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Financial EducationSavings & Spending

Invest in your family’s future with an education savings account

Planning for your family's financial future involves many important decisions, and saving for education is certainly one of them. It's essential to consider how saving for a loved ones' education fits into your broader financial picture. If saving for education aligns with your overall financial strategy, an education savings account can be a valuable tool to help you build funds with potential tax benefits along the way. Two popular savings options are the NC 529 Plan and the Coverdell Education Savings Account (CESA), which can make paying for education and planning for future costs easier.

NC 529 Plan

The NC 529 Plan1 is a savings and investment plan that helps you save money for future education costs, while enjoying tax advantages.2 The NC 529 plan offers a variety of investment options with a range of strategies, from conservative to aggressive. You can choose one or more options based on your objectives.3 The NC 529 Plan makes it easier to save for college and K-12 education for designated beneficiaries.

With the NC 529 Plan, earnings from invested funds grow tax-free, and you won't pay taxes on withdrawals either, as long as you use the money for approved education costs. You may open the account and invest funds on behalf of yourself, your child, your grandchild, or any future student regardless of age.

You can use the money from the Plan for qualified education expenses, including:

  • College tuition, books, fees, room and board, computers, and more

  • K-12 tuition up to $10,000 per year, per child4 

  • Career and technical education expenses at schools on the Federal Student Aid list

  • Special needs equipment

  • Student loan payments on behalf of the beneficiary or their siblings, up to $10,000 per person

Opening an NC 529 Plan

Accounts in the NC 529 Plan are not SECU deposit accounts and are administered by College for North Carolina (CFNC). You can open your NC 529 Account through CFNC’s website or, if you need personal assistance, at your local SECU branch.5 You do not have to be a member of SECU to open an NC 529 Plan.  Be sure you have the Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) for you and the future student you are saving for.

Start an NC 529 Plan with a $25 minimum initial deposit. Subsequent contributions are also a minimum of just $25. You can contribute as often as you like or at regular intervals through CFNC’s automatic draft (ACH) or Payroll Deduction.

Coverdell Education Savings Account (CESA)

A CESA is a tax-deferred savings account you can withdraw funds from tax-free to pay for qualified expenses for elementary, secondary, and higher education.6

Elementary and secondary education expenses include:

  • Tuition, fees, tutoring, books, supplies, and equipment

  • Room and board, uniforms, transportation, and other services provided by public or private schools

  • Computer technology, equipment, or internet access used by the beneficiary and their family while the beneficiary is in school

  • Special needs services7

Higher education expenses include:

  • Tuition, fees, books, and supplies

  • A portion of room and board if beneficiary is enrolled at or more than half-time

  • Purchase of computer or related equipment, computer software, or internet access

  • Special needs services7

Opening a CESA

A CESA can be opened with the Credit Union if the beneficiary you are saving for is an SECU member. Generally, you can save funds on behalf of yourself, your child, your grandchild, or any other student under 18 years old, but only the beneficiary’s parent or guardian can be listed as a responsible individual. The responsible individual manages the account for the beneficiary while they are a minor.

A minimum balance of $25 is required for CESAs.8

To open an account with SECU, visit your local branch or request one online via Member Access.

Should I open an NC 529 Plan or a CESA?

There are key differences such as contribution amounts, account restrictions, and investment options. Here are some aspects to consider.

With the NC 529 Plan:

  • You do not have any income restrictions for contributions.

  • You can save on behalf of any person regardless of age or relationship to you.

  • You have no annual contribution limit, unlike a CESA.

  • Funds might be eligible for rollover to the beneficiary’s Roth IRA tax-free.

  • You should consider how this impacts Federal Student Aid.

With a CESA:

  • You may not be eligible to contribute if your modified adjusted gross income (MAGI) is more than $110,000 ($220,000 if filing jointly).9

  • The beneficiary’s parent or guardian must be listed as Responsible Individual.

  • Your beneficiary must be under 18, unless they are a special needs beneficiary.

  • You must honor the $2,000 annual contribution limit.

  • Funds are required to be withdrawn once the beneficiary turns 30, unless they are a special needs beneficiary.

  • The account is considered an asset of the student/beneficiary for Federal Student Aid purposes.

 

This information is provided for educational purposes only and should not be considered financial, tax, or investment advice.

  1. The NC 529 Plan is officially known as the North Carolina College Savings and Investment Program and is referred to as North Carolina's National College Savings Program. It is generally marketed under the shorter name, “NC 529 Plan.”
  2. All descriptions of tax treatment of the NC 529 Plan are based on current federal and North Carolina state tax law. However, state tax law varies from state to state. SECU does not offer personal tax advice. Please consult your own attorney or tax advisor regarding the tax consequences specific to your participation in the NC 529 Plan.
  3. For more information on your investment options, please refer to the NC 529’s Program Description.
  4. In 2026, the amount of tuition covered for K-12 increases to $20,000 per year, per child. K-12 expenses will also expand in 2026 to cover tutoring, textbooks, test prep, online learning, homeschool materials, and special education expenses.
  5. Accounts in the NC 529 Plan are not SECU deposit accounts, are not federally insured by NCUA, and are administered by College Foundation, Inc. (CFNC). The Federally-Insured Deposit Account investment option made available by SECU is federally insured by NCUA.
  6. Rules about distributions from Coverdell ESAs and any resulting tax consequences are governed by the Internal Revenue Code. Please consult your tax advisor if you have any questions.
  7. A special needs designated beneficiary is an individual who, because of a physical, mental, or emotional condition (including learning disability), requires additional time to complete his or her education, as determined by the Department of Treasury Regulations. Consult a tax advisor to determine if the designated beneficiary qualifies as a special needs designated beneficiary.
  8. A $1 monthly maintenance fee is charged if the account is below the minimum balance on the statement date.
  9. There may be income restrictions when contributing to a Coverdell ESA or tax consequences when taking disbursements. Consult your tax advisor for additional information on the requirements and limitations of the Coverdell ESA.