So if you’re going to college, you’re going to need a means of paying for it. Your parent may be kind enough to help you out, but the cost of education nowadays is so high that it’s hardly manageable. It’s always best to plan head. The 529 Plan allows families save up for college and set aside the money needed to pay off the expenses without having to rely on student loans. It’s essentially an investment plan in which you (your parents, actually) will be hiring someone to manage for you. This of course means there will be fees involved, but nowhere compared to what you will be paying the college. Now the 529 Plan comes in two flavors: the prepaid tuition plan and the college savings plan.
1. The Prepaid Tuition Plan
The prepaid tuition plan locks tuition in place. Since tuition prices are constantly on the rise, being able to pay for the tuition up front and in advance helps. Any investment you make into this plan is also guaranteed and backed up by the state, so there’s very little risk involved. The only negative about this one is that it only covers tuition costs and any mandatory fees the college may have. Also, there are many eligibility requirements having to do with the beneficiary’s age, state residency, and the enrollment period in which they may apply; this may make it difficult to get approved.
2. The College Savings Plan
Any money put into this one pretty much goes into everything: tuition, mandatory fees, room & board, textbooks, and anything else that may be required. There’s little to no restrictions on eligibility, but there is also a risk in investing in this one. For one, the money put into this type of plan is not backed or guaranteed by the state. Also, tuition prices are not locked by this plan, so you’ll likely be paying out extra over time.
The plans offered vary from state to state and each state sponsors at least one, so you many need to do some research and find out which ones are available in your state and which ones offer the best rates. There’s usually tax benefits involved, so that’s something that you may want to be aware of too. If I were to take a pick out of the two, I’d go with the prepaid tuition plan. Not only because of the lowered risk, but because colleges are always raising their tuition rates and campus fees, so you want to be sure you have that under control first. For everything else, the issue of money there can be solved by just simply moving in with a friend, getting a job, and paying for it with your own money.
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