Tennessee 529 Plan Rules And College Savings Options

Tennessee has a 529 plan called TNStars that can help you save for college. Tennessee also has a 529 Able Plan as well.

If you live in Tennessee, these might be good options for you to save for college. 

These programs are designed to help make college more affordable - so that you can get the education you need. By saving for college early on, you can make paying for college easier down the road.

If you're not quite sure how 529 plans work, check out this starter guide to What Is a 529 Plan?

There is also a specific order of operations to save for college that we recommend families follow. These programs are specific to the State of Tennessee. Each state has different rules when it comes to 529 plan savings. Here are the Tennessee 529 plan rules.

Average Cost Of College In Tennessee

When saving for college in Tennessee, it's important to take into consideration the cost of attendance in the state. If you choose to go to an out-of-state school, you need to look at the average cost of attendance in that state.

There are 148 colleges and universities in the State of Tennessee.

The total average cost of college (Cost of Attendance) in Tennessee for in-state residents is $17,039 for 2023. This includes tuition, room and board, books and supplies, and other expenses.  

For just tuition alone, the average undergraduate tuition for in-state residents is $5,843 for 2023. The cost of tuition in Tennessee has been rising about 2% for the last several years.

See how this compares to the average cost of college here. Keep in mind the average student loan debt by graduating class here.

Tennessee 529 Plan Rules And Tax Information

Tax savings is one of the big benefits of using a 529 plan to save for college. On a federal-level, there is no tax savings for contributions, but qualified distributions are tax-free. 

Here are the special tax benefits and considerations for using a 529 plan in Tennessee.

Contributions

Tennessee does not have a personal income tax, and as such, there are no tax benefits for contributing to a 529 plan.

Minimum: $25

Maximum: Accepts contributions until all account balances for the same beneficiary reach $350,000.

Matching Contributions: Eligible Tennessee families can receive a matching contribution of $100 for a minimum $25 investment, or $500 for a minimum $125 investment. Beneficiaries can receive a maximum match of $500 per year for up to three years.

Rollovers

Rollovers into the state plan are allowed.

Qualified Distributions

Qualified distributions from a Tennessee and non-Tennessee 529 plan are tax-free. 

K-12 Education

Tennessee does conform with Federal law in regard to using a 529 plan for K-12 tuition. See this guide: Using a 529 Plan For Elementary and High School Private Education.

Student Loans

Tennessee does conform with Federal law for using a 529 plan for student loans.

Rollover To Roth IRA

Tennessee does allow the rollover to a Roth IRA up to $35,000. Learn more about the 529 plan to Roth IRA rollover here.

Non-Qualified Distributions Taxes, Penalties, Recapture

A non-qualified withdrawal from a Tennessee 529 plan is subject to only federal taxes and penalties, as there is no state personal income tax.

Tennessee 529 College Savings Plan Options

Tennessee has one 529 plan option - one consumer plan.

TNStars College Savings 529 Program

The TNStars College Savings 529 Program is the name of Tennessee's 529 Plan. This plan offers a variety of investment options, including age-based portfolios that become more conservative as the child approaches college, and static investment fund options.

The funds offered include Vanguard.

Fees:

There is a program management fee of 0.20%.

The underlying funds all charge expense ratios from 0.03% to 0.65% depending on the investment option.

Who Should Use It:

We recommend that Tennessee residents use another 529 plan due to lack of tax benefits in the state, and lack of solid investment options in the plan.

We recommend that out-of-state residents utilize other plans.

Tennessee 529 Able Plan Options

529A Able accounts are accounts designed to help those with disabilities escape poverty and save for themselves. Learn more about 529A Able Plans here. 

ABLE TN

The ABLE TN Plan is a 529A plan open to all residents in Tennessee.

This plan allows contributions of up to $18,000 per year from all sources.

It does have a minimum initial contribution amount of $25 per account.

The plan does not have an account maintenance fee. It also has a program management fee of 0.00% to 0.62%.

You can open an ABLE TN Plan here.

Other Programs To Save For College

A 529 plan is one way to save for college. Remember, we have a full guide on our approach to college savings here - and it helps you find other options.

If you're looking for ways to boost your college savings, check this out:

Backer

Backer is one of our favorite ways to save for college because they make gifting for college so easy. You can setup an account, link your 529 plan (in most states), and get a unique URL that you can share with friends and family to save for your children's college.

Plus, they have Backer Bucks, which allow you to earn rewards and rebates for the shopping you already do - directly deposited into your children's 529 plan.

Check out Backer here >>

Upromise

Upromise is another awesome tool to help you save for college because they have a lot of ways that you can earn money for your 529 plan. You can get rebates and rewards, and you can get cash back into your child's 529 plan by using the Upromise credit card.

Check out Upromise here >>

Tennessee Financial Aid

Using a 529 plan isn't the only way to save money for college. Each state typically offers a variety of financial aid programs for their residents. These include scholarships and grants, and sometimes unique forgivable student loan opportunities.

Check out the list of Tennessee Student Loan and Financial Aid Programs.

Return to the full list of 529 Plans By State.