One advantage to this type of college funding is the freedom to apply the savings to the students choice of college when he or she is old enough to participate in the decision. The funds can be used at any accredited U.S. college or university. The Savings Plan may offer a higher return on the investment then a Prepaid Tuition Program . Savings Plan Trusts also defer federal taxes until the point when the funds are actually used. They are then also taxed at the beneficiary rate, which can be significantly lower then the parent's tax base.
Many states offer tax benefits.
Warnings A Savings Plan Trust, unlike a Prepaid Tuition Program, does not guarantee the current tuition rate regardless of a rise in those rates. Some states have residency requirements. For the states that do, it is often required that either the participant or the beneficiary be a state resident when the student is first enrolled in the program. The states that do not have such a requirement are open to non-resident investors. All rights reserved.