Whats the difference between college savings plans and prepaid tuition plans?
Although both college savings plans and prepaid tuition plans are 529 plans (assuming they meet the statutory requirements), there are important differences between them. The main difference is that with a college savings plan, you contribute to an individual account to pay for a child’s future education. Your money is invested in a particular investment portfolio at the time you join the plan, and you take your chances on what your rate of return will be – there are no guarantees. If your portfolio performs well, you reap the benefits. If it doesn’t, you suffer the losses. By contrast, with a prepaid tuition plan, you prepay all or part of a child’s future tuition by investing in units or contracts (depending on how the particular plan is structured), and you’re guaranteed a minimum rate of return. However, you aren’t necessarily entitled to any extra money that the plan may earn. There are other important differences, too. A college savings plan lets you use the funds at any college
