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The Value Grows as Tuition Rises
 When
you open your account, you purchase a certificate. Since each member
college has a different current tuition rate, your certificate
represents a different value at every participating college. For
example, your $25,000 certificate may be worth 1 year of tuition
at college x and 75% of 1 year of tuition at college y.
Once you've purchased a certificate, it must be held for a minimum
of three years and redeemed within 30 years. Each time you add to
your account, you will be purchasing a certificate at the current
year's tuition rates.
Here's an example of how it works:
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Let's start by supposing the college your child will eventually
attend has a current tuition of $25,000 per year.
If you prepay $25,000 today to cover one year of tuition,
that amount will cover one year of tuition 10 years from now—even
though the projected cost at that time is $44,770 (using a
6% annual tuition rate increase).
By prepaying, you save $22,160, and that savings—the
increase in value—is federal tax-free.
The savings benefit you gain is proportional to the amount
you prepay. However, even a small starting contribution and
regular contributions will yield savings and help take the
sting out of rising college costs.
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» Next: Redeem your prepaid
tuition
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your account
