|
| Prepaid Tuition Plans |
 • Residency Requirements and Other Limitations
Most state prepaid tuition plans require either you or your child to be a resident of the state offering the plan when you apply, unlike college savings plans. Some limit enrollment to a certain period each year. A lot of plans also have age or grade limits for beneficiaries (i.e., future college students).
• Investment Options
These plans have no investment options. The price of the contract is determined prior to purchase and usually depends on the type of contract, the current grade of the beneficiary, the current and projected cost of tuition and the projected rate of return. These plans then pool the money and make long-range investments so that the earnings meet or exceed college tuition increases. When a child grows up and become ready to go to college, the plan transfers funds to cover the tuition directly to the institution.
 • Portability
If your children select not to attend a college covered by the prepaid tuition plan, all is not lost. All prepaid tuition plans allow you to use plan money to pay tuition at other colleges and universities, although you will not get the benefit of guaranteed tuition. A lot of state prepaid tuition plans will pay out an amount equal to the weighted average tuition and mandatory fees at your state's public institutions, not to exceed the actual tuition and fees you incur. Plenty of prepaid plans also let you transfer the plan to a child's brother or sister (although age restrictions may prevent transfers to an older sibling). If your child selects not to go to college and a sibling doesn't use the plan, or you need to cancel the prepaid plan, most plans will only give you back what you originally contributed with a reduction or elimination of any interest earned. There are also plans that charge a cancellation fee.
|
|
