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What are Prepaid Tuition Plans?

Aug 18, 2017

Used through state 529 plans and personal colleges, pre-paid tuition strategies are a method to pay beforehand for your kid's college education. You secure the present rate when you begin paying, so you can prevent the greater tuition rate that you 'd likely pay in the future.

For instance, moms and dads who save for one term's expense of tuition at today's rates for their 2-year-old would have the ability to pay at that locked-in rate for a term's worth of education when their young child is old enough to go off to college.

Prepaid tuition plans don't have all the benefits of a 529 Plan but they do have many good attributes that can fulfill your college funding needs.

It's Even Better


Usually, pre-paid tuition strategies just cover the expense of classes and do not cover room and board or other additional expenditures.

In most cases, you or your kid need to be a legal resident of that state, so you cannot purchase a pre-paid tuition strategy of another state.



In selecting your technique of payment, you can either save for the whole expense of tuition at the same time or make routine payments through a time payment plan. Pre-paid tuition plans normally are for community colleges along with four-year universities.

It's not all perfect concerning pre-paid tuition strategies. The problem is that just 11 states use them. The bright side is that private colleges have them, too.

How Does it work?


When you purchase a pre-paid tuition plan, you purchase an agreement that covers from one to 5 years of tuition. You can pick a community college, four-year university or a mix of both. If you want your kid to take their very first 2 years at a community college and complete their degree in a four year college, you can do that as well.

If your kid wishes to participate in a another school than the one you purchased the prepaid for, you can still utilize the cash even if that school isn't really covered by the strategy. That's due to the fact that you can use the money for tuition at another college or university.

However, while you can utilize the cash you invested, you do not get the rates that you secured when you purchased the strategy. Rather, you'll pay the rates charged by your kid's college of option.


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