The evolution of 529 college savings plans continues, but many of the same questions remain for people saving for education. We update this article every year to address some common questions on 529 plans.We answer these eight questions:Why should I use a 529 plan?What counts as a “qualified education expense” for a 529 plan?What does a 529 plan investment menu look like?Can I use a 529 plan like a brokerage account?What fees do 529 plans charge, and what are the cheapest 529 plans?Does using a 529 plan affect financial aid packages?What are the contribution limits and gift tax implications? What happens to my money in a 529 plan if it isn’t used?Why Should I Use a 529 Plan? A 529 savings plan offers a tax-advantaged way to pay for education. Federal and state-level tax breaks, deductions, and credits are available, depending on where you file your taxes.At the federal level, your money invested through a 529 account grows tax-free, and you don’t pay capital gains taxes on your withdrawals if you use them for qualified education expenses.In addition, many states offer additional tax benefits to residents who contribute to in-state plans. The benefits can come in the form of a tax deduction (subtracting your 529 contributions from your taxable income calculation) or a tax credit (a cash amount that you can use to offset your state income tax). Some states, such as Arizona, Kansas, and Maine, extend the tax benefits to contributions made to any 529 plan, not just the in-state option.We recommend you consult with a tax specialist regarding your specific situation.What Counts as a ‘Qualified Education Expense’ for a 529 Plan?At the college level, qualified education expenses include tuition, fees, books, supplies (computers, for example), special needs equipment, and room and board if the student is enrolled at least part-time.Expenses outside of college can also be considered qualified education expenses. Tuition and fees for graduate school and trade school, for example, qualify. Up to $10,000 can also be used for student loan repayments. For K-12 schools (public, private, or religious), savers can claim tax benefits on up to $20,000 of contributions per year. A full rundown of tax benefits for education savers can be found in the IRS’ Publication 970.What Does a 529 Plan Investment Menu Look Like?While specific line items can differ by state, all 529 plan menus share the same basic structure.Every plan provides an age-based or target-enrollment series for set-it-and-forget-it investors, which gradually reduces their exposure to risky assets (that is, stocks) during the accumulation period. These series can serve as a default choice for most investors, like a target-date series would for retirement savers.For those who want to select their own investments, 529 plans also offer a menu of individual funds. The lineup can include a balanced fund, an index-tracking fund, or more specialized products such as value, growth, or small-cap funds.Finally, plans provide an FDIC-insured account or a stable-value account as their least risky option.Can I Use a 529 Plan Like a Brokerage Account?No. Unlike brokerage accounts, 529 plans generally do not allow the purchase of individual stocks, and investment changes are only allowed twice per calendar year. Contributions into the account are also invested in your preselected investment option once the check or bank transfer clears. It is usually not possible to deposit the money into a cash account and then decide when to invest.What Fees Do 529 Plans Charge, and What Are the Cheapest 529 Plans?Setting aside minute differences, the cost to an investor will be the sum of the underlying funds’ expenses in the chosen portfolio and any potential management fees. Management fees pay for the state agency that administers the 529 plan and, in most cases, the outside firm that manages the portfolio. Additional fees may include a sales charge for those who invest in a 529 plan through a financial advisor, and account maintenance fees that typically range from $0 to $25 a year.There are several affordable plans available. Many of these hold cheap index funds and tend to charge little to no additional account or maintenance fees. As of October 2025, the four cheapest 529 plans covered by Morningstar analysts were: Florida 529 Savings Plan, Georgia’s Path2College 529 Plan, Louisiana START Saving for College, and Michigan Education Savings Program.Does Using a 529 Plan Affect Financial Aid Packages?Yes, though to a lesser degree than income does.Federal financial aid is based on an estimate of what a family can contribute annually from their income and assets. Income is the largest portion of the expected family contribution, typically 25% to 35% of the parents’ adjusted available income, though it can go as high as 47%. Parental contribution from assets, including 529 account balances, is assessed at a much lower maximum of 5.64%. So, if a family has a 529 account with $10,000, this raises the expected family contribution by at most $564.The impact also depends on who owns the account. Student-owned 529s are assessed at up to 20% of value. Under the Fafsa Simplification Act, which went into effect starting the 2024-25 academic year, accounts owned by grandparents or other relatives are no longer counted, and 529 assets held for a beneficiary’s siblings are also excluded. The CSS Profile, used by some private schools, applies its own formulas.What Are the Contribution Limits and Gift Tax Implications? There is no annual IRS contribution limit to 529 accounts. There are lifetime limits set by each state, typically ranging from $300,000 to $550,000 per beneficiary. These ceilings give families substantial room to build education savings over time.Contributions to 529 plans are considered gifts, subject to the annual gift tax exclusion limits of $19,000 per year, or $38,000 for married couples filing jointly. Contributions within those limits do not trigger gift tax reporting.You can also “superfund” an account by front-loading five years of contributions at once, up to $95,000 ($190,000 for couples), with no gift tax. However, you cannot make additional gifts to that beneficiary during the five-year window. Because state-level rules and tax treatment vary, we recommend you consult with a tax specialist regarding your specific situation.What Happens to My Money in a 529 Plan If It Isn’t Used?If a beneficiary no longer needs the money in the account (by deciding not to go to school or by earning a generous scholarship, for example), the account owner can name a new qualified beneficiary without incurring federal or state income tax penalties. Qualified beneficiaries are members of the current beneficiary’s family, which includes siblings, children, nieces and nephews, their spouses, or a first cousin.In addition, driven by the passage of the Secure 2.0 Act, beneficiaries with an account open for 15 years or more can transfer unused funds to their Roth IRA, allowing them to reposition the funds to another tax-advantaged vehicle. The ability to execute the conversion began in 2024 and is subject to Roth IRA contribution limits, in addition to other requirements.Morningstar.com subscribers can access our 529 plan reports and ratings from the 529 Plan Center map.