Some states offer prepaid tuition plans. Generally, with a prepaid
tuition plan, you make a series of payments or a lump-sum payment to
a state program and designate your child as the beneficiary
of the program account. If the plan meets all the applicable tax law
requirements, the earnings on your account accumulate tax free and can
be used to pay for the college tuition or expenses of the child.
Some individual colleges and universities offer prepayment programs
as well. By paying in advance, you can lock in current tuition
costs for your child's college education years from now.
A growing number of tuition plans even allow students to use the money
saved in the prepaid plan at a different school. If your child chooses
not to attend college, most programs refund some or all of your account
balance. Be sure to check the refund terms of any tuition program you're
considering before making a decision.