These plans allow people to lock in today's tuition rates to fund tomorrow's education costs. Plans are guaranteed by the state government. Proceeds cover tuition and mandatory fees only, not room and board.

Allows an individual to contribute money to an account established to pay for a child's higher-education costs. Earnings at the federal level are tax-deferred and become tax-free when withdrawn, if used for qualified education expenses such as tuition, room and board, books and other related fees. Nonqualified withdrawals are subject to taxes and penalties. Some states may offer additional tax benefits for persons investing in their own state's plan. As with any investment, the potential for gain is not guaranteed and there is a risk of loss of the principal. Proper management and monitoring is a necessity.

It is a simple way for minors to own securities without the use of employing an attorney to set up a trust. A donor must appoint a custodian and specify the recipient. The donor then irrevocably transfers assets in to that account. The assets are controlled by the custodian until the child attains full control at age 21 (18 in some states).

Formerly called an Education IRA, money is contributed to an IRA in the child's name to fund education expense. This option offers tax-free and penalty-free distributions when used to fund educational expenses. Penalties and taxes apply to nonqualified expenses. Contribution limit is capped at $2,000 per year. May have some negative financial aid implications.