Virginia 529 Education Savings Plans Explained

The Virginia 529 plan offers tax benefits for college savings.
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Student loan debt in the U.S. is on track to exceed $1.5 trillion in 2021. As multiple generations of young Americans struggle with the burden of this debt, state governments are being forced to search for better ways to support families who want to save money for their children's higher education.

Benefits of a 529 College Savings Plan

Section 529 plans are accounts that offer tax-advantages for educational saving and allow families to begin contributing to a child's college fund as soon as a baby is born. Such accounts can receive contributions from parents, family members, and friends (up to a certain dollar amount each year), and they grow free of taxation. All withdrawals used for qualified educational expenses are also exempt from federal income tax, and many states have begun waiving their taxes, as well.

Virginia offers a 529 education savings plan, called Virginia529, that comes with some great tax incentives to help you save money for academic expenses—for both higher education and K-12. The 529 savings plan was established to help families save for tuition, room, and board, and to experience less stress at admissions time in regard to applying for financial aid or searching for scholarships.

Virginia has 170 colleges and universities, with the average annual tuition, books, and housing costs hovering around $8,387 (in-state), $19,550 (out-of-state), or $23,036 (private) depending on the type of institution in which a student is enrolled.

In 2019, Congress established a lifetime limit of $10,000 from a 529 plan that can be used without any penalties or tax consequences to repay a qualified student loan of the 529 beneficiary or a qualified student loan of the 529 beneficiary's sibling, including federal and most private loans.

Saving and Earnings Potential

Earnings from Virginia529 accounts grow free of federal taxes, and with regular contributions (and compound returns) the plans can make a significant impact on a child's educational expenses. Family members and friends can contribute to a child's college fund and get a tax benefit for doing so.

The funds can be withdrawn to pay for tuition, materials, room and board, and other higher education expenses, all free from income tax. As of January 2018, you can also use up to $10,000 of the Virginia529 fund each year for qualifying K-12 school tuition. The money can be used at eligible educational institutions nationwide.

Virginia529 account owners who are Virginia taxpayers may deduct contributions of up to $4,000 per account per year on their state income tax returns, with an unlimited carry-forward to future tax years.

If you're a Virginia taxpayer and contribute $5,000 to a Virginia529 savings plan during one year, you can deduct $4,000 on your tax return for that year and $1,000 on your tax return for the following year. People who are age 70 or older may deduct the entire amount contributed to a Virginia529 account in one year.

Virginia 529 Plan Options

Virginia offers the following three 529 plan options:


  • Invest529: This plan is offered directly from the state. Virginia's Invest529 state-administered 529 savings program features a mix of different mutual funds and separately managed accounts in its age-based, static, and FDIC-insured portfolio options. Invest529 is consistently ranked among the top 529 plans by independent sources due to its low fees, tax advantages, and diverse investment options.
  • Prepaid529: Permanently closed for new enrollment in May 2019, Virginia offered a pre-paid 529 tuition program. It allowed Virginia residents to pay ahead of time, per semester, for in-state tuition and mandatory fees at two- and four-year Virginia public colleges or universities. There are no changes to existing Prepaid 529 contracts.
  • CollegeAmerica: In partnership with American Funds, one of the oldest and largest mutual fund companies in the country, this plan is managed and sold by third-party advisors and has dozens of investment options, including an age-based investment strategy that gets more conservative as the beneficiary gets closer to college.

Frequently Asked Questions

Are There Costs to Start Investing?

All plan options require a small application fee before an account can be opened. These plans have low minimums, and you can contribute very small amounts each month.

What Is the Maximum Contribution?

Many families choose to enroll in multiple Virginia529 programs. Account values across all programs may not exceed $500,000 per beneficiary.

Does the Student Have to Go to School in Virginia?

With the exception of the Prepaid529 plan, the beneficiary can use the money from a Virginia529 plan to attend any qualified educational institution, regardless of its location.

What if My Student Doesn't Go to College?

f your child decides to take a break after high school before going to college, the 529 savings plan will remain intact. There is no age restriction on the plan. If a student decides in a few years to go to school, then they can make withdrawals on the account for those education costs. If your child decides they're not going to college at all, you can switch the beneficiary to another person, such as a niece, nephew, or friend. You also have the option of withdrawing the money for non-educational purposes, but that will come at the cost of income taxes and additional penalties.

Article Sources

  1. Federal Reserve Bank of St. Louis. "Student Loans Owned and Securitized, Outstanding." Accessed March 29, 2020.

  2. College Tuition Compare. "2020 Tuition and Living Costs Summary By State." Accessed March 27, 2020.