Nearly 1.2 million people use the plans to save for college. The plans offer professional money management, and state and federal taxes on earnings are deferred until withdrawn.
Many plans offer additional state tax incentives.
State tuition plans are either prepaid or savings plans. If the money isn't spent for education, the investor loses the tax benefits and incurs a penalty. Most recent growth has been in savings plans. Fourteen more are set to launch soon. Many states accept investments nationwide, and some offer enhancements beyond tax concessions.