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Information on Education Savings Plans

529 Plans

A 529 plan is a state-operated investment plan designed to help families save for future college costs.   Texas offers three 529 college savings plans, one direct plan called the Texas College Savings Plan, one advisor-sold plan called the LoneStar 529 Plan, and one pre-paid plan called the Texas Guaranteed Tuition Plan.

Texas College Savings Plan

Texas College Savings Plan is a traditional 529 plan that allows you to invest money today and reap tax benefits when you withdraw it to pay for qualified education expenses.

Type:  Direct – this 529 plan can be purchased directly from the state.

Fund Family:  Various

Minimums:  To get started you can deposit $25 and $15 with a payroll deduction or an automatic monthly plan.  Minimum subsequent contributions are $15.

Maximum Contributions:  You can contribute up to $320,000 per beneficiary.  Of course, your total amount in the plan can be higher as your investments group.  529 plans typically increase the contribution limit over time, so you may be able to contribute more.

Tax Benefits:  In and out-of-state participants get the federal tax benefits.  Texas does not have a state income tax.

Residency:  Texas College Savings Plan is open to all United States residents, not just those in Texas.

You can learn more about this Texas 529 plan at the official website https://www.texascollegesavings.com/.

 

LoneStar 529 Plan

LoneStar 529 Plan is a traditional 529 plan that allows you to invest money today and reap tax benefits when you withdraw it to pay for qualified education expenses.

Type:  Advisor.  Please contact a financial advisor in your state for assistance. 

Fund Family:  Various

Minimums:  To get started you can deposit $25 and $15 with a payroll deduction or an automatic monthly plan.  Minimum subsequent contributions are $15.

Maximum Contributions:  You can contribute to your Texas 529 plan until your account balance reachs $320,000.  Of course, your total amount in the plan can be higher as your investments group.  529 plans typically increase the contribution limit over time, so you may be able to contribute more.

Tax Benefits:  In and out-of-state participants get the federal tax benefits.

Residency:  LoneStar 529 Plan is open to all United States residents, not just those in Texas.

You can learn more about this Texas 529 plan at the official website https://www.lonestar529.com/.

Texas Tuition Promise Fund

This is a new plan offered by the state of Texas.  It helps you protect against rising college costs and can be used to pay for any accredited public and private junior/community college as well as 4-year colleges and universities throughout the country.  More information can be found at TexasTomorrowFunds.org.

 How to report 529 plans on the FAFSA

If the parent is the owner of the program, the value is reported on the FAFSA as a parent asset. Note that you should report the value of all programs or plans, not just the one for the student applying for aid. For plans established by someone other than the student’s parent, the value of the account is not reported on the FAFSA.

Coverdell Education Savings Accounts

Coverdell accounts are trusts created exclusively to pay the qualified education expenses of the designated beneficiary of the trust.  More information can be found at http://www.irs.gov/taxtopics/tc310.html.

How to report Coverdell on the FAFSA

If the parent is the owner of the program, the value is reported on the FAFSA as a parent asset. Note that you should report the value of all programs or plans, not just the one for the student applying for aid. For plans established by someone other than the student’s parent, the value of the account is not reported on the FAFSA.

Uniform Gifts to Minors Act (UGMA) and Uniform Transfer to Minors Act (UTMA)

UGMA and UTMA are custodial accounts that allow parents to transfer assets to their minor children

How to report UGMA and UTMA on the FAFSA

Custodial accounts are considered assets of the student.