Prepaid Tuition Plan
EducationGlossary term
Definition
A type of 529 plan that allows you to purchase credits at participating colleges and universities at today's prices, effectively locking in the cost of tuition against future increases. These plans are typically sponsored by state governments and may be limited to in-state public institutions. Prepaid tuition plans provide peace of mind against tuition inflation but may offer less flexibility than 529 savings plans if your child attends a different school.
Related terms
- 529 PlanA tax-advantaged savings plan designed to help families save for future education expenses, sponsored by states, state agencies, or educational institutions. Contributions grow tax-free, and withdrawals are also tax-free when used for qualified education expenses like tuition, books, and room and board. Many states also offer a state income tax deduction or credit for contributions to their 529 plan.
- TuitionThe amount of money charged by a school for instruction and academic services, which varies widely between public and private institutions and between in-state and out-of-state students at public colleges. Tuition is typically the largest component of the cost of attendance and has been rising faster than inflation for decades. Financial aid, scholarships, and 529 plans can all be used to help cover tuition costs.
- Cost of AttendanceThe total estimated cost of attending a college for one year, including tuition and fees, room and board, books and supplies, transportation, and personal expenses. Colleges use the cost of attendance to determine your financial need by subtracting your Expected Family Contribution. Understanding the full cost of attendance helps you compare colleges more accurately beyond just their listed tuition prices.
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