Disadvantages of Qualified State Tuition Programs

The advantages of qualified state tuition programs are many. However, every type of investment has some sort of downside, and qualified state tuition programs are no exception. Let's look at the cons of these plans to help you decide whether they're the appropriate education investment for you.

The control issue is a good place to begin a discussion on the disadvantages of qualified state tuition programs. Unlike your own mutual fund investments and Coverdell Education Savings Accounts (ESAs), you don't have the direct input into the investments made with your contributions to a state plan. However, when choosing a state plan to contribute into, information is made available on who is managing the plan, the types of investments that are being made, as well as the performance record of investments already made. For this type of information and more, go to the College Savings Plans Network website.

Another disadvantage of state-sponsored savings plans is that withdrawals are generally qualified only if they are used to pay for college and college associated expenses. Unlike ESAs, the funds can't be used for tuition and expenses for kindergarten through 12th grade. Depending on your situation, this may not be an issue. For example, if the beneficiary attends public school in an excellent school district and incurs minimal other expenses that would qualify for payment with Coverdell Education Account Funds, this probably will not influence your education investment decision to any extent.