College Tuition Savings Plans – There are several types of prepaid tuition plans available, and although they can be confusing, the idea is to put some savings away for college. In fact, some parents are socking money the day after their child is born. There are some programs that allow participants to pay a fixed price based on the current rates.
Although each state that features a Prepaid Tuition Plan has slightly different guidelines, there are usually two ways to save. The first one is called “Prepaid Units,” which offers the chance to purchase a fixed percentage of tuition. The second plan is called “Contracts,” which allows the parents a specified number of years of tuition.
Check your own State’s rules and regulations for any Plan you are considering.
There is also something called the 529 plan. This is an education program operated by a state or institution. It is designed to help family’s set aside funds for future college costs.
It is named after Section 529 of the Internal Revenue Code which created these types of programs in 1996.
529 Plans can be used to meet costs of qualified colleges nationwide. In most plans, your choice of school is not affected by the state your 529 savings plan is from. You can be a CA resident, invest in a VT plan and send your student to college in NC. Check to see if your institution is eligible under 529 rules.
Nearly every state now has at least one 529 plan available. It’s up to each state to decide whether it will offer the program and what it will look like, which means it can vary in different states.