Shannon Kietzman, Contributing Writer
Have you started saving for your child to go to college? If not, you may want to seriously start looking at your options. According to a report published by The College Board, the average tuition for those enrolling in a private university in 2008 will be $110,000, while those attending a two year community college and then moving on to a two year private college can expect to pay $63,300. Those wanting to save some money can go to a public university as an in-state resident, but the costs will still average $28,700 to complete a four-year degree. Obviously, these costs will be much higher in 18 years if you have a child that will be going to college. So, whether you are looking toward a bright future for your child or even if you are considering pursuing a higher education in a few years, you should seriously consider starting a 529 Plan to help you with the costs.
The 529 Plan is a special type of savings plan that is specifically geared toward saving for educational purposes. Created in 1998, the plan is meant to help families more effectively set aside funding for future college expenses. The money that is saved with a 529 Plan can be used to pay for college expenses at any of the many qualified colleges in the nation, so the state where you set up the 529 Plan does not have a bearing on where you or your child can attend school. In addition, you are free to start up a 529 Plan with a state other than the one you live in. Therefore, since every state has its own 529 Plans available, it is best to check into what each state has to offer in order to find the plan that offers the most attractive features and benefits.
There are two major types of 529 Plans available to those interested in saving for their education. These include:
Savings plans are similar to IRAs or 401K plans. In other words, the money you contribute to the plan is invested in mutual funds or in other types of investments. As with a 401K or IRA, you will have a variety of different investment options to choose from and the value of your account will rise and fall according to the performance of your investments.
Prepaid plans are different in that they allow you to pay all or a portion of in-state public education or they can be converted to allow you to pay for expenses associated with private and out-of-state colleges. Specific educational institutions can offer this type of 529 Plan, but they cannot offer the savings plan.
In order to determine which type of 529 Plan is best for you and which state you should go through for your plan, it is a good idea to consult with a 529 Plan manager or a financial advisor. This way, you can be certain you are selecting the plan that will best prepare you for paying your college expenses, whether they are for your child's education or your own.