Prepaid Tuition Funds Pose Risks.

• Position: Brief Article

Prepaid tuition funds were designed by state governments to help parents pay for their chi1dren's college education. The programs, which have grown in popularity and number, allow state residents to deposit money in a tax-free savings program for future tuition costs. State governments can designate a particular financial services firm to be the manager of that state's college saving program. In effect, this is much like selecting a particular mutual fund to be the state's official haven for residents who wish to invest their savings free of federal and state taxes. Currently, 19 states offer college savings programs and seven additional states have plans to begin programs. The entrance of state governments into the mutual fund business has provided residents with sizable opportunities and risks. The college savings programs in some states are...