Assets in 529 savings plans ballooned from $8.5 billion in 2001 to $221.1 billion in 2014, according to data from the Investment Company Institute.

Despite the popularity of the tax-advantaged college-savings vehicle, certain aspects are still misunderstood. Check your knowledge with this 529 quiz.

True or False?

1. You can invest in any state’s plan.

True. You are not limited to your home-state plan. You can invest in any 529 plan from any state, although some plans offer state tax and other benefits to in-state participants. It pays to do your homework.

2. 529s are only for four-year schools.

False. The assets can be used for qualified education expenses at a long list of two-year colleges, trade schools, graduate schools and even some international institutions. offers a useful tool for determining whether the institution you’re interested in is 529 eligible.

3. 529 college savings plan assets can only be used at schools in the sponsor state.

False. You can use 529 plan assets at any eligible school in any state, regardless of whether that state is the one sponsoring your 529 plan. So assets from an Ohio 529 plan, for example, can be used to fund expenses in New Jersey or any other state.

4. There is no income limit on participation.

True. Unlike other savings vehicles, such as IRAs, 529 plans do not limit or prohibit participation based on a high-income threshold. Anyone can invest.

5. If the beneficiary does not attend college, you lose the money.

False. The 529 plan account owner, not the beneficiary, controls the account. This means you can change the beneficiary to another eligible family member (in accordance with plan rules) if the named beneficiary does not require the assets. Notably, there are generally no time or age limitations on use or distribution of plan assets, so the assets can remain in the account and grow in perpetuity.* Worst case, plan assets can be returned to the account owner as a non-qualified withdrawal, but earnings will be subject to ordinary federal, state and local income taxes, as well as a 10% federal penalty.

6. If your child receives a scholarship, you lose the money.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.