Fact vs. Fiction Archive

Fiction: A prepaid tuition plan and a college savings plan are the same thing.

Fact: A prepaid tuition plan is what it sounds like—a plan that allows you to prepay all or part of the costs of a college education. Operated by state governments, these plans are guaranteed to increase in value at the same rate as college tuition. A college savings plan differs in that the plan is managed by a mutual fund company, which determines the investment choices available. Contributions are made to a portfolio of mutual funds or other selected investments, and the account owner bears the risk of investment returns. In other words, there are no guarantees.

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