Prepaid tuition plans
can be
attractive if you prefer to lock in your investment
results rather than risk the potential fluctuations
of investing in a
529 savings plan.
They can also make sense if you or your beneficiary has a strong sense of where
she or he might attend school. For example, if your beneficiary plans to attend
a private college, and a number of the target schools participate in the Independent
529 plan, then that plan may be a good choice.
1. Read
the fine print to make sure you understand how
much the program charges in fees. If fees are high,
that could erase much of the benefit of prepaying
tuition, and you may be better off finding another
way to save for college.
2. If your beneficiary is considering attending
a particular school in your state, find out if
that school participates in more than one prepaid
plan. A few schools offer their own prepaid tuition
plan as well as participating in the state’s
plan. Then you can compare fees, flexibility, and
other aspects of the two plans.
3. Tuition at the schools that participate
in your state’s prepaid plan may
vary widely. If your beneficiary plans
to attend the most expensive school in
the state and take the maximum number of
credit hours, then your state’s plan
may be a good deal. On the other hand,
if your beneficiary will be attending one
of the less expensive schools in the plan,
your potential return on the state’s
plan may be low.
