College Investment Plans - Prepaid Plans
With Prepaid Tuition Plans you are required to make deposits into a state-sponsored account for a number of years to cover anticipated college costs at a public higher-education institution. As a Teenvestor, you probably will not be able to make the required payments to Prepaid Tuition Plans. Your parents, however, may find the information about these types of plans valuable if they hope to pre-pay your college tuition at a state school. The following are features of pre-paid plans:
The money you deposit in these plans guarantees (or nearly guarantees) that the beneficiary can attend any public college in your state without requiring additional payments by you even if tuition increases. In many of these Prepaid Tuition Plans, you have no choice in terms of how your money will be invested by the state.
Shortfalls Made Up
In some of these Prepaid Tuition Plans, the state makes up any shortfall in the amount of money you will have to pay in a state college if college costs have gone up more than anticipated by the time your are ready for college.
Payments Based On Tuition Projections
In the Prepaid Tuition Plans, the payments are based on the state’s projection of future increases in tuition costs. When the beneficiary is ready for college, he can attend any public college in the state. An example is Alabama’s Prepaid Tuition Plan, called the Prepaid Affordable College Tuition Program or PACT. PACT covers the cost of four years of undergraduate college education for any public college or university in Alabama. If the beneficiary of the PACT account goes to an institution outside of Alabama, the state pays the average tuition and mandatory fees at the public four-year colleges in Alabama to the institution.