Advantages and disadvantages of US savings bonds for college savings


Interest earned is generally exempt from state income taxes
Interest earned may be exempt from federal income tax if the proceeds of the bond are used to pay for the beneficiary’s qualified education expenses, provided other conditions are met *
The bonds are backed by the federal government, offering a virtually guaranteed rate of return.
You are in control of the bonds as long as they are owned by you.
Series EE bonds are purchased for half their face value, so you can start investing in small amounts.
Bonds earn interest for up to 30 years
The bonds are treated as a parental asset for federal financial aid purposes.


The proceeds of the bonds that are not used for the beneficiary’s qualified education expenses will be subject to the payment of taxes by the owner.
Qualified education expenses for the purpose of US Treasury bonds, generally include the cost of tuition and fees only, not room and board
The maximum annual amount allowed for the purchase of EE bonds is $ 10,000 per individual and $ 10,000 for I bonds (EE bonds can be purchased in print for half their face value; I bonds are purchased for their value) total nominal)
Your income must be below a certain level when you cash in the bonds for you to be eligible to exclude the interest earned from your federal income tax (you still must add the proceeds of the bond to your income total for the year to determine if you meet that income threshold) *

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