Accounts are considered assets of the child (minor), and may have a high impact on financial aid eligibility.
Tax Treatment

Contributions are not tax deductible, but earnings grow tax free.

  • Earning can be withdrawn tax free if used for eligible education expenses, including: room and board, tuition, books, supplies and equipment, academic tutoring, and special needs services.

Contributions are not tax deductible, but earnings grow tax free.

  • Withdrawals are federal–income–tax–free if used for qualified higher educations expenses.

All earnings are reported to the IRS under the child's social security number.

  • The first $900 of a child's investment income is tax free.
  • The next $900 is taxed at the child's own rate.
  • Any unearned income in excess of $1,800 is taxed at the parent's presumably higher tax rate.
Other Account assets must be used by a beneficiary prior to becoming 30 years old and are subject to taxes and penalties 30 days after the beneficiary turns 30. There is no age limit on the use of 529 Plan assets. Once the child gains control of the account, the funds in the account can be used for any purpose and the minor is not limited in using the funds.
More Information
Applications

1 Modified Adjusted Gross Income (or MAGI) is calculated by adding certain items back to an individual's adjusted gross income. Items added include, but are not limited to student loan deductions, deductions for higher education expenses, IRA-contribution deductions, and foreign income.

2 Usually 18 or 21 years, but in some states, it's 25.

Note:
This is a Marketing tool intended for use in the sale of insurance. Completion of an application for a State Farm insurance policy will require contact with a State Farm agent. The information provides brief, general description of coverage provided by these policies. It is not a contract and certain exclusions and limitations apply. A complete statement of coverage provided is found only in the policy itself. Policy coverages, exclusions and limitations may vary in some states.

Next Step: What's Next

Risk Disclosures

Investing involves risk, including potential for loss.

Unpaid loans and withdrawals will reduce the death benefit and the policy's cash value. Withdrawals also will reduce the policy account value/cash surrender value. Loans accrue interest.

AP2013/11/2172

Not FDIC Insured

  • No Bank Guarantee
  • May Lose Value