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529 vs Brokerage vs Student Loan Calculator

Where should this monthly money go — a 529 plan, a taxable brokerage, or paying down student loans? This engine projects the future value of each path by tax treatment, expected return, and the loan rate.

Quick answer: Compare simplified education-funding scenarios using entered returns, tax assumptions, flexibility, and capped student-loan principal. Enter Monthly amount to direct, Years until college, How much flexibility do you want?, and Student loan APR to personalize the estimate. It returns Recommended path, 529 future value, and Brokerage (after tax) so you can compare the impact before choosing a next step. Use it to compare long-term value, tax impact, risk, time horizon, and contribution choices.

Your situation
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Alternatives
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Assumptions
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Your decision

Fund a 529 plan. Over 12 years, $400/mo grows to about $86,940 in a 529, $85,036 after-tax in a brokerage, or $64,489 of value by paying off 6.50% loans.

Recommended: Fund a 529 plan

Recommended path

Good

Fund a 529 plan

Highest value given tax treatment, returns, the loan rate, and your flexibility need.

529 future value

$86,940

tax-free for education

Growth plus the state tax benefit on contributions.

Brokerage (after tax)

$85,036

fully flexible

After capital-gains tax on the gains.

Loan payoff equivalent

$64,489

6.50% entered APR

Simplified interest-avoidance equivalent, capped by entered loan principal.

Ranked options

  1. #1Fund a 529 plan

    Tax-free growth for education + 5.00% state benefit on contributions.

    Confidence: MediumEffort: LowRisk: Low

  2. #2Taxable brokerage

    Fully flexible, but gains are taxed.

    Confidence: MediumEffort: LowRisk: Medium

  3. #3Pay down student loans

    Modeled interest-avoidance equivalent at 6.50%, capped by entered principal.

    Confidence: MediumEffort: LowRisk: Low

Watch-outs

  • • 529 funds used for non-qualified expenses owe income tax plus a 10% penalty on earnings. Recent rules allow rolling some unused 529 money into a Roth IRA, but limits apply.
  • • Estimates only, not financial advice. Returns are assumptions; the 529 advantage depends on actually using the money for qualified education.

Assumptions used

Monthly contribution
$400
Years until college
12
529 return
6.00%
Brokerage return
7.00%
Student loan APR
6.50%
Student loan balance
$30,000
Flexibility preference
medium

Estimates based on your assumptions above — roughly indicative, not financial, tax, or legal advice.

Next steps

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Why this matters

The right home for college money depends on three things: the tax benefit (529s grow tax-free for education and often carry a state deduction), your after-tax investment return, and the rate on any student debt. Paying off a 6%+ loan is a guaranteed return that a taxable brokerage often can't beat after tax.

Frequently asked questions

When is a 529 the best choice?
When the money is earmarked for education and your state offers a deduction on contributions. 529 growth is tax-free for qualified expenses, which usually beats a taxable brokerage for money you're confident will go toward school.
When does a taxable brokerage win?
When you want flexibility — the ability to use the money for anything without penalty — and your state offers little or no 529 tax benefit. You give up the tax-free growth but keep full control.
When should I pay down student loans instead?
When the loan APR is higher than your expected after-tax investment return. Paying off a 7% loan is a guaranteed 7% return, tax-free — hard for a taxable brokerage to match. Keep an emergency fund first, though, since payoff is not liquid.
What if my child does not go to college?
Unused 529 funds owe income tax plus a 10% penalty on earnings if withdrawn for non-qualified expenses, though recent rules allow rolling some unused 529 money into the beneficiary's Roth IRA, subject to limits. Flexibility-minded savers may prefer a brokerage.

This tool produces estimates based on the assumptions you enter. It is not financial, tax, or legal advice. Actual rates, fees, and outcomes depend on your lender, account terms, and approval.