American Funds ®

College Savings

College Savings Comparison Table

This table helps you compare the advantages of three popular college savings plans.
A tax-advantaged way to save for qualified higher education expenses.

More on CollegeAmerica

Use for qualified expenses for K–12 and higher education.

More on Coverdell ESAs

Take advantage of lower tax rates for children with these custodial accounts.

More on UGMA/UTMA accounts

INCOME LIMITS

None. Anyone can contribute.

Ability to contribute is phased out for married couples with incomes between $190,000 and $220,000, and for individuals with incomes between $95,000 and $110,000.

None.

CONTRIBUTION LIMITS

$350,000 per beneficiary.

$2,000 per year per beneficiary.

None.

INCOME TAX TREATMENT

Earnings can grow free from federal tax, and withdrawals for qualified higher education expenses are free from federal tax.

Earnings can grow free from tax, and withdrawals for qualified elementary, secondary and higher education expenses are free from federal tax.

For children under 19 and for full-time students under 24 whose earned income is less than one-half of their support, the first $1,050 of earnings is tax-free. Earnings between $1,050 and $2,100 are taxed at the child’s rate; earnings above $2,100 are taxed at the parents’ rate.

OVERSIGHT

Owner maintains control of the assets, decides when withdrawals will be made, and can change the beneficiary.

Beneficiary may assume control at age of majority — 18 or 21 in most states.

Beneficiary assumes control at age of majority — 18 or 21 in most states.

INVESTMENT FLEXIBILITY

Assets can be changed among funds twice each calendar year and when a new beneficiary is selected.

Assets can be changed at any time.

Assets can be changed at any time, but each transfer usually is a taxable event.

USES

Higher education expenses, such as required books, tuition, room and board and supplies.

Education expenses, including required books, tuition and room and board for kindergarten through high school, college and graduate school.

Any use that benefits the child.

AMERICAN FUNDS INVESTMENT OPTIONS

Most American Funds including American Funds College Target Date Series® in five share classes.*

Most American Funds, not including target date funds.

All American Funds except target date funds.

ABILITY TO CHANGE BENEFICIARIES

Yes.

Yes.

No.

PENALTIES ON NON-QUALIFIED WITHDRAWALS

Subject to ordinary income tax and a 10% federal tax penalty on earnings.

Subject to ordinary income tax and a 10% federal tax penalty on earnings.

Not applicable.

CONTRIBUTION DEDUCTIBLE FROM STATE TAXES

Yes, for Virginia residents.

No.

No.

ROLLOVERS

Allowed once every 12 months or when the beneficiary is changed.

Allowed once every 12 months.

Not applicable.

*Class B shares are available only for exchanges.


Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses, summary prospectuses and CollegeAmerica Program Description, which can be obtained from a financial professional and should be read carefully before investing. CollegeAmerica is distributed by American Funds Distributors® and sold through unaffiliated intermediaries.  

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.  

Depending on your state of residence, there may be an in-state plan that offers tax and other benefits not available through CollegeAmerica.   Before investing in any state's 529 plan, investors should consult a tax advisor. 

If withdrawals from 529 plans are used for purposes other than higher education, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax.