With the Education Bond Program, you do not have to pay taxes on the money you earn from “Series EE” or “Series I” U.S. Savings Bonds. You just have to use the money for qualifying education expenses or transfer the money into a 529 account.

All about Bonds

• Bonds are backed by the U.S. Government. You are guaranteed not to lose what you paid for them, and, in the case of Series EE bonds, your interest is also guaranteed.

• Series EE Bonds can be bought for half their final value. They have a fixed interest rate, and they “mature” to their final value in 17 years. Learn more about Series EE bonds. 
• Series I Bonds can be bought at face value and earn interest, but the interest rate varies. Learn more about Series I Bonds. 
• You can redeem Series EE or Series I bonds after you’ve had them for 1 year, but if you redeem them before 5 years have passed, you will pay a penalty equal to 3 months of interest. Either type of bond will continue to increase in value for up to 30 years.
• These bonds are exempt from all income taxes if you use the money you earn for qualifying education expenses.
• These bonds can affect the amount of financial aid you can get, especially if they are in the child’s name. Learn more.