If you worry that sort of thing, with a 529, your child gets no say over how to spend the proceed when it finally comes due. When they have no legal funds to their name, they become eligible for financial aid. And also, in some cases, the fact that the child has no right over how the money is spent keeps me safe from careless choices (say, spending the money on a week at the Bahamas).
We approve thousands of automotive loans each day for folks with no credit car loans or bankruptcy, whatever. 529 plans can be real winners in other ways too. Over the years, you can make deposits that amount to as much as a quarter million dollars; in states like Colorado, the state will contribute up to $500 each month to your account, and you get all kinds of tax breaks as well.
Of course 529 plans can be a bit of a pain for the number of choices they give you with all kinds of features (like how they will invest your money). And if you happen to use the money to not pay for college costs, there’ll be a penalty. The way they invest your money can often become an area of serious disagreement. For instance two years ago when the markets plunged, ahead of the recession, some 529 plans tried to follow their normal plan oblivious of the economic environment. For accounts that were nearing maturity, they tried as usual to shift investments from low-risk mutual funds to more conservative investments (like income securities). The direct finance business works as a great credit auto mortgage would from your native financial institution, except borrowers with car loans for bad credit will probably be anticipated to bring in a bigger down cost and pay a better curiosity rate. In doing this, they went and sold their mutual funds on the market when it was very low. Everyone tried to stop them, but they wouldn’t listen. They sold at the bottom of the market.
529 plans, like anything else you trust others with, depend on how bureaucratic their administrators can be. Even if you’re completely enthusiastic about investing in your child’s future in this way, you need to be aware that if you are hoping for Hope and Lifetime Learning tax credits, paying your child’s entire college education bills with a 529 bounty can disqualify you. Well, nothing is without the downside.