Louisiana, Michigan, Minnesota, and Pennsylvania match part of the contribution, subject to income and other restrictions. New Jersey offers scholarships for students who attend in-state. The programs also have much in common. All come with the benefit of tax-deferred growth, with earnings taxed at the child's typically lower rate when he or she pulls the money out. That makes them attractive estate-planning tools for wealthy grandparents.
Financial aid is another consideration.
The prepaid plans can be even more devastating. With those, aid may be reduced dollar for dollar. Still, tax-deferred growth is a powerful lure. The McGraw-Hill Companies Inc. All rights reserved.