Some 529 plans offer the opportunity to avoid both the stock market and the impact of spiraling tuition. You can purchase a contract that effectively guarantees an investment return equivalent to the rise of college tuition, not the performance of the markets.
These are prepaid tuition plans and guaranteed savings plans, are available in nearly two dozen states. In many of these programs, but not all, you or your beneficiary must be a resident of the state in order to enroll.
Before enrolling, check out the details. Several prepaid tuition plans charge a premium over current tuition prices, and the premiums will likely increase in the near future. For example, in the Guaranteed Savings option of Ohio’s CollegeAdvantage program, participants now pay a premium of as much as 30 percent over current tuition levels to buy protection from future tuition increases.
In other states, there may be an opportunity to jump in now and take advantage of current pricing, before such premiums become more common.
