Prepaid Tuition Program

AAA

DEFINITION of 'Prepaid Tuition Program'

One of the two major types of 529 plans. Prepaid tuition plans allow donors to provide all or part of the amount of tuition for college education. The amount paid is guaranteed to grow at the same rate as college tuition, regardless of its rate of growth over time. If the cost of tuition at a specific college doubles within three years, then the amount of prepaid tuition will pay a proportionate amount of tuition at the time of payment.

INVESTOPEDIA EXPLAINS 'Prepaid Tuition Program'

Prepaid tuition plans allow donors to lock in the future cost of tuition in today's dollars. Because the cost of tuition is increasing faster than the rate of inflation, the rate of return on these plans is generally greater than that of guaranteed instruments such as bonds or CDs. But these plans are also guaranteed by the financial backing power of each state.

RELATED TERMS
  1. Bursary Award

    A type of financial award provided to certain students to assist ...
  2. Tuition Insurance

    A type of insurance that allows families to recoup some or all ...
  3. Coverdell Education Savings Account ...

    A tax-deferred trust account created by the U.S. government to ...
  4. 529 Plan

    A plan that allows for the prepayment of qualified higher education ...
  5. Full-Time Student

    A status that is important for determining dependency exemptions. ...
  6. Education IRA

    A savings plan for higher education. Parents and guardians are ...
Related Articles
  1. Savings

    Don't Forget The Kids: Save For Their Education And Retirement

    Retirement and education financing are the two most important planning items for taxpayers.
  2. Insurance

    Investing In Your Child's Education

    Overwhelmed by increasing tuition costs for your kids? The U.S. government can help.
  3. Savings

    Choosing The Right 529 Education Savings Plan

    Before you fund one of these education-savings vehicles, be sure you know their differences.
  4. Budgeting

    Last-Minute Strategies To Help Pay For College

    Find out what to do when your kid is ready for higher education, but you aren't.
  5. Savings

    Stop Procrastinating! Enroll In A College Savings Plan

    The cost of sending your kids to college could be a serious financial burden - unless you get prepared. Now.
  6. Credit & Loans

    Student Loan Deferment: Live To Pay Another Day

    Extending your principal repayment date can increase your chances of fighting off default.
  7. Options & Futures

    Invest In Your Education With An RESP

    All Canadians should know the benefits of these flexible education savings plans.
  8. Savings

    Taking Smaller And More Manageable Resolutions

    Something you can do for your savings and investing resolutions this year is to rely on tools already available at your workplace and take them to the max.
  9. Savings

    Money-Saving Tax Breaks For College Grads

    Even if you graduate from college with a heavy debt load – especially if you do – use these tax benefits to ease your transition into the 'real world.'
  10. Savings

    How Much Do You Know About College Savings Plans?

    Despite the popularity of the tax-advantaged college-savings vehicle, certain aspects are still misunderstood. Check your knowledge with this 529 quiz.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center