One of the three types of 529 plans is the prepaid tuition plan. The purpose of this account is essentially to lock in today’s price of tuition and avoid the inevitable increases in college costs over the coming years. However, they are less flexible than other kinds of 529 plans and feature a relatively rigid, contract-based structure.

Instead of depositing funds into a financial account the way you would with an education savings plan or ABLE account, the owner of a prepaid tuition plan buys credits at a rate set by the state administering the plan, which generally corresponds to the cost per credit at a public college or university in that state. Contributions are then made at regular intervals in amounts set down in a contract.

Though useful, the only expenses these plans generally cover are tuition and mandatory fees, meaning that you can’t use a prepaid tuition plan to pay for room and board, books, or other college essentials.