Can I upgrade my iphone 5 (AT&T carrier)?

So as I present, I plan to buy my sister the new iphone 5s, an upgrade from the iphone 5. However, my sister bought the iphone at AT&T with a 2-year contract, and it still has not expired yet. Can she still switch phones, and what will happen if she does? I hear that if she does not stick with her phone, the 2-year contract is invalid, and she will be forced to pay the full amount for the iphone, not just the $199 she paid up front. If this isn't the case, will she have to turn in her iphone 5 to AT&T before switching to the iphone 5s I'm planning to give her? I'm utterly clueless as to how this works, and I will listen and be very grateful to any help offered.

You will have to pay full retail for the 5S which is $649 plus tax for the 16GB.

Luckily, a new startup just launched called UpgradeSwap and you can buy the 5S there for $539 shipped. It's pretty cool, you should check it out