University joins other institutions in offering prepaid tuition planBy Josh Schonwald
The University has joined more than 200 other colleges in a groundbreaking new prepaid tuition plan designed to make private higher education available to more families. Joining institutions such as Princeton, Smith, Oberlin and Emory, Chicago is the only private research university in Illinois to offer this program.
The Independent 529 Plan is an income-tax-free way to lock in affordable tuition rates, independent of tuition increases or market volatility. Under the plan, friends or members of a family pre-purchase a certificate for a percentage of college tuition at a fixed rate, always less than current rates. The certificate can then be redeemed by any member of that family for that percentage of tuition at any of the participating schools. Accounts can be opened for as little as $25 or as much as five years of tuition at the most expensive participating college; there are no fees and the accounts are free of federal and state taxes. The certificates can be redeemed any time after three years from the time of purchase.
Michael Behnke, Vice President and Dean of College Enrollment at the University, said, “We have been working for five years with other members of the Tuition Plan Consortium to persuade Congress to allow this plan, and we’re happy to have succeeded. This isn’t so much a benefit to private colleges as it is a benefit to families who aspire to a private college education for their children.”
Section 529 plans, named after the IRS code that defines them, have become popular for public colleges over the last decade. Families have been attracted by the security and flexibility of the tax-free plans, which are transferable to other family members and redeemable if the student receives a scholarship or decides not to attend college.
According to Doug Brown, president of the not-for-profit Tuition Plan Consortium, the Independent 529 Plan is similar to a gift certificate that can be used at a large number of stores. Students do not have to choose which of the participating colleges they will attend at the time of purchase. Instead, they are able to decide when they have applied and been accepted. And the number of participating colleges and universities is expected to increase over time, leading to an even wider range of options.
Here is how the program works: For example, individuals might contribute $10,000 this year to the plan while their child is considering attending colleges A and B. If college A’s tuition this year is $30,000, then this year’s contribution will be good for at least one third of tuition at college A, no matter how high college A’s tuition rises in the future.
Similarly, if college B’s tuition this year is $10,000, the certificate will be more than enough for 100 percent of tuition at college B, no matter how high tuition rises at college B by the time the child attends. In fact, the price of the plan will always be at least half a percent less than tuition rates at the time of purchase. If the certificate cannot be used by the beneficiary, it can be transferred to a wide range of relatives, or the adjusted value can be rolled over into another 529 plan without penalty.
institutions and learn about details of the plan by calling (888) 718-7878 or visiting www.independent529.org.
The plan is administered by TIAA-CREF, a $282 billion financial services organization that provides the premier retirement system for colleges and universities.