Oregon Tax Consultants Practice Exam

What is the primary purpose of Prepaid Tuition Plans?

1. Invest money for general expenses

2. Paying now for future education

3. Providing loans for education

4. Cashing out tuition benefits

The correct answer is: Paying now for future education

The primary purpose of Prepaid Tuition Plans is to allow individuals to pay for future education costs at today's tuition rates. This mechanism provides a way for families to safeguard against rising tuition prices by securing a contract for their child’s future education expenses in advance. By prepaying, individuals lock in the current rates, which can result in significant savings over time, especially as college tuition typically increases each year. Prepaid Tuition Plans directly correlate to the expectation of future educational needs, making option B the most accurate representation of their function. This approach helps families plan for future financial responsibilities associated with higher education, making it a proactive strategy for managing educational costs.