Prepaying for college can potentially save you thousands on the cost. Contributions to your account purchase Tuition Certificates at the current rate at any participating college or university, or any that join in the future. A Tuition Certificate represents all of your contributions in a Program Year, July 1 through June 30.
For example, tuition at College A is now $35,000 a year and you contribute $35,000 into an account with your 8-year-old child as beneficiary. If tuition rises an average of 4 percent a year, in 10 years College A's tuition would be $51,809. By prepaying, you save $16,809 on that year of tuition. That $16,809 savings is tax-free.
Here is what that looks like:
Example of Savings Accrued Over the Course of 10 years
Today's Tuition(8 Years Old)
Future Tuition Cost(18 Years Old)
Prepaid Tuition Certificates must be held for 36 months before being redeemed to pay for tuition at a participating institution. Rollovers or refunds can be requested after 12 months. The waiting periods begin on the date of the first contribution in a given Program Year. Certificates that have not been redeemed within 30 years will be refunded.