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[quote=Anonymous]Your contributions may be (depends on the state) deductible from your state income tax. The earnings are exempt from federal and state taxes. There is no limitation about what school you use it for (assuming it's an accredited school). If you do the VA pre-paid and do not go to a VA state school, there are ways to convert it to a different plan and apply the funds to any school. It may not be as much of a cost advantage though. Extra money can be transferred to another beneficiary with no tax penalty (ie, a younger sibling); used for grad school; or withdrawn (and you pay a penalty plus income tax on the earnings). If your child receives a scholarship, you can withdraw the amount of the scholarship penalty free (but you do have to pay the income tax on the earnings.) You may also be able to set remaining funds as a legacy for future grandchildren, though that's a bit more complicated. [/quote]
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