Should You Prepay College Tuition?
However, prepaid tuition plans may not be backed by the full faith of the state. In some states, such as Illinois and Alabama, tuition has increased faster than their plans’ investment returns. Some states are not required to bail out their plans if they fail. Other drawbacks, says Hurley, include attached premiums: You are buying future tuition at a price higher than current tuition, not at current rates. You won’t be subject to any penalties if your child opts not to go to college, but the amount you get refunded may be a lot less than the amount of tuition that would have been paid under the plan, and you may not be able to transfer the funds to one of your other children.