None have gone bankrupt. Some of the “prepaid tuition plans” have stopped taking deposits. Those plans guaranteed semesters of college. And now that they are coming due, they have cost Illinois, for example, too much money. They are not an official obligation of the state, but so far they have continued to pay the promised benefits.
What you SHOULD DO is opt for the 529 “investment” programs. If you live in Illinois, that would be www.BrightStart.com, because if YOU are an Illinois resident you get a small deduction on your state income taxes for your contribution.
But you can use any state’s plan. Learn more, including about the plans with the best long-term performance records (Illinois has a good one) at www.SavingforCollege.com
Over the long run — and this child does have the long run — you should come out way ahead. You can invest in the “age-based” plan, which is more aggressive for younger children since they have a longer time to accumulate funds. Keep contributing over the years, and it will be a big help when they’re ready for college.