What will happen to the Smiths' prepaid tuition plan if college costs increase to $30,000 for two semesters?

In a prepaid tuition plan, families pay for future college tuition at today's rates, allowing them to lock in costs and protect against future tuition increases. If the cost of attending college rises to $30,000 for a year (two semesters), the outcome largely depends on the terms and conditions of the prepaid tuition plan.

In this scenario, if the plan was established to cover specific tuition rates for certain institutions, it may still be able to fully cover the costs if the previously agreed-upon terms align with the new tuition figures. The language of the plan generally sets out specific guarantees about how much tuition will be covered.

It is also crucial to consider that state-sponsored prepaid tuition plans often promise to cover a specified number of credit hours or semesters. Thus, if the Smiths' plan explicitly guarantees coverage for two semesters, then the A choice would accurately reflect that their plan still provides sufficient funding to cover the increased costs up to that guarantee.

Understanding the relationship between the prepaid tuition plan terms and the actual college costs gives clear insight into budgeting for future education expenses.