There is no guidance specific to prepayment options from universities, but based on current information this is technically possible. Tuition would just be incurred up-front, as opposed to over time, so you're good according to IRS Publication 970.
You should consider carefully, however, the potential tax benefits you might forego by doing so, such as the American Opportunity Tax Credit, as well as the possibility that your daughter could transfer schools midway, drop out to seek an alternate career path, encounter unforeseen medical issues, etc. 60 percent of first-time, full-time students who began seeking a bachelor's degree at a 4-year institution in fall 2008 completed the degree at that institution by 2014 (Source). What are the penalties, if any, if some of that tuition needs to be reimbursed to you from the current school if she's transferring out? Have you inadvertently given the school a 0% loan in that scenario? These situations may be unlikely, but they're possible, and you want to be prepared!
Brian Boswell VP, Research & Development
This information does not constitute tax advice and is provided for informational purposes only. Please consult your tax advisor, financial advisor, local taxing authority, and/or plan provider or sponsor for more information.