MASSACHUSETTS

Massachusetts U.Fund College Investing Plan

Type: Savings

Phone: 800-544-2776

State tax deduction for residents: No deduction

Open to nonresidents: Yes

Refund provisions: Penalty of 10% of earnings

Minimum/maximum contributions: $1,000 or $50 per month / $250,000

This flexible U.Fund plan has a series of age-based portfolios that is 85% in stocks for newborns and reaches a 25-25-50 split of stocks, money market and bonds at about age 16. You also can contribute to a 100% equity, 70% equity fund, fixed-income fund and money-market fund. There's a 0.3% asset-based management fee plus fees for underling funds that range from 0.64% to 0.81%, plus a $30 annual fee that is waived with automatic contributions or a $25,000 account balance.

Massachusetts U. Plan

Type: Prepaid (contract)

Phone: 800-449-6332

State tax deduction for residents: No deduction

Open to nonresidents: Yes

Refund provisions: Tuition certificates may not be redeemed before their maturity date. Afterward, you get back your contributions plus the rate of inflation

Minimum/maximum contributions: $300 / four years' tuition and fees at highest cost participating college

Enrollment period: May-June

Other: Must be used at one of 82 participating institutions.

If you really think your child will attend one of the 80 or so participating four-year colleges in Massachusetts (which includes Amherst and Wellesley but not Harvard or MIT), then the U. Plan may be a reasonable deal. Your earnings will match tuition inflation at the school your child attends (which has averaged about 4% at public colleges and 5% at privates recently). Earnings are also free from federal and state tax because tuition credits are really municipal bonds, backed by the full faith and credit of the state. That's a risk-free 5.8% to 7.2% taxable equivalent return for taxpayers in the 31% tax bracket, also free from any fees or expenses.

Trouble is, you have to make that call early on because you must leave your money in the plan for at least five years. If you use the money at a nonparticipating school -- or never use it for college at all -- you get your contributions back plus earnings that match the consumer price index.

State College Savings Plans