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College Funding |
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Pre-Paid Tuition Plans |
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| How much can you invest? | -Varies by State. Typically $15,000-$30,000 |
| Who controls the account? | -Account owner, not beneficiary |
| Tax Treatment |
-Tax deferred growth -Qualified withdrawals are tax free |
| Restrictions on using the money |
-Withdrawals must be used for a wide range of qualified higher
education expenses -Often limited to in-state schools |
| Financial Aid Considerations | -Withdrawals reduce financial aid dollar-for-dollar under the federal aid formula |
| Advantages |
-Low participation costs -No family income restrictions -Contributions can be made by anyone |
| Disadvantages |
-Some states won’t allow use for out-of-state schools -Traditionally offer fixed, low rate of return -Tax and 10% penalty on earnings for non-qualified withdrawals |