Coverdell Education Savings Account (ESA)


  • Savings vehicle that allows assets to accumulate tax-deferred.
  • Can be established by parents, grandparents, or family friends.
  • Maximum contribution of $2,000 per beneficiary, per year.


  • Distributions are exempt from federal taxes if used to pay qualified education expenses of the beneficiary. 
  • Can be used to cover elementary and secondary school expenses, as well as college.
  • Unlimited investment options.
  • Can be rolled over to another ESA for the same beneficiary or another family member.


  • Income limitations on donor:  Contributions are phased out for incomes between $95,000– $110,000 (single filers) and $190,000–$220,000 (joint filers).
  • Contributions may be made until the student reaches age 18.
  • Remaining funds must be distributed to the beneficiary at age 30, with earnings taxed as ordinary income plus a 10-percent penalty.

Financial Aid Impact

  • High impact if account is owned by student.
  • Low impact if account is owned by parent.  Treated as an asset of the account owner.
  • Qualified distributions are not considered income of parents or student.