529 - Part 2What

January 04th, 2008 | Category: Student Loan

2What are the differences amidst pre-paid tuition plans and college savings plans?

Pre-paid tuition plans generally allow college savers to purchase units or credits at participating colleges and universities for future tuition and, in some cases, room and board. Most prepaid tuition plans are sponsored by state governments and have residency requirements. Many state governments guarantee investments in pre-paid tuition plans that they sponsor.

College savings plans generally permit a college saver (also called the “account holder”) to set up an explanation for a student (the “beneficiary”) for the purpose of paying the beneficiary’s eligible college expenses. An history holder may typically choose

among several investment options for his or her contributions, which the college savings plan invests on behalf of the explanation holder. Investment options often include stock mutual funds, bond mutual funds, and money market funds, as well as, age-based portfolios that automatically shift toward more conservative investments as the beneficiary gets closer to college age. Withdrawals from college savings plans can generally be used at any college or university. Investments in college savings plans that invest in mutual funds are not guaranteed by state governments and are not federally insured.

(This is Part 2 of the 529 series.)

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