College Savings:

Information on State Tuition Prepayment Programs

HEHS-95-131: Published: Aug 3, 1995. Publicly Released: Aug 3, 1995.

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Pursuant to a congressional request, GAO provided information on state tuition prepayment programs, focusing on: (1) how these programs operate and the participation rates; (2) participants' income levels and options for increasing the participation of lower-income families; and (3) the key issues surrounding these programs.

GAO found that: (1) all seven of the state tuition prepayment programs reviewed emphasize the importance of effective advertising and marketing, a positive public perception of the program, simple and flexible program features, and affordably priced benefits; (2) most participants in the state tuition prepayment programs come from middle- and upper-income families; (3) two options for increasing program participation among lower-income families include a sliding-scale fee and a tax credit, but program officials believe that a tax credit would pose too much of an administrative burden; and (4) the major issues concerning the state tuition prepayment programs are the potential effects they may have on students' educational choices, their appeal to middle- and upper-income families, their value as an investment for purchasers, the degree of risk they pose for states, and the applicability of federal tax provisions to the programs.

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