State Tution Programs

"State Tution Programs" submitted by SchoolGrantsfor Editorial Team and last updated on Saturday 23rd July 2011

State Savings Plans

Most states sponsor some type of college savings plan. Each state sets the maximum amount you can contribute per child. These plans are not subject to state and local taxes and may grow faster than a taxable investment.

While there are no favorable federal tax deductions, taxes on the interest will be deferred until your child goes to college. Additionally, the interest earned will be taxed based on the student's lower tax bracket.

Interest gains, flexibility and tax benefits vary from state-to-state, and there are two potential drawbacks:

  1. Some states may assess penalties if the student decides to attend an out-of-state school.
  2. Private savings - even without the tax benefits - might deliver better earnings, as the interest rate paid by some states is very low.

Prepaid Tuition Plans attract many people due to tax savings. They're called Qualified Savings Tuition Plans, or "Section 529" Plans, after the portion of the IRS code that authorizes these accounts. They deliver attractive benefits:

Would you like to know what your state has to offer?
Click HERE to link over to your state's web site.