A prepaid college fund allows parents or grandparents to pay for their child’s college tuition at current levels, regardless of rising costs. It must be used for a college education and is generally for public universities in the state where the student resides. It provides tax relief but is only useful if the child attends a state university in their home state.
In the United States, a prepaid college fund is a savings fund that allows parents or grandparents to pay for some or all of their offspring’s college tuition long before they actually enter college. This allows them to price college at current levels, which is beneficial considering college costs are constantly rising. Those who endow into a prepaid college fund may pay all aspects of the tuition or may pay only a portion and may increase the amount paid by making installments. The money saved must be used for a college education and generally must be spent at a public university in the state where the students reside.
College education for your children is one of the biggest concerns for parents. There are great benefits for children receiving such an education, but the cost of college tuition has become increasingly prohibitive. As a result, parents are often looking for new ways to save money for the future when their children make the trip to college. One savings method is a prepaid college fund.
A prepaid college fund is generally administered by the state where the funders reside. Parents of grandparents can put as much money into the fund as they can afford, and it goes toward tuition credits at current prices. These credits can be used for actual college classes or for room and board at the college in question when it’s time for the kids to go off to college.
What makes a prepaid college fund so attractive is that it locks college prices in at your current amount. If these funds are started when the children in question are very young, the difference in tuition between then and when they are old enough for college could be huge. Another way of looking at the fund is as an investment. Whatever the tuition price differences in the two time periods, represents the return on investment.
Another positive aspect of a prepaid college fund is that it generally provides tax relief in the state where it is started. The downside, however, is that it is generally only useful if the children in question attend state universities in their home state. If those children decide to go elsewhere, the money in the fund cannot be used for its intended purpose.
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