Glossary of Municipal Securities Terms

PRE-PAID TUITION PLAN

A plan, sometimes referred to as a “529 plan,” established by one or more states, state agencies, or educational institutions as a “qualified tuition program” pursuant to Section 529 of the Internal Revenue Code. Under a pre-paid tuition plan, a person may purchase credits or units entitling a designated beneficiary to a waiver of or credit for payment of a specified amount or percentage of qualified higher education expenses at such time in the future as the beneficiary attends a qualifying higher education institution. The credits or units are priced to provide a discount for prepayment of qualified higher education expenses. Most pre-paid tuition plans are sponsored by state governments and have residency requirements. Many state governments guarantee investments in pre-paid tuition plans that they sponsor. See: DESIGNATED BENEFICIARY; 529 PLAN; QUALIFIED HIGHER EDUCATION EXPENSES. Compare: 529 COLLEGE SAVINGS PLAN.

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