Prepaid Tuition 529 Plans

Prepaid tuition 529 college savings plans enable you to prepay tuition at certain state universities. Essentially you are purchasing tomorrow’s tuition at a predetermined price, and you lock in your tuition costs well in advance of when the student attends college. You can potentially save tens of thousands of dollars. However prepaid tuition 529 college savings plans have two big disadvantages.

• You don’t get to save, spend or invest the money you contribute to the plan, even if your child will enroll in college for years or even decades.
• Your son or daughter must usually attend one of your state universities, in your current state of residence, that participates in a plan in order for your prepay tuition payments to apply. If your child attends in not participating college or university, in most cases you can withdraw your savings from the account to pay the tuition, but you’ll have to pay current tuition rates.

There are some aspects of the prepaid tuition plans to consider when deciding whether this kind of plan meets your needs

·    Eligibility requirements
·    Types of plans
·    Payment terms and fees
·    Contribution limits
·    Control of assets
·    Rollover options
·    Financial health of the plan
·    Enrollment process

Eligibility requirements

Your eligibility to participate in prepaid tuition plans depends on specific plans and availability in your state, residency restrictions and enrollment status. State-by-state plans change frequently, often without notice always asked for the most up-to-date information. Residency restrictions also change as do and enrollment status of prepaid tuition plans in different states. College savings plans close for a variety of reasons, from enrollment quotas to financial or funding troubles.

Types of plans

Prepaid tuition plans allow you to prepay tuition in one of two ways a prepay contract or prepaid units. In prepay contract plans to purchase a contract worth a certain number of semesters or years worth of tuition. This type of contract is not available in every state.
Conversely in prepaid units plans, you can purchase fractional units for future tuition rather than an entire semesters or years worth of tuition.

Payment terms and fees

Prepaid units and contract plans allow you to pay all it wants for the total amount of tuition you intend to buy or to pay off the total amount you’d like to buy in monthly installments. Most people opt for monthly installments.

Contribution limits

Prepaid plans normally limit the total amount of tuition you can prepay based on the average cost of four years worth of State College and university tuition at the time you establish the plan. Depending on your state the total contribution limit is roughly $50,000-$100,000. Again you can contribute to your prepay plan by buying love Psalms or buying smaller amounts of tuition periodically.

Control of assets

The person who establishes prepaid tuition plan remains the sole owner throughout the life of the plan. Only he or she make investment withdrawal decisions about the assets in the plan

Rollover options

Being transferred out of state are moving because of the job are the most common reasons people roll over prepaid tuition plans. If available or into a state or private savings plan without incurring Internal Revenue Service penalties, you’ll lose the benefit of having prepay for tuition since beneficiary will no longer attending school and accept your prepay contract or units. Compensation is made in the form of a small amount being added usually 2% interest to the balance of your account before the rollover occurs. You usually must pay a termination fee of $50-$100 as well

The Financial Health of the Plan

The effectiveness of a 529 college savings plan depends entirely on the state’s ability to make good on his promise to pay for future tuition by investing your money now. If the investments that the state makes with prepay tuition funds don’t perform well, the state may be forced to refund the plant owners money and cancel the prepay program. Some states require that the state government payout of pocket for a financial shortfalls in the plan. Other plans require the state legislature to entertain proposals to bail out the plan if it runs into financial difficulty.

The college savings plan network, a nonprofit organization can provide information to a prepaid tuition plans enrollment.