4. Higher-education CDs have pros and cons Those who crave choice without gambling on their investment should stick with risk-free, low-gain savings vehicles, says Tanabe, the college-finance writer.
"Since adults usually have a good sense of when they'll be attending school, they can purchase a bond or CD timed to their enrollment date and gain a little bit that way," Tanabe says. "You want to make sure you have that money in two or three years, so stay away from stocks and mutual funds."
One risk-free way that returning adults can keep the federal tax benefits that accompany 529 plans without limiting their choice of schools is to purchase a CollegeSure CD offered through the College Savings Bank in Princeton, N .J.
Acting as a compromise between prepaid plans and 529 college savings plans, CollegeSure CDs are certificates of deposit whose annual percentage yields are tied to the rise in college costs.
Invest $37,208 -- the amount required to buy one year of college today -- and you'll be able to attend your first year for that price at any accredited institution in the country regardless of how much the tuition has risen since buying the CD.
The catch is that CollegeSure only saves money for those attending pricey private schools. For undergrads at schools like George Washington University in Washington, D.C., where the 2007-08 tuition price was $39,240, a CollegeSure CD bought for $2,032 less is a steal even if cashed in the next year.
For those attending schools such as the University of Florida, where tuition and fees for one year come to $3,094, CollegeSure account holders can use their funds to pay for a year of school, then spend the rest on other qualified educational expenses like room and board or a computer.
If there is CollegeSure cash left after educational expenses, account holders can either roll over their funds for the next school year, or they can pay a 10-percent penalty on account earnings and pull their money out for noneducational expenses.
For example, parents who invest $100,000 in a CollegeSure CD but only have tuition and educational expenses that total $40,000 would lose 10 percent on any earnings generated on the remaining $60,000.
No matter which savings vehicle you choose, Tanabe says the biggest financial risk for adult learners isn't choosing the wrong savings plan. It's taking on debt for a degree that doesn't pay off.
"Delaying college for a few years while you save is much less risky than taking out a loan for a degree that might not increase your income," Tanabe says.
The first step to risk-free college saving is simply making sure that the degree is worth the financial investment, he says. "Before looking at how to save, you really need to consider: What's the payoff to getting this degree?"
Christina Couch is the author of Virginia Colleges 101: The Ultimate Guide for Students of All Ages.