529 PREPAID TUITION PLANS

This plan allows you to purchase tuition credits for a certain school or set of schools at current prices. In other words, you pay now and lock in the cost of attending college. You can think of what you purchase as the tuition credit version of the Forever stamps offered by the U.S. Postal Service.

Many of these plans require that you open your account and begin saving prior to your child entering high school. The benefit of these plans is obvious. By paying for your child's education now, you avoid the inevitable rise in tuition rates, with the state paying the difference. But consider your options carefully because these plans are not for everyone.

One disadvantage of this plan is that it locks your student into a school or set of school long before he or she will have given a single serious thought as to where to attend college. On the flip side, there is a private college 529 prepaid tuition plan in which approximately 300 schools participate, with your prepaid tuition credits being good at all schools.

And what if your son or daughter decides not to attend college? Will your plan allow for transfer to another beneficiary or for some other way to avoid penalties? Make sure you read all the fine print and ask the right questions.