529 Prepaid Tuition Plan

AAA

DEFINITION of '529 Prepaid Tuition Plan'

A tax-advantaged method for paying future college tuition costs at current prices. 529 prepaid tuition plans are authorized by Section 529 of the Internal Revenue Code and allow the account holder to purchase tuition credits at their present price even though they will not be used until a future year, when tuition costs will have most likely increased. Plans are state sponsored and only available in some states, but it is possible to participate in a prepaid tuition plan outside of the account holder's current state of residence.

INVESTOPEDIA EXPLAINS '529 Prepaid Tuition Plan'

If the child who is the account beneficiary dies, decides not to attend college, decides to attend college in a state other than the one in which the plan was established or decides to attend a private college, prepaid tuition credits may be transferred to another child, contributions may be withdrawn, or the in-state value of the prepaid credits may be transferred to an out-of-state or private institution. Parents, relatives and friends are all allowed to contribute to the child's account, which can be especially helpful to grandparents who want to give money to their grandchildren in a tax-friendly way.



RELATED TERMS
  1. 529 Savings Plan

    A tax-advantaged method of saving for future college expenses ...
  2. Qualified Higher Education Expense

    Expenses such as tuition and tuition related expenses that an ...
  3. Education IRA

    A savings plan for higher education. Parents and guardians are ...
  4. 529 Plan

    A plan that allows for the prepayment of qualified higher education ...
  5. Coverdell Education Savings Account ...

    A tax-deferred trust account created by the U.S. government to ...
  6. Full-Time Student

    A status that is important for determining dependency exemptions. ...
Related Articles
  1. Don't Forget The Kids: Save For Their ...
    Savings

    Don't Forget The Kids: Save For Their ...

  2. Investing In Your Child's Education
    Insurance

    Investing In Your Child's Education

  3. Choosing The Right 529 Education Savings ...
    Savings

    Choosing The Right 529 Education Savings ...

  4. Stop Procrastinating! Enroll In A College ...
    Savings

    Stop Procrastinating! Enroll In A College ...

Hot Definitions
  1. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  2. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  3. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  4. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  5. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
  6. Earnings Multiplier

    An adjustment made to a company's P/E ratio that takes into account current interest rates. The earnings multiplier is used ...
Trading Center