Prepaid Tuition Plans and Financial Planning for College

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What You Need to Know About Getting Internships in College

Have you ever heard of a prepaid tuition plan? Sometimes known as a “529″ (after the federal IRS code which addresses the issue), prepaid tuition plans allow people to plan ahead for college, locking in the current rate of college tuition for children who will be attending college in the future. Parents and young adults who are fairly certain that the family’s kids will be attending college in the future should consider the prepaid tuition plan as one option that makes sense when doing financial planning for college. It saves money in the long run and also helps make sense of college tuition planning as a whole.

The basics of prepaid tuition plans

Prepaid tuition plans are offered by the federal government as well as by many states and by some independent colleges. Parents general start at the federal level with their research and work their way down. It is often uncommon to know in advance which colleges will be attended so planning for a 529 at certain colleges doesn’t make sense for most families, but you should be aware that it’s an option you have on your plate. For additional information about the different types of prepaid tuition plans.

How prepaid tuition plans work

The prepaid tuition plan is a college savings plan which is designed to increase in value at the same rate that college tuition rates increase. So, the sooner that you start saving with your prepaid tuition plan, the better because you are basically locking in the current rate of tuition and when all documents check or essay proofreading will ready, accordingly, financing will already be needed. Since college tuition costs are increasing every year, it makes sense to pay for college as soon as possible even if you or your children aren’t going for a long time.

The two kinds of prepaid tuition plans

There are two different prepaid tuition plans that are commonly purchased by parents seeking to secure low college costs (relatively) and set aside money for their child’s education. The first is a contract plan essentially the parent contracts to buy a certain number of years of education in the future. The requirements for contract plans vary dependent on the state, the number of years purchased, the age of the child at purchase and the method of repayment for the purchase. The second kind of prepaid tuition plan is the prepaid unit plan. Units are bought in increments, with one unit basically representing one percent of the tuition during the year of purchase, and the price of units goes up as the cost of tuition goes up.

Using your prepaid tuition plan for gifts

Prepaid tuition plans are great not just because they give you a way to save money for your children or for your own education but also because they encourage other people to contribute to the education of the person for whom the prepaid tuition plan is set up for. In simpler terms, if you set up a prepaid tuition plan for your child when he is young, you can let your family and friends know that they can pay into the plan when birthdays and holidays come around. It gives them an easy way to gift every year and helps the child pay for college while saving on the actual cost of the education.

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