Higher Education Prepayment Tax Act of 1987

Higher Education Prepayment Tax Act of 1987 - Amends the Internal Revenue Code to provide an income tax exclusion for the value of any benefits covering tuition and related expenses and reasonable living expenses while away from home when such benefits are provided in accordance with a qualified prepaid college education contract, except for payments by an employer under such a contract. Defines eligible contracts as those between a payor and either a State or one or more institutions of higher education under which: (1) educational benefits are provided to eligible beneficiaries enrolled in certain undergraduate or vocational courses in pursuit of a degree or certificate; and (2) all payments made by the payor must be deposited into a prepaid college education trust created by a State or by one or more qualified institutions of higher education for the exclusive purpose of funding benefits under such contracts.