There are two types of 529 plans that can be used to save for college.
1. Prepaid Plans allow you to start contributing today for your child’s college education. By starting a plan today with the Prepaid Plan, you can lock in the cost of the tuition at today’s rate. If you are certain that you know what college your child will attend, call the accredited vocational school, college or university and speak with their financial aid department who can get you started buying tuition credits.
Both the Prepaid and the Savings Plans are easy to open and are managed by professional investors. You need to complete a simple registration form and you can easily link it to your bank account for direct deposit of your contributions.
The bad news is that these funds can be counted towards your total household finances and may decrease your financial aid offering if the owner of the funds is listed as the student or the parent. If the funds are not used for qualified education expenses, you’ll have to pay tax on the funds and a 10 percent penalty.