A. An advance tuition payment contract shall authorize a termination of the contract when any one of the following occurs:

1. The qualified beneficiary dies;

2. The qualified beneficiary is not admitted to a state institution of higher education after making proper application;

3. The qualified beneficiary certifies to the Regents, after attaining the age of eighteen (18), that such qualified beneficiary has decided not to attend a state institution of higher education and requests, in writing, that the advance tuition payment contract be terminated; or

4. Other circumstances, determined by the Trust and set forth in the advance tuition payment contract, occur.

B. An advance tuition payment contract shall provide for a refund pursuant to this section to a person to whom the refund is payable under the contract upon termination of the contract. If the qualified beneficiary has a high school diploma or has reached the age of majority, and attends an institution of higher education, the amount of a refund shall be the lesser of the average tuition cost of all state institutions of higher education on the date of termination of the contract, or the face amount of the payment or payments and any accrued investment income attributable to the payment or payments, or the lowest tuition cost of all state institutions of higher education on the date of termination of the contract depending upon the terms of the contract. The amount of a refund shall be reduced by an appropriate percentage if the purchaser entered into an advance tuition payment contract that provided for a fixed number of credit hours less than the total number of credit hours required by a state institution of higher education for the awarding of a bachelor's degree, by the amount transferred to a community or junior college on behalf of a qualified beneficiary when the contract is terminated as provided in Section 6 of this act and by the amount transferred to an institution of higher education on behalf of a qualified beneficiary. Termination of a contract and the right to receive a refund shall not be authorized under the contract if the qualified beneficiary has completed more than one-half (1/2) of the credit hours required by the institution of higher education for the awarding of a bachelor's degree. However, this provision shall not affect the termination and refund rights of a graduate of a community or junior college. Pursuant to this subsection and except as provided by subsection C of this section, the Trust shall make refund payments in equal installments over four (4) years and not later than August 15 of the year due.

C. An advance tuition payment shall authorize a person, who is entitled under the advance tuition payment contract to terminate the contract, to direct payment of the refund to a community or junior college located in this state. If directed to make payments pursuant to this subsection, the Trust shall transfer to the designated institution an amount equal to the tuition due for the qualified beneficiary, but the Trust shall not transfer a cumulative amount greater than the refund to which the person is entitled. If the refund exceeds the total amount of transfers directed to the designated institution, the excess shall be returned to the person to whom the refund is otherwise payable.

Added by Laws 1988, c. 261, § 9, emerg. eff. June 29, 1989.