The Risks And Benefits Of A College Tuition Plan

May 23, 2010 · Filed Under College Tuition Plan

There are numerous ways to get on a tuition plan to get cash today to work for you tomorrow. Whether it’s planning for a child with a 529 plan or asking universities and colleges to put you on a monthly payment plan, you can find ways to balance your budget. There are risks and benefits to trying any tuition plan. In order to manage your money more effectively, consider each plan’s risks and benefits to decide if they’re going to save you money or not.

For 529 Plans

A 529 plan is a great pre-tax vehicle to save for your children’s education, long before they’ve even graduated high school. It’s this fact, along with the stock market swings, that can cause havoc with even the best laid 529 plans. If your kid decides to skip college, you’ll lose the monies in the plan as it can’t be used for anything else. Even if they do decide to go, and you create a large pool of savings pre-tax for this purpose, you still risk falls in the stock market that can impact how much you end up saving over time. The benefit is the power of compounding over time and saving taxes on that money, as it is taken from your paycheck on a pre-tax basis.

Tuition Payment Plans

If you’re still short of funds, you can request that the college or university put your account on a payment plan. There are monthly payment plans available at some institutions, and others may require four equal installments to be paid before a semester ends. The risk is that if the semester ends and the account is not paid in full, a student can be suspended from classes, and their grades withheld. They may not be allowed to re-register until the account is brought current too. The benefit is that it can lower the upfront costs of paying tuition by spreading it out over time.

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