College Savings: Prepaid College Trust or Investment Plan??

[happymomma]

I have been depositing money directly into our states 529 College Investment Plan. It has been good so far. However, I have been wondering if I should be putting the money into the Prepaid College Trust. What are the cons to putting the money into the prepaid trust? I know that it covers all tuition in our state (Maryland). I know that you can use the money for another state if your child attends either a private or non-Maryland school. Can someone explain to me how a prepaid could be better?

[AnnieW625]

We have a 529 and each girl has a savings account. I am pretty sure that both of my girls will go to college but I hate having everything tied to account that must be used for schooling in case they decide to do something else. Our fund also made it through the last stock market dive okay, but it kind of makes me nervous to depend solely on an account that is tied to the stock market.

I am not aware of any program in California for a pre paid trust. I do know some states have plans that only cover public colleges in their state too and in the end it might be kind of limiting.

[khalloc]

we do have a 529 account for our DD. My understanding is that you can use it for siblings too? I'm not entirely sure.

We recently met with a financial advisor though and he recommended that we save for college using a Roth IRA. I forget the exact reasons, but I think its just because the money can be withdrawn at any time and used for any reason. So right now we do have a 529 account. My own father (kids grandfather) also has a 529 account for one of the kids (I think DD). And again I think the funds could be used for DD or DS, even though the account is in DD's name.

So we have a Roth IRA for each parent and contribute the max. Then we have 2 529 accounts(one is DH's and one is my fathers). I think DH would like to have both kids tuitions mostly paid for. I am good with the kids having to pay off some of their own college education. So if they leave school with $10k they need to pay themselves then I think that is fine.

[brittone2]

We have 529 savings accts and our own investments like Roths.

Some of the prepaid plans are not guaranteed despite their names. I looked into this for a while a few years back; I'm not totally fresh on the details. Many of those prepaid 529 plans are underfunded, and I personally didn't feel comfortable when I read up on the details in my state

http://money.cnn.com/101/college-101/savings-plan.moneymag/index.html
http://www.nytimes.com/2011/04/02/your-money/paying-for-college/02money.html?pagewanted=all&_r=0
http://www.reuters.com/article/2012/01/11/us-usa-education-prepaid-idUSTRE80A0QG20120111
http://www.smartmoney.com/invest/strategies/risks-rise-for-college-prepaid-plans-1330528634530/
http://www.palisadeshudson.com/2012/03/floridas-prepaid-tuition-plan-lives-on-borrowed-time/

[mommylamb]

Another thing to consider is a coverdell education savings account. You are limited to just $2000 a year per child, but it can be used for all sorts of other educational costs besides for college-- books, computers, private school, eduational camps, high school trip to France, etc, and you don't need to wait to use it until college. We actually used some for pre-K last year. It grows tax free like a roth.

[egoldber]

We have 529s, but plan to use general savings as well. We also have savings in short and medium term mutual funds that we plan to be able to use for college for the girls. (Short term for older DD and medium for younger DD.)

[sariana]

Each child has a 529, and we contribute a small amount monthly. Grandparents have provided some nice funds, as well.

But DH is a disabled veteran, so under current policy, our children could attend any state school (CA) tuition-free. So the 529s would go toward housing and other eligible expenses.

For those of you who mention Roths, are those in the children's names? DH and I each have a Roth, but we no longer can contribute, and they are for our own retirement, not college costs.

[happymomma]

Thanks so much for all the advice. I am glad that we are doing the investment plan versus the prepaid trust. The links that have been attached have been so helpful.