Opening an Account
CollegeBound Saver is a Section 529 education savings plan offered by the Office of the General Treasurer of Rhode Island. CollegeBound Saver is designed to help individuals and families save for higher education in a tax-advantaged way and offers valuable advantages including tax-deferred growth, generous contribution limits, attractive investment options, and professional investment management.
When you enroll in CollegeBound Saver, you choose to invest in one or more of the available investment options, including an Age-Based Portfolio, the Target Risk Portfolios, and eight Individual Portfolios, based upon your investing preferences and risk tolerance. All of the contributions made to your account grow tax-deferred and the distributions are free from federal and Rhode Island state taxes if used for qualified higher education expenses.1
There are no investment minimums, so you can get started with whatever amount fits your budget. You can also establish recurring contributions from your bank account for any amount.3 More than one person can contribute to the same account until total market value reaches $500,000. After that, the account may continue to grow higher through investment earnings only.
CollegeBound Saver has no commissions, loads, or sales charges. The total annual asset-based fee varies from 0.03% to 0.60%, depending on the Portfolio you choose and your Rhode Island residency status.
No. The beneficiary must have a Social Security number or taxpayer identification number, but you may name yourself as beneficiary and change the beneficiary to that child later on.
Yes. You may perform a federal income tax-free rollover from another 529 plan into your CollegeBound Saver account for the same beneficiary once every 12 months. You may also perform a federal income tax-free rollover from another 529 plan into your CollegeBound Saver 529 account at any time when you change the beneficiary to a qualifying family member of the current beneficiary.
Earnings grow tax deferred and are free from federal income tax when used for qualified higher education expenses.1 Qualified higher education expenses include tuition, mandatory fees, books, supplies, computers, and equipment required for enrollment or attendance; certain room and board costs during any academic period the beneficiary is enrolled at least half-time; and certain expenses for a special-needs student.
Yes. Rhode Island taxpayers who are account owners are eligible for a deduction in computing state income tax of up to $1,000 for married couples filing jointly and $500 for individual filers for contributions to their CollegeBound Saver account. Subject to certain conditions and requirements, contributions in excess of the annual limit can be carried forward and deducted in future years. If an account owner makes a non-qualified distribution or certain transfers or rollovers to another state’s program, the amount of the deduction may be "recaptured" and included in the account owner’s Rhode Island income.
Individuals can invest up to $15,000 ($30,000 for married couples) per beneficiary without assuming any gift-tax consequences. You can also contribute up to $75,000 per beneficiary in a single year ($150,000 for married couples) and take advantage of five years' worth of tax-free gifts at one time.4 (Contributions are considered completed gifts and are removed from your estate, but you, as the account owner, retain control.) Upon the death of the account owner, money remaining in the account will not be included in the account owner's estate for federal estate tax purposes. For more information, consult your tax advisor or estate-planning attorney.
Managing Your Account
Anyone, including friends and family, can contribute to a CollegeBound Saver account. Contributions can be accepted until the total market value for all accounts for the same beneficiary in 529 plans sponsored by the State of Rhode Island reaches $500,000.
Yes. As account owner you choose the portfolios in which you invest, as well as the distribution of the funds.
Yes. You can change the direction of your future contributions at any time. Federal law permits you to move the assets in your CollegeBound Saver account to a different mix of investment options twice per calendar year.
Yes. You can transfer your account to a member of the family of the beneficiary without incurring federal income tax or penalties.2
- Electronic funds transfer from your checking or savings account
- Recurring contributions with scheduled contributions in set amounts from your checking or savings account3
- Payroll direct deposit3 through participating employers
- Check (made payable to CollegeBound Saver)
- Rollover from another 529 plan
- Rollover from an Education Savings Account or a qualified Series EE or Series I U.S. Savings Bond
- Transfer from an UGMA/UTMA account
Ugift is an easy, free-to-use service that lets 529 plan account owners encourage family and friends to celebrate children’s milestones with the gift of college savings, in lieu of traditional gifts. To learn more, visit Ugift529.com.
Ugift is a registered service mark of Ascensus Broker Dealer Services, LLC.
Making a Withdrawal
The money in your CollegeBound Saver account can be used for any purpose. However, to qualify for federal tax-free distributions and avoid penalties1, the money must be used for qualified higher education expenses for the beneficiary at an eligible educational institution.
Eligible expenses can include tuition, computers, mandatory fees, books, supplies, and equipment required for enrollment or attendance; certain room and board costs during any academic period the beneficiary is enrolled at least half-time; toolkits for apprenticeship or cosmetology school; and certain expenses for a special-needs student.
No. You can use the assets in your account toward the costs of nearly any public or private, 2-year or 4-year college nationwide, as long as the student is enrolled in a U.S.-accredited college, university, graduate school, or technical school that is eligible to participate in U.S. Department of Education student financial aid programs. In fact, many U.S. colleges and universities now have campuses or locations outside of the country, where money from your CollegeBound Saver account can be used.
If the beneficiary decides not to go to college, you have three options:
- Stay invested. You can leave the money in the account in case the beneficiary decides to attend school later. There is no age limit for using the money.
- Change the beneficiary. You can change the beneficiary on your account at any time provided that the new beneficiary is an eligible Member of the Family of the former beneficiary. Please see the Program Description for more information on who qualifies.)
- Withdraw the money for other uses. The earnings portion of a distribution not used for a beneficiary's qualified higher education expenses is subject to federal and state income taxes and may be subject to a 10% federal penalty tax. (For exceptions to this penalty, please see the Program Description.)
Additionally, any accumulated earnings that are withdrawn from your account must also be reported on the recipient's income tax return for the year in which they are withdrawn. Contact your tax advisor to determine how to report a non-qualified distribution.
529 plan assets are counted at different rates for the Expected Family Contribution (EFC) in the FAFSA formula. As of July 1, 2009, federal guidelines are as follows:
- If the student is a dependent, a 529 plan account is considered as the parent's asset (if the account owner is the parent or the dependent student). As a result, it will generally be counted at a rate of only 3-6% of its value for the EFC.
- If the student is not a dependent and is the account owner, the 529 plan account is treated as the student's asset and is generally factored into the EFC at the higher rate of 20%.
- In other cases, the account does not count as an asset for federal financial aid purposes. (However, a student may have to report distributions received from the account as income for these purposes.)
Note: Financial aid programs offered by educational institutions and other non-federal sources may have their own guidelines for the treatment of 529 plan accounts. For complete information about financial aid eligibility, you should consult with a financial aid professional and/or the state or educational institution offering a particular financial aid program, since rules and regulations often change.