A prepaid tuition plan allows you to use today’s dollars to pay for future college expenses. In some ways, a prepaid tuition plan is similar to a 529 college savings plan, as both allow you to generate tax-free earnings on your contributions, with distributions being tax-free when used for qualifying expenses.
However, as distributions from 529 plans can generally be used for a wider range of expenses, they have gained in popularity while the number of available prepaid tuition plans has shrunk to just 10. Here’s a look at the nine states that still allow prepaid tuition plans, along with the federal option.
Washington: Guaranteed Education Tuition (GET)
The GET program is Washington’s 529 prepaid college tuition plan, and it comes with a number of important features. Most important, perhaps, is that the state of Washington guarantees that your account will keep pace with the cost of college tuition, no matter how much it changes in the future. Also, if the program ever runs out of money due to the increasing cost of education, state law requires the Washington Legislature to cover the shortfall, one of the few states with such a guarantee written into law. Lastly, you can use your GET program account to pay for college in other states as well, or even at schools around the world.
The GET account is open for enrollment every year from Nov. 1 to May 31. Account values are measured in units, with 100 units equaling the cost of one year of resident, undergraduate tuition and state-mandated fees at Washington’s highest-priced public university. Units can be bought in whole or partial amounts, up to a maximum of 800 units per student.
Nevada: Nevada Prepaid Tuition Program
The Nevada Prepaid Tuition Program was established in 1997. Via a 529 plan, the program allows you to purchase future tuition credits at today’s cost. Students must utilize their benefits within six years of high school graduation, and benefits can be used at any eligible institution nationwide.
There are five specific plans available within the Nevada Prepaid Tuition Program, as follows:
- 4 Year University Plan (120 credit hours)
- 2 Year University Plan (60 credit hours)
- 1 Year University Plan (30 credit hours)
- 2 Year Community College Plan (60 credit hours)
- 2 Year Community College + 2 Year University Plan (120 credit hours)
Participants can pay for the plan in one lump sum or can spread out payments over five or 10 years. An Extended Monthly payment plan is also available, which requires monthly payments until high school graduation. As with all prepaid tuition programs, earnings are tax-exempt when used for higher education.
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Texas: Texas Tuition Promise Fund
Like other prepaid tuition plans, the Texas Tuition Promise Fund allows you to lock in current rates for tuition and schoolwide required fees at Texas public colleges and universities, with the exclusion of medical and dental institutions. Depending on how many tuition units are purchased in the plan, they may be used for some or all tuition and fee costs at eligible institutions. The plan offers a variety of flexible payment options for all types of budgets. Enrollment is open to Texans between Sept. 1 and Feb. 28 (Feb. 29 in leap years), or through July 31 for the enrollment of children younger than one year of age.
Mississippi: Mississippi Prepaid Affordable College Savings (MPACT) Program
Mississippi is one of the nine states offering a prepaid tuition plan, known as MPACT. Enrollment for MPACT is available from Sept. 1 to May 31 every year, although enrollment for newborns is open throughout the year. The program offers a wide variety of pricing plans, from one semester of community college with no down payment to the four-year university plan with a $5,000 down payment. The current weighted average tuition rate for semester institutions is as follows:
- University: $277.23 per credit hour
- Community/Junior College: $106.35 per credit hour
For quarter institutions, pricing is slightly lower:
- University: $184.82 per credit hour
- Community/Junior College: $70.90 per credit hour
You can use MPACT for community college, university/senior college, or a combination, from one year up to five years. It can be used for either in-state or out-of-state institutions, although a $25 administrative fee is charged the first academic term for out-of-state institutions. The MPACT program also allows participants to transfer one college to another.
Contributions to the MPACT program are deductible from Mississippi taxable income for state residents.
Michigan: Michigan Education Trust
The Michigan Education Trust is a 529 prepaid tuition program. Participants, including parents, grandparents or other family members, can use the MET to pay for future educational expenses at today’s rates. The MET offers the flexibility to be transferred to immediate family members, such as siblings or cousins. MET funds can be used for Michigan private colleges or for out-of-state schools or trade schools. Michigan residents are allowed to deduct payments from their state income tax returns in the year they are made. Students must use their MET within 15 academic years from their expected high school graduation year.
Florida: Florida Prepaid College Plan
The Florida Prepaid College Plan allows participants to prepay future tuition and most fees via either installments or a lump-sum payment. The program also offers dormitory plans. As with other prepaid plans, once you’re locked into a program, you don’t have to worry about the performance of the stock market or the rising cost of inflation, as the FPCP is guaranteed by the state of Florida.
Although the program is designed for Florida schools, funds in the plan can be used at most schools nationwide. The FPCP will simply pay other schools the same that it would have paid to a Florida school. You can use the funds in the plan for up to 10 years after your child’s projected high school graduation/college enrollment year. Although anyone can purchase a prepaid plan, such as parents, grandparents, aunts and others, the child beneficiary must be a Florida resident. The plan maxes out at 120 hours of registration fees and eight semesters of university dormitory coverage.
Pennsylvania: PA 529 Guaranteed Savings Plan
The PA 529 Guaranteed Savings Plan is another state-sanctioned plan that lets you pay today’s rates for tomorrow’s college expenses. Once you’re a plan participant, you won’t have to worry about how much college costs rise, or even the performance of your investments. The Pennsylvania Treasury Department does the investing work for you, placing money in a separate fund established by the Commonwealth of Pennsylvania known as the GSP Fund.
Contributions are divided by the GSP credit rate for the tuition level you choose, and the number of GSP credits accumulates. For most four-year colleges, it will take 96 GSP credits to cover four years of tuition; for community colleges, generally 60 GSP credits are needed for an associate degree.
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Massachusetts: MEFA U.Plan Prepaid Tuition Program
The U.Plan Prepaid Tuition Program offers the same security as other such types of plans, removing the risk of investing in the stock market from your college savings account. Under this plan, you can prepay up to 100% of the cost of tuition and mandatory fees at participating colleges and universities, and you’re protected from any increase in college tuition down the road. All you have to do is choose one or more maturity years, when your beneficiary is projected to attend college, and the plan takes care of the rest. There’s also no risk if your child doesn’t attend college, as the program will refund all of your contributions, plus interest. Unlike some other plans, however, your child must attend one of the over 70 public and private colleges and universities in Massachusetts that participate in the U.Plan to benefit.
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Maryland: Maryland Prepaid College Trust
The state of Maryland’s Prepaid College Trust is a very flexible option offered to state residents. In addition to the ability to use earnings tax-free for qualified education expenses, the MPCT offers a variety of flexible tuition plans and payment options that can be changed at any time. Participants can begin with as little as a one-semester plan, and benefits can be used both in and out of state. Additionally, the Trust is backed by a Maryland Legislative Guarantee. Even more enticing to Maryland residents is that payments may be eligible for a Maryland income tax deduction of up to $2,500 per year, per account. The MPCT is open to newborns through 12th graders, with a stipulation that at the time of enrollment, either the owner or the beneficiary must be a Maryland or DC resident.
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National: Private College 529 Plan
If you don’t live in one of the above nine states, you might still be able to take advantage of a federal prepaid tuition plan, the Private College 529 Plan. Almost 300 private colleges and universities take part in this plan, which allows you to lock-in current tuition rates in more than 30 states and the District of Columbia. As this is a national plan, there aren’t any state-resident requirements to participate. One of the many benefits of this plan is that you don’t have to choose a specific school when you open an account, although you do need to name a beneficiary.
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