Parents flock to prepaid college plans

This article was originally published by on Friday, Feb. 6, 2009.

The bear market has made 529s that let you pay tomorrow's tuition at today's prices attractive. But they come with strings -- and states might not be able to keep their promises.

By Katherine Reynolds Lewis

If you thought paying for college was hard before last year, talk to some parents who had invested their kids' college cash in the stock market.

The past year's losses have crushed many parents' dreams of saving enough for their children's higher education or even a substantial chunk of that bill.

That's why a growing number of parents are turning to prepaid 529 plans, state-sponsored programs that let you pay today's prices for future tuition. Although some plans require students to attend a state university, most states let you use the money at any accredited higher-ed institution.

"When everything's going well in the markets, people think they can go it alone," said Kathleen McGrath, the director of Pennsylvania's tuition account program bureau. "When things get rocky, that's when they want the safety of the prepaid plan."