12 Questions About Prepaid Savings Plans?

Answer 1

College tuition can be burdensome if you do not prepare for it beforehand. It takes careful planning to minimize the cost of college education and truly it is but wise to start saving for this purpose early in your life. You can accomplish this important goal through prepaid savings plan for your college tuition. So, how can this be achieved?

Unknown to many high school students and low-income families, there are prepaid tuition plans available for them to participate in. These plans or programs are also called Prepaid Education Arrangements (PEAs) and the way they work is that families can purchase public in-state education at current prices for their sons and daughters who plan to pursue their college education. This is advantageous for families and students because college tuition inflation will not affect their pre-purchased education.

How many types of prepaid savings plan are there?

There are two plans available for aspiring college students and their families or sponsors: a units plan and a contract plan. With a units plan, you can buy portion of your tuition units, which are usually measured in credit and semester hours. A contract plan is more flexible than a units plan because it allows you to purchase tuition contracts for one year and all the way up to five years. Both plans can be paid in installments or in a lump sum.

What are the beneficial advantages of prepaid savings plans?

State governments assured purchasers of prepaid savings plans that they will match any increase in in-state tuition amount at any given year. Upon knowing which college you will attend, you may start your safe investment in prepaid savings plan. Realize that these plans for the most part outmatch the interest compounded in your savings or CD accounts so they are indeed the best choice in preparing your loved one for college.

What are the drawbacks of prepaid savings plans?

There are a few drawbacks, however, with prepaid savings plans. First, these plans are limited to state residents so they restrict your choices of college or university to attend. Prepaid savings plans cannot be transferred or used if you decide to enroll in a private or out-of-state college or university and some plans basically cover your tuition cost only, not your board and lodging, or even your books. Once you start paying for your prepaid savings plan, requesting a refund or cancellation is imprudent because it can result in stiff penalty and also of loss of interest.

Now that you know the pros and cons of prepaid savings plan, evaluate your situation and make an informed decision about your educational future. It’s not too early to plan for your college education. Your decision today will surely enhance your life’s outlook so make your choice and don’t delay any further.

Source:

http://www.collegeboard.com/parents/pay/scholarships-aid/21391.html