Prepaid Tuition Plans

Prepaid tuition plans are college savings plans that are guaranteed to increase in value at the same rate as college tuition. For example, if a family purchases shares worth half a year's tuition at a state college, these shares will always be worth half a year's tuition -- even 10 years later, when tuition rates may have doubled.

The main benefit of these plans is that they allow a student's parents to lock in tuition at current rates, offering peace of mind. The plans' simplicity is also attractive and most offer a better rate of return on an investment than bank savings accounts and certificates of deposit. The plans also involve no risk to principal, and often are guaranteed by the full faith and credit of the state.

Anybody can contribute to a prepaid tuition plan, including grandparents and friends of the family. This lets people give the gift of education.

Prepaid tuition plans are exempt from federal income tax, and are often exempt from state and local income taxes. Favorable state tax status may be limited to the state's own plan. Some states offer a full or partial tax deduction for contributions to the state's plan.

Wisconsin - Edvest

Illinois - Brightstart