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semidevil

529 vs prepaid Plan for education

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I’ll be starting some sort of college fund for a child due soon,  and I’m wondering if anyone has any experience between choosing the different college savings plan,  such as a prepaid plan vs the non prepaid plan.

 

is there one that is more generally better than the other?  I like the prepaid as that you are essentially paying tuition at today’s price, but I wonder if a non prepaid plan is better since it grows.

 

anything to consider between choosing these two?

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Its great to see parents thinking ahead on even an unborn child's future.

 

Generally, a prepaid tuition plan is for one school, though some states have tuition certificates that would be good for any state supported (Don't laugh @hegemony) school in that state. If the child ends up not wanting to go to said school or for some reason isn't academically qualified for said institution then you would need to determine your options. Check the details on the ability to either sell your prepaid credits or get a refund in case of things such as you child decides to join the military instead of go to school. Some states do offer a tax credit for prepaid tuition certificates. Check with a tax professional etc etc etc

 

529 plans have the advantage of being tax free on both what you put into it as well as the capital gains when you receive distributions as long as it goes for a qualified educational expense - tuition, on-campus dorms, and books basically. It also offers the flexibility to go to any school - public or private - and if your child turns out to be a star athlete or academic prodigy and gets a full ride then the 529 can go towards things that a scholarship won't cover like books.

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