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.
North Carolina makes education loans to parents who have depleted their account. State officials pitch the programs to residents in TV ads. And investment companies who manage state funds put their marketing muscle behind the plans. Merrill Lynch, for example, markets Maine's program to investors nationally. Michigan was first with a tuition plan in 1988.