Introduction to the Massachusetts U Fund 529 College Savings and the U Plan Pre-Paid Tuition Plans

Massachusetts offers two types of college plans, the MEFA U.Fund 529 college savings plan, and the MEFA U.Plan pre-paid tuition plan. Both of these plans can help you to save or to pay for college, but they are very different types of plans, and it is important to understand the differences. You can contribute to both if you wish, and they each offer the same annual Massachusetts state tax deduction (up to $1000 single / $2000 joint). This is a brief summary of the two plans to introduce them, and there are links below to visit the official websites and learn more.

Disclaimer: I am not a financial professional. I am not offering financial advice. I am not employed by MEFA, the State of Massachusetts, or Fidelity. Information here is not guaranteed to be accurate. Please visit the MEFA and Fidelity websites for complete and accurate information about these plans.

MEFA U.Fund is a 529 college savings plan. You contribute your desired amount each year up to $18,000, by Dec. 31. You select from the investment choices (managed by Fidelity) for how you want the contributions to be invested. Investment choices include:
-Age-based portfolios that adjust to be more conservative as the time for college approaches.
-Static growth portfolios that do not adjust based on the child’s age.
-Index portfolios whose returns are based on the particular stock market index.
-Money market and bank deposit accounts that offer the current interest rate of that particular portfolio (which is around 5% as of 3/2025).

Be aware that you can change your investment choice at any time. And you can also create a custom allocation, mixing investments across the various available portfolios. For example, you could choose to allocate 70% to the Bank Deposit Account (a low risk option that will earn the current interest rate of the portfolio, at this time about 5 percent), 20% to the Fidelity 500 Index Portfolio (that will follow the returns of the broad stock market that it indexes), and 10% to the Aggressive Growth Portfolio (a higher risk, market-based option).

Also note that the fine print says that “College Savings Plan Participants invested in the Stable Value Portfolio may not move/exchange money from the Stable Value Portfolio to the Bank Deposit Portfolio or Money Market Portfolio. Please carefully review your Portfolio selection before investing in your College Savings Plan. You may want to consult with a financial or tax professional before investing.” (Though the Massachusetts 529 does not appear to offer the Stable Value Portfolio.)

Massachusetts will give you $50 to start a 529, within a year of a child being born or adopted (

Advantages/disadvantages: With the 529, you are saving money for college, but that money must be used for certain educational uses, such as tuition, fees, room and board, books, computers, or student loans. The money can be used for K-12, undergraduate, and graduate educational expenses. Most (but not all) of the investment options are tied to the stock market, and thus the investment returns are unknown. If the contributions are invested in one of the stock market-related options, the money you contribute could lose value, based on the performance of the stock market. The money is locked into the 529 account until you use it. If you don’t end up using the money for a qualified educational use and need to cash out, there is a 10% penalty and taxes are owed. The annual contribution is tax deductible on your MA state taxes (up to $1000 single / $2000 joint). Each 529 account has one beneficiary. You can open multiple 529 accounts for multiple students, and you can change the beneficiary to any other family member, at any time – such as if one student is done but you wish to transfer the 529 to the next student if money still remains in it. The money can be used at any accredited college in the United States. The 529 is managed by Fidelity. If you already have any Fidelity investment accounts, you will be able view and manage the 529 on the Fidelity website along with your existing accounts.

MEFA U.Plan is a prepaid undergraduate college tuition program, that works very differently than the above program. It can be used to pre-pay tuition and fees at 70 different Massachusetts public and private colleges. You do not need to select the specific college in advance. With this plan, you are pre-paying tuition and locking in the current tuition rate. You can start with $0 and contribute as little as $25 a month, as long as there is a minimum of $300 in the account by July 15 of each year. Or you can make lump contributions at any time, which are then locked in at the pre-paid tuition rate, on July 15 of each year.

What is powerful about this plan is that you are pre-paying a percentage of the future tuition. So, for example, if the current annual tuition at a particular participating Massachusetts school is (for example) $15,000, and you contributed $1,500 in 2024, you have paid for 10% of the future annual tuition. So when your child goes to that particular school, tuition in 2034 might be (for example) $25,000. You have already paid 10% of that $25,000 tuition. So the $1,500 you contributed in 2024 is now worth $2,500. Based on how much tuition rates rise (perhaps 4-5% per year), and how much you contributed early on, this can potentially lead to significant tuition savings.

Advantages/disadvantages: The money can only be used for undergraduate tuition and fees (not for books or room and board, etc.), and only at the 70 or so participating Massachusetts colleges:
If the child does not end up going to one of the participating colleges, you can cash out and get the money back without penalty, and with interest paid to you. So there is basically no penalty for cashing out and not using this money, other than you don’t have access to this money when it is in the plan, and while the money is in the plan you lost the opportunity to invest this money in another way that may have offered different returns. The annual contribution is tax deductible on your MA state taxes (up to $1000 single / $2000 joint). Since the money you are contributing each year goes into a 5 year bond, you can only contribute up to 5 years before the money is to be used. So you can only contribute up to when your child is in 10th grade. If your child delays college or you miscalculate the college starting date, you still have a 6 year window to make use of the money.

You can learn all about the two MEFA plans here:

You can learn about the Massachusetts U.Fund college savings plan, and view the various Fidelity-managed investment options here:

You can learn about the Massachusetts U.Plan pre-paid tuition plan, and view the participating schools here:

There is an informative video about the U.Plan pre-paid tuition plan here:

There is much more information about these two programs here, including college cost calculators and cost projectors:

As noted above, you may want to consult with a financial or tax professional before investing in either of these plans.

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