There are various ways to fund a college education – savings, loans, financial aid and scholarships.

Section 529 of the Internal Revenue Code authorizes states to establish programs that allow Purchasers to prepay a student’s qualified education expenses at a postsecondary institution. When it comes to saving for college, due to their tax advantages, state-sponsored 529 Plans are a popular choice. Learn more about saving for college in Texas.

Also known as Qualified Tuition Programs (QTPs) or Prepaid Education Arrangements (PEAs), 529 Prepaid Tuition Plans allow families to buy all or part of a public in-state education at present-day prices.

Features of the Texas Tuition Promise Fund Prepaid Plan

  • Purchasers can prepay undergraduate resident tuition and required fees at Texas public colleges and universities at today’s prices rather than at prices in effect when the Beneficiary enrolls.
  • The Plan is administered by the state of Texas.
  • Purchasers and beneficiaries must meet Texas residency requirements.
  • Any earnings on qualified withdrawals are tax-free.

In general, the Texas Tuition Promise Fund is a way to lock in the price of tuition and required fees at today’s prices at Texas public colleges and universities, thus insuring against college cost inflation, which is helpful considering college costs have been rising two to three times the rate of inflation.

In contrast, a savings plan is best thought of as a tax-advantaged way to build up a college fund. Savings plans do not lock in the cost of covered educational expenses. However, you can use your savings plan for more kinds of higher education expenses.

Build Your Plan Now

On the Road to Higher Education

This hypothetical cost comparison illustrates the potential savings that could be realized by prepaying and “locking in” a tuition price at $35,000 for a four-year Texas public college versus waiting 10 years and, assuming a cost increase of 6.5% a year, paying $65,700.

The Plan Delivers Potential Savings