Prepaid Tuition Plans

What Is a Prepaid Tuition Plan?

A prepaid tuition plan is a type of education savings program that allows families to lock in future college tuition at today’s prices. These plans are often offered as part of state-sponsored 529 college savings programs and are designed to help families manage the rising cost of higher education.

Participants typically purchase credits or units that cover future tuition expenses at eligible institutions.

Why It Matters

Prepaid tuition plans help families plan for education costs by protecting against tuition inflation. By paying in advance, families can reduce uncertainty about future college expenses and improve long-term financial planning.

These plans are particularly attractive for parents who want predictable education costs.

How Prepaid Tuition Plans Work

Prepaid tuition plans typically involve:

purchasing tuition credits in advance
locking in current tuition rates
applying the credits toward future tuition costs
using the plan at participating colleges or universities

Some plans are tied to specific state public universities, while others allow limited transfers to private or out-of-state institutions.

Example

Parents purchase prepaid tuition credits when their child is young. Years later, those credits cover a portion of the student’s college tuition even though tuition costs have increased.