What is a Pre-Paid Tuition Plan?

A pre-paid tuition plan is one of the two major types of 529 plans that allows investors to lock in the future cost of tuition in today’s dollars. The amount invested is guaranteed to grow at the same rate as college tuition, regardless of its rate of growth over time or the rate of inflation, which is typically a better deal than investing in bonds or CDs. 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.


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