Saving for your children’s education becomes increasingly important as college tuition continues to increase. The good news is that the state of Maryland sponsors some great plans that help make saving for college a bit easier. These plans, called 529 savings plans, are an excellent way to fund your kids’ education.

I recently had the opportunity to speak with Lauren Shipley, executive director of the College Savings Plans of Maryland. Ms. Shipley was formerly a financial aid counselor, so she understands the challenges of financing an education.

Ms. Shipley explained that Maryland offers two 529 college savings plans: The Maryland Prepaid College Trust and the Maryland College Investment Plan. Money contributed to these plans can be used to pay for tuition, room and board, books, fees, and even laptops.

The Maryland Prepaid College Trust

Maryland is fortunate enough to be one of just 15 states that offer a prepaid savings program. The Prepaid College Trust allows parents to lock in tuition at today’s prices. This type of plan is essentially a contract between you and the state — you agree to make payments into the plan, and the state agrees to cover the tuition when your child graduates. So even if the cost of tuition increases in the future, your child’s tuition will be paid in full. Parents can start contributing as soon as a child is born.

The College Investment Plan

The other 529 savings account is the College Investment Plan, which more closely resembles a savings account. You can choose from approximately 16 investment options. Parents or other relatives can open an investment plan account for as little as $250 and contribute as little as $25 per month, and you may use the savings for any college or trade school that is accredited by the Department of Education.

There are benefits to each plan. For example, there’s no limit to the amount of time that funds can remain in a College Investment Plan, so parents can use the funds for any of their children or even their grandchildren. The Prepaid College Trust enables students to use the savings up to 10 years after they graduate from high school.

People sometimes think there are disadvantages to the Prepaid College Trust plan, but I believe it offers some great benefits. Perhaps the biggest advantage to the prepaid plan is that it is guaranteed to cover your child’s tuition. You don’t need your money to grow like you would if you invested in the stock market because the plan is designed to cover the cost of tuition at the time your child graduates.

Ms. Shipley says that a frequent misconception is that 529 savings may not be used for out-of-state schools. However, students may use the funds for out-of-state schools and even private schools.

Another advantage of Maryland’s 529 plans is that they provide a state income tax deduction up to $2,500 per year per plan, and the growth of funds has tax deferred status. As long as funds are used for education expenses, they come out of the plan tax free.

To learn more about the College Savings Plans of Maryland, visit

To watch my interview with Ms. Shipley, you can find the full episode of “Your Future, Your Finances” below: