It is an interesting proposition but not a slam dunk. Essentially, it is a risk and tax free return at the rate of the college’s tuition increase. On an after-tax basis, it is not awful for those in a high tax bracket and at a school expected to have decent sized tuition increases. Knowing that one should move to more conservative investments as the payment date approaches, I think it is a decent but not great deal.
One thing I find attractive is the idea of locking in a 2022-2023 tuition rate for my offspring despite the fact that the first year’s tuition (2023-2024) is more than 5% higher. In other words, I’ve prepaid the senior year of college tuition at the rate in effect during senior year of high school. Not a terrible deal. It is kind of funny that senior year is going to cost me less than freshman year.
If we didn’t have to wait 3 years before using the funds, I would have prepaid more years.
Note I started participation after I knew where my offspring was going to school, know the tuition, and the payment date is near (within 4 years).