In 1990, the U.S. Treasury Department initiated the Education Bond Program , which allows you to completely or partially exclude from federal income tax the interest you earn on Series EE savings bonds issued after 1989, provided that you meet certain conditions.
Bonds are an excellent way to save for college.
They increase in value monthly and can earn interest for 30 years. You pay qualified higher education expenses at an eligible institution or state tuition plan in the same calendar year in which you redeem the bonds. You must also meet certain income guidelines established by the Internal Revenue Service to qualify for the exclusion. You can either report the interest you earn on your child's savings bonds each year or wait to report the interest until you cash them in. The Bureau of the Public Debt has more details about tax reporting of education bonds .