Some states give citizens both breaks.
Tax deferral works for you whether you choose a savings plan, which invests your money in mutual funds or similar accounts, or a prepaid-tuition plan, which promises that your payments today will cover tuition tomorrow no matter how much costs rise. If you're saving over the long haul, savings plans let you reach for stock-market returns, which are likely to outpace tuition inflation. Savings plans have other benefits, too. So it may be wise to hedge your bets by investing monthly or annually, rather than committing a large lump sum. And though it involves some pretzel twists, it is possible to move money from one state plan to another, and to change your investment choice in the process.