College Savings Plans have several advantages you should be awar of as outlined below.

No Federal Taxes. After a new law called the Tax Relief Act of 2001 was enacted, you no longer have to pay federal taxes on the earnings on a College Savings Plan as long as you use it for qualified higher education expenses. This tax exemption wil be in place from 2002 to 2010 when Congress will decided whether to extend the provision. In addition, in many states, you won’t have to pay state taxes if the withdrawals are for qualified expenses. This may not mean that much to you but we are sure your parents will appreciate its significance.

Guarantees. In some cases, coverage of your college costs are guaranteed. This is the case with prepaid plans which we discussed in another section.

No Income Limitations. Individuals at any income level can contribute to the plan. This means that if your parents make a lot of money, they can still open a College Savings Plan account for you.

Professional Money Management. You have professional money managers such as TIAA-CREF, Fidelity and others investing your money for you.

Low Minimum Investments. The minimum investment requirements are low—as low as $5 and you (or your parents) can invest as much as a few hundred thousand dollars in total.