Baccalaureate bond

Baccalaureate bonds are tax-free zero coupon bonds issued by certain states specifically to help families accumulate assets to meet college tuition costs.

The bonds are usually sold in small denominations, so that you can buy several, with maturity dates that correspond with the dates that tuition payments are due.

In some states, baccalaureate bondholders receive a small tuition discount if they use the bonds to pay for attending an in-state school.