VIRGINIA

Virginia College Savings Plan

Type: Savings

Phone: 888-567-0540

State tax benefit: Deduction of up to $2,000 per contract per year. (No cap for donors over age 70.)

Open to nonresidents: Yes

Refund provisions: No withdrawals in first 12 months. Penalty of 10% of earnings thereafter.

Minimum/maximum contributions: $25 / $250,000

Other: There's a one-year waiting period before you can make withdrawals.

Residents can deduct up to $2,000 per beneficiary per year for contributions to the savings plan, and deduct $2,000 more per child for prepaid-plan contributions. So a parent of three children, for instance, could rack up $12,000 in deductions in a single year by funding both. At Virginia's top rate of 5.75%, that would save $690.

Education Savings Trust
This plan has an age-based portfolio as well as four fixed portfolios (aggressive, moderate, conservative and money market). Expenses are 1% or less, plus an $85 enrollment fee.

You must wait 12 months before making a qualified withdrawal and must begin making withdrawals within ten years of high school graduation or, for older beneficiaries, ten years of opening the account.

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CollegeAmerica Our pick for the best broker-sold plan, it has been wildly popular since its 2002 introduction, gathering more than $6 billion in assets. The drawing card is an excellent collection of 21 American Funds products, nearly all of them strong performers. Expenses range from 0.4% to 2.25%, depending on investment and share class, with a $10 enrollment fee and $10 annual fee.

The account must be used (or the beneficiary changed) within 30 years of the beneficiary's high school graduation or 30 years after opening the account.

Virginia Prepaid Education Program

Type: Prepaid (contract)

Phone: 888-567-0540

State tax deduction for residents: Deduction of up to $2,000 per contract per year (no cap for donors over age 70). Unlimited carryforward for large lump-sum contributions.

Open to nonresidents: No

Refund provisions: You get back contributions with no interest in first three years. Then contributions plus "reasonable" rate of return (5%), less 10%-of-earnings penalty.

Minimum/maximum contributions: $1,505 for a one-year community college contract for a newborn / $29,400 for a five-year university contract for a ninth grader.

Other: Beneficiary must be in the ninth grade or younger when account is opened.

Enrollment: January through May

Tuitions vary dramatically in Virginia, along with returns on the Virginia Prepaid Education Program. But there's a safety net: If you're not satisfied because tuition increases have been low or because your child attends a low-cost Virginia public school, you can roll the proceeds into the state's savings plan and secure a "reasonable" rate of return. (Virginia decides what's reasonable.) The catch: If you use the plan at an out-of-state school, you can earn no more than that reasonable rate of return, even if tuition increases in Virginia are higher.

Shortly after Virginia launched its state-guaranteed prepaid plan in 1996, the legislature froze -- and then reduced -- tuitions at its public colleges. Returns on its prepaid contracts haven't been negative because mandatory fees went up at many schools, but in a public relations move, the program nonetheless decided to refund a portion of contributions to plan participants.

The $2,000-per-year cap on state-tax deductible contributions is waived for contributors age 70 or older; they can deduct their entire contribution right away. But nuisance fees are plentiful, including $85 to enroll and $25 to roll benefits to the savings plan.

State College Savings Plans