Could This Little-Known College Savings Plan Save You Thousands?

Could This Little-Known College Savings Plan Save You Thousands?

Imagine you had a child born in 1996 and you wanted to start saving for his or her college education immediately. Back then, tuition at Arizona State University -- currently the largest school by enrollment in the United States -- was just $2,000 per year.

Fast-forward to today, however, and the picture is much different. Tuition has grown by 10.6% per year and now runs $9,720 annually. At the same time, the stock market returned just 6.8% per year. In other words, your investments weren't able to keep up with the inflation in college prices.

But if you had taken advantage of your state's 529 Prepaid Tuition plan, you could've gotten one heck of a deal. Using the program, you would have paid the going rate for tuition back then and gotten to use that money for tuition today -- and your investment would have outperformed the market by a wide margin.

However, as Motley Fool contributor Brian Stoffel explains, there are some important drawbacks to using a 529 Prepaid Plan that investors need to be aware of.

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Originally published