About a dozen states have prepaid plans, and some have struggled.
"History shows that families that got into these plans are almost unanimously happy they did so because tuition has skyrocketed. These plans have done whatever they could to meet their obligation," Hurley said. "Nobody has lost money."
Prepaid plans are best suited for very young children who face more years of potentially steep tuition increases, Hurley said. Parents thinking of investing in the prepaid plan need to understand the rules.
"In theory, you need to recognize whatever sort of intrinsic risk exists in the plan. And if the plan runs out of money, what happens?" Hurley said. "Different states have different approaches."
Some states promise to fully cover any shortfall. Maryland's plan comes with a legislative guarantee, which means the governor must include any shortfall in the budget. Maryland legislators still have final say on approving the money.
While no state has walked away from its prepaid plan obligations, some have changed the rules.
Colorado gave participants several years ago a chance to cash out or stick with the plan under less generous terms, Hurley said. And Texas recently tightened the rules on a liberal refund policy, he said.
Families can sign up for the plan during an open enrollment that runs from Dec. 1 through April 5. The price is based on tuition and fees at Maryland public institutions. A tuition freeze this academic year at Maryland's four-year public institutions will keep the price increase of new contracts under 2 percent, Marshall said.
For instance, to buy four years at a Maryland university for an infant will cost a lump sum of $37,445, a 1.2 percent increase over last year. Two years at a community college for an infant will total $7,663, up 1.8 percent. Families can spread the cost out using one of the various payment plans, or opt to buy fewer semesters of schooling.
