College Savings Options

With so many ways to save for college, there’s a lot of information out there. View the comparison chart below to see how the Bright Start Direct-Sold College Savings Program stacks up against other options.

Coverdell Education Savings Account (ESA)

Bright Start

UGMA / UTMA

Mutual Funds

Contribution limit

$2,000 per beneficiary per year

$450,000 maximum account balance1

None

None

Illinois state income tax-deductible contributions

(up to $20,000)2

Change of beneficiary allowed

N/A

Age restrictions for contributions

Before age 183

None

N/A4

None

Age restrictions for withdrawals

Before age 303

None

N/A4

None

Income restrictions

Yes5

None

None

None

What a 529 Plan Means for Financial Aid

A 529 account may be an advantageous way to save for college without having a detrimental impact on financial aid eligibility. Here are several general rules of thumb. We recommend that you review with your own advisors and your high school guidance counselor for information regarding your own situation. If a parent is the account owner of a Bright Start account, up to 5.64% of the value of the account may be included in the expected family contribution calculation for federal financial aid purposes. A custodial 529 account (i.e., UTMA 529 or UGMA 529 account) is typically treated as a parental asset (up to 5.64% of the value included) for purposes of the federal aid application. Withdrawals from a 529 may also receive favorable treatment. Generally, withdrawals from a parent-owned 529 account are not includible in the income portion of the financial aid calculation. Be careful with grandparent-owned 529 accounts. While they may not need to be reported as an asset on the financial aid forms, withdrawals from a 529 plan owned by a grandparent will generally be included in the income portion of the financial aid formula. Visit fafsa.gov for details and specifics regarding 529’s and their financial aid treatment.


NOTE: The eligibility of the Beneficiary for financial aid may depend on the circumstances of the Beneficiary’s family at the time the Beneficiary enrolls in an Institution of Higher Education, as well as on the policies of the governmental agencies, school, or private organizations to which the Beneficiary and/or the Beneficiary’s family applies for financial assistance. Because saving for college will increase the financial resources available to the Beneficiary and the Beneficiary’s family, it most likely will have some effect on the Beneficiary’s eligibility. These policies vary at different institutions and can change over time. Therefore, no person or entity can say with certainty how the federal aid programs, or the school to which the Beneficiary applies, will treat your Account.

1 The combined maximum account balance limit for limit for the Bright Start Direct-Sold College Savings Program and all other Section 529 programs established and maintained by the State of Illinois for a particular beneficiary cannot exceed $450,000. Although account balances can grow beyond that amount, no additional contributions can be made once the balance reaches $450,000.back

2 An individual who files an individual Illinois state income tax return will be able to deduct up to $10,000 per tax year (up to $20,000 for married taxpayers filing a joint Illinois state income tax return) for their total, combined contributions to the Bright Start College Savings Program, the Bright Directions Advisor-Guided 529 College Savings Program, and CollegeIllinois! during that tax year. The $10,000 (individual) and $20,000 (joint) limit on deductions will apply to total contributions made without regard to whether the contributions are made to a single account or more than one account. The amount of any deduction previously taken for Illinois income tax purposes is added back to Illinois taxable income in the event an Account Owner takes a Nonqualified Withdrawal from an Account or if such assets are rolled over to a non-Illinois 529 plan. If Illinois tax rates have increased since the original contribution, the additional tax liability may exceed the tax savings from the deduction.back

3 Contributions can be made for a beneficiary from birth to age 18. The account may remain open until the beneficiary reaches age 30, with certain limitations.back

4 Custodianship typically terminates when a minor reaches age 18 or 21.back

5 ESA eligibility phases out at $95,000–$110,000 adjusted gross income ($190,000– $220,000 for joint filers). Please check with your tax advisor for details and information regarding your specific situation.back