Using Savings Bonds to Fund Your Education

Savings bonds are one of the tried and true investment vehicles in the market today. With savings bonds, you know what you are getting because there is a guaranteed payout from the government. With such guaranteed form of payment, many people turn towards savings bonds as a way to pay for college education. The government has actually made it easier for those who want to use them to fund college. Here are a few things to consider about funding your education with savings bonds. 

Tax Exemption

The main reason that many people use savings bonds to fund education is that this gives you a tax exemption. The government allows you to use the money from the bonds to pay for qualified education expenses during the year in which the money is withdrawn. This can provide you a way to save for college without having to worry about the tax problems.

The ability to use savings bonds for education funds tax-free is set forth in the Education Savings Bond Program. If you want to qualify for the program, you must have been at least 24 years old when you bought them for your children. Qualifying for this program also depends upon your income and your filing status for income taxes. Before you claim a deduction on the interest, you should consult your tax professional to see if you meet the guidelines for the program. 

Inflation Bonds

One popular type of savings bond is the series I bonds. These bonds actually come with a factor that is determined by the rate of inflation in the country. The government looks at the consumer price index and determines what that portion of the interest rate should be. You get a fixed rate of interest each year along with a variable rate that moves with the consumer price index and inflation.


One big reason that many people like to use savings bonds to fund education is the safety that is involved. You are not getting any outside parties involved. You can cash your savings bonds in and then use the money to pay for college. There is no chance of your portfolio going down and losing everything that you have invested. You know that the savings bonds are going to be there for your loved one regardless of what happens in the market.


You can cash a savings bond in early or wait until the maturation date. The savings bond earns interest only for 30 years. After that point, you do not necessarily have to redeem it, but the money is no longer doing you any good being in the bond. 

Name on the Bonds

If you are buying bonds for your children's education, you will want to make sure that your name is on the bonds. You can name your children as beneficiaries, but you have to be on there. You will also want to make sure that your name is on the bonds if you are using them to fund your own education. 

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