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COLLEGE SAVINGS 101

Are 529 plans only for my state's public colleges?Updated: 2013-11-18

There's a misconception that state-sponsored 529 plans are only geared to families that send their children to a state school. That's just not true!

There are two general types of 529 plans:

  1. savings programs, and
  2. prepaid programs.

Savings

If you decide to use a 529 savings program, the full value of your account can be used at any accredited college or university in the country (along with some foreign institutions). You can look up eligible institutions.

Prepaid

The states offering prepaid tuition contracts covering in-state tuition will allow you to transfer the value of your contract to private and out-of-state schools (although you may not get full value depending on the particular state).

The tax law now permits higher education institutions to offer their own 529 prepaid programs. These will allow you to target your tuition prepayment to the sponsoring institution (or group of institutions). The Independent 529 Plan is the only such program currently in operation and you must check to see what restrictions they may place on the colleges covered by the plan.

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