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Prepaid Tuition (529) PlansEven if you intend to become an adult e-learner in the near future, it's never too late to start saving for your college education. Even a small investment now can potentially save you money when you actually begin or resume your education in the future. Qualified tuition plans, widely known as 529 plans (named after the section of federal tax code that authorizes them), are savings and investment instruments designed to help pay future higher education costs. Though typically established by states, educational institutions were also allowed beginning in 2002 to establish their own 529 plans. You can invest in a 529 plan to benefit anyone's education, including your own! There are two types of 529 plans. The first, prepaid tuition plans allow you to "lock in" tuition and fees for future enrollment at a set rate. The second college savings plans function like mutual funds, with the invested principle and earnings earmarked for future college expenses. All states offer at least one type of 529 plan, with some offering both. Prepaid tuition plans allow you to pay for a specified amount of tuition (by credit-hour or semester units) at a rate determined by the specific plan. The money you pay can then be used at a future date to cover tuition costs, no matter how much those costs have increased from the time when you made your initial payments. College savings plans allow you to open an investment account to be used for tuition and fee payments at a later date. Monies invested in college savings plans are managed by private fund managers in a fashion similar to mutual funds (often the fund managers are mutual fund managers). College savings plans typically provide several investment options with varying levels of investment risk — all college savings plans carry the potential that your investment will decrease, though the risk becomes smaller over time. Contributions made to a 529 plan of either type are made with after-tax dollars, and any earnings from a 529 plan are tax-free. Beginning in 2004, amounts withdrawn from a 529 plan are also tax-free, as long as they are withdrawn to pay qualified higher education expenses. Each state determines the specifics for its 529 plan(s), from eligibility for the plan and benefits it may provide to fees charged by the plan and the portability of your investment to other states. Always thoroughly investigate various 529 plans available to you before investing in one; you may also want to speak with a financial advisor to help decide which plan is right for you. The links below will take you to the prepaid tuition and college savings plans established in the SREB member states. [Note: due to current budgetary restrictions, many states have suspended new enrollments in their prepaid tuition plans.]
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