My sister and I had a big argument about this recently.
She is paying $575 a month for 55 months to lock in college tuition for her daughter (who is currently 1 year old). If they do this, then my niece gets 4 years of tuition at today's costs.
I was trying to argue with my sister that she would probably be better off investing the money for the 17-18 years, and then having it available to spend on college. My reasoning is that 575/mo @ 7% for 55 months, and then sitting for the rest of the time is nearly $90k. She's paying 31.6k in today's money, betting that tuition and expenses will be greater than $90k by the time her daughter goes to college. She will be able to get a refund, at the going rates, for the money when my niece is college age, if she doesn't go or doesn't need the money.
So, what do y'all think? If this a fair deal? College tuition seems to be rising at around 4-5% per year, so it's probably pretty close. It's probably not a horrible mistake. It isn't tax advantaged (neither is a 529), so I don't know that there's really any deciding factor there either.
