Fact vs. Fiction Archive

Because of the risks of college savings plans, I should use a prepaid tuition plan for my children's college education.

Although the account owner bears the risk of investment returns, there are advantages to the college savings plan option. Funds in prepaid tuition plans typically must be used at public colleges in a particular state, but funds in college savings plans can be used at any college accredited by the U.S. Department of Education—at home or abroad. Also, there is generally no time limit on taking distributions from college savings plans; most prepaid tuition plans, on the other hand, require tuition credits to be used by the time the beneficiary reaches age 30.

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