A recent article from the Dallas News alerted me to a problem with the Prepaid Tuition 529 Plan in Texas. Originally, the plan let investors withdraw their funds, plus earnings, even if the designated beneficiary wasn’t going to college in Texas. Now, however, the state of Texas is amending that benefit: If investors don’t use their plan to pay for school in Texas, they get only the value of their original investment, without any of the interest. What gives? Apparently, the longhorn plan is running in the red, to the tune of almost $2 billion by 2030. The Texas Legislature deregulated tuition rates in 2003, and that’s when tuition started to skyrocket — much faster than the fund could keep up with. Anticipating this problem, the pre-paid tuition fund was closed...

The Obama Administration is proposing a series of changes to 529 Plans, reports the LA Times, in order to encourage more middle class Americans to save money for college. 529 Plans allow you to contribute after-tax dollars, which then grow tax-free until withdrawal, as long as they are used for qualified education purposes. (To learn more about 529 Plans, see Financial Aid Finder’s extensive section on College Savings and Prepaid Plans.) According to the Treasury Department, only 5% of middle-income Americans take advantage of these plans, despite their lucrative tax benefits. Among high-income filers, however, one in three have a 529 account. The College Savings Plan Network reports that there are some 11 million 529 accounts to date, with more than $100 billion in assets. The Oba...

Consumer Reports recently published its May edition of Consumer Reports Money in which it ranked the 88 different 529 College Savings Plans. If you aren’t familiar with College Savings Plans, I recently reviewed them in our “Best Ways to Save for College” series — check it out here. Or you can read a more in-depth analysis of 529 Plans in our section on College Savings. While the past year was abysmal, at best, for mutual funds, there were still a few super stars — and a few super flops — among the 529 Plans, according to Consumer Reports. The magazine compared the plans based on three factors: investment flexibility, low expenses and fees, and 2008 performance. They also looked for plans that were appropriately tracked to decrease the level of investm...

On Monday, I launched a new series on the best ways to save for college. We explored 529 college savings plans, concluding that when you carefully compare fees and state benefits, you can really score with a college savings plan. Today we are looking at the other type of 529 Plan — the prepaid tuition plan. (By the way, if you want to know why there are two different plans, both called 529s, check out this article on the difference between College Savings and Prepaid Plans.) 529 Prepaid Tuition Plans What is it: A savings vehicle that allows you to lock in future tuition payments at today’s in-state rates. Pros: “Guaranteed” return on your investment; money can be applied to tuition at out-of-state schools (although it obviously won’t cover as much); many st...

Conventional wisdom tells us that it’s never too late to start saving. But is that necessarily true when it comes to college costs? If you are a parent, how much do you need to save in order to pay (or even help to pay) for your child’s undergraduate education? Let’s say you are have a newborn baby. If you start putting away $100 a month for the wee one right now, by the time he or she is ready to start in on the freshman fifteen, you will have over $60,000 in the bank (assuming a 10% rate of return).  That sounds like a pretty big pot for a relatively small investment (just $100 a month). But is it enough? The answer to that question is: It depends. It depends on where you child attends school. The average total cost for tuition, room, board, and books at a four-yea...

Warning: This turned into a bit of a personal rant! If you have 50 minutes to spare, let me recommend that you give a listen to this interview with Alan Michael Collinge, author of The Student Loan Scam: The Most Oppressive Debt in U.S. History — and How We Can Fight Back. Collinge is angry about his personal experience with student loans. After losing a job, he applied for forbearance and not only got rejected, but also had his interest rates completely jacked up. His rage over what happened to him compelled him to talk to hundreds of others like him and to do an obscene amount of research into the history of student loans, political warts and all. The result: The Student Loan Scam. In this interview, Collinge openly compares student loans to predatory lending. My first reaction...

If you are a parent who has diligently socked away funds in a 529 Plan for your children’s college education, you have probably lost a bundle in the last year.  Seeing your kids’ nest egg dip down is scary, no doubt about it. When the panic starts to set in, some of you are probably thinking about calling it quits on your college savings. Before you pull the plug, here are some tips for recouping your losses and keeping the college plans afloat. 1. Do the interest rate math. If your child is still in preschool, you really don’t have anything to worry about. With an average of 10 percent returns, your fund will double in value in 10 years. But even if you don’t have 10 years, you can probably recoup your losses within six years. So even if your child is 12 or 13...

We talked a few weeks ago about how the stock market crash is going to affect college savings plans.  I mentioned that those of you with plans to attend school in the next year might be feeling a real pinch. Before you completely panic, I decided to take a look at what the experts are saying about 529 Plans – both for those of you who are in school, or about to start, and for those parents who are wondering whether they should still invest for their children’s future. Quick Reminder: What is a 529 Plan? There are two different kinds of 529 Plans: college savings plans and prepaid tuition plans. Prepaid plans let you buy tuition credits at today’s prices and guarantee them for the future. In today’s market, this might seem like a safer bet, but keep in mind that pre...

It’s never too late to save for your children’s education. Even if your child is a teenager, save as much money as you can until they are ready to attend college. One way to save is with a 529 college savings plan. A 529 college savings plan is an investment plan that puts money aside for higher education, and can offset the amount needed in the form of college student loans. 529 plans offer a tax advantage to parents and other relatives that want to help a child go to college. All fifty states and the District of Columbia have their own 529 plan. To find out the requirements for the savings plan in your state, visit their website. There are two types of 529 plans. Pre-paid tuition plans let parents purchase tuition credits based on what the going rate is today and the plan...