Stock market worries? Consider a prepaid college plan

— -- Q: I'm worried the stock market will shred my grandchildrens' college savings. Would converting their 529 savings plans to 529 prepaid plans be a wise move?

A: If you have someone in your life planning to go to college, including yourself, the 529 plan is an amazing deal.

With a 529, you can sock away money, let it compound and take the money out tax-free as long as you use the dough to pay for education. It's one of those rare tax breaks the government provides that anyone interested in paying for education should learn more about. USA TODAY's personal finance team covers 529 plans extensively, so I urge you to read more, including this story, which explains the ins and outs of 529's and compares them with other college savings plans.

But you bring up an excellent point from an investing point of view. If you're afraid of stock market declines, like the ones we've been enduring since 2007, you might look at your alternatives with a 529.

To explain what I mean, first understand there are two main types of 529 plans: Savings and prepaid. Savings 529 plans work just like any investment account, you put money in and the money hopefully grows until you need to take it out. Most 529 savings plans provide a variety of investments for you to choose from. All states offer savings plans and the savings can be used to pay for tuition in any state.

Then, there's the 529 prepaid plan. With a prepaid plan, you lock in your tuition costs in at a public college in a specific state by paying a predetermined amount of money ahead of time. Many plans require you to live in the state when you open the account and there may be hefty penalties for non-qualified withdrawals. Here's what the College Board says about prepaid plans.