ALABAMA

Higher Education 529 Fund

Type: Savings

Phone: 866-529-2228

State tax deduction for residents: No deduction

Open to nonresidents: Yes

Refund provisions: Penalty of 10% of earnings

Minimum/maximum contributions: $250 ($25 for automatic deposit)/$269,000

There's no extra incentive for residents to stay in state because there's no tax deduction for contributions, and Alabama taxes earnings on withdrawal. Run by Van Kampen, the plan's three fixed portfolios and eight individial funds about matched their peers in the past year. The conservative age-based portfolio performed below average over the past year.

This is an expensive plan for nonresidents, who must buy broker-sold shares, which add up-front or annual sales charges ranging from 2.25% to 5.75%. There also is an $25 annual account fee. Alabama residents pay only a $10 annual fee.

Alabama Prepaid Affordable College Tuition (PACT) Program

Type: Prepaid (contract)

Phone: 800-252-7228

State tax deduction for residents: No deduction

Open to nonresidents: No

Refund provisions: You get back contributions plus a passbook interest rate, less a $25 fee.

Enrollment period: September

Minimum/maximum contributions: Four-year contracts range in price from $15,364 to $18,964, depending on the age of the child. Monthly installments start at $134 per month.

Other: Beneficiary must be in the ninth grade or younger to enroll.

Alabama's plan has a significant risk: The state does not back the plan with a guarantee that it will fully cover costs if its underlying investments do not outpace tuition inflation. If you don't use the proceeds for college expenses, you get back your contributions plus a passbook rate of interest (no more than 5%), less a $25 fee. Contracts are fully portable, which means they can be used at any accredited college in the U.S., though you'll pay $25 per term to use the proceeds at a private or out-of-state school. There's also a $100 enrollment fee.

State College Savings Plans