EMU Joins Tuition Plan Consortium
EMU has joined a national tuition program with these and some 220 other private schools across the country in a concerted effort to make higher education more affordable and accessible to more students.
"Independent 529 Plan", which was officially launched in early September this year, is a new pre-paid college tuition plan which allows families to lock in tuition and mandatory fees at participating institutions.
Under the plan, participants can prepay tuition at any participating school. The plan trustee, in turn, invests these funds in order to offer a discount on today's prices.
When the student later enrolls, he or she is guaranteed the percentage purchased, no matter how much tuition costs rise in the future. There are flexible payment options and refunds available if the student later decides not to enroll.
"Independent 529 Plan proceeds can be used at any participating college," said Doug Brown, president and CEO of Tuition Plan Consortium, the Albuquerque, N.M.-based non-profit group that oversees the plan. Think of it as buying a shopping certificate for use at any of the stores at a mall. Students don't choose their college at time of purchase, but after they have applied and are accepted in the regular manner," Brown said.
Nearly all 50 states currently sponsor Section 529 programs, which take their name from a section of the U.S. tax code. Some of these are savings plans and some are pre-paid plans. Both types allow investments to grow tax-deferred and exempt withdrawals from federal taxes when they're used for educational expenses.
Participating institutions will continue to set their own tuition rates. Then, families buy certificates for a certain dollar amount, which may guarantee a year's worth of tuition at one college or a half year's tuition at another. The percentage of paid tuition established at the time of the certificate purchase is guaranteed, even if tuition rates rise sharply before the student enrolls. Then, when students are ready to go to college, their certificates will be valid at any of the schools in the consortium.
"Not only does the plan help guard families against inflation, but it also offers families a discount on tuition costs and preferred tax treatment on the earnings of their prepaid certificates," said Ronald E. Piper, vice president for finance at EMU.
Undergraduate tuition and mandatory fees are covered by the certificates for now, although the alliance hopes to extend certificate use to include room and board and graduate school study. But what happens if the student wants to attend a non-alliance school, or decides not to attend college at all?
"The tuition plan will not impose any penalties on withdrawals which are used for enrollment at non-member schools," Piper noted. "Certificates can also be transferred to immediate family members without any penalties." However, federal law requires imposition of a penalty for redemptions that are used for non-educational expenses.
Students saving for their education aren't the only ones who benefit from this plan. Member schools have chosen TIAA-CREF Tuition Financing, Inc., a successful and well-respected investment manager, to invest the money. The earnings from this investment may exceed the rate of tuition inflation, thus allowing institutions to offer this plan without losing financially and providing a "win-win" situation for both parents and colleges.
"The advantage to families is that they can buy the tuition now and be sure it will be covered," Piper said. "The institutions benefit because people start considering them early on."
"The states want to encourage people to save, and the private colleges, in order to be competitive, felt like they needed to give students an alternative plan," Piper added.
At the moment, EMU is the only Mennonite higher education institution participating in Independent 529 Plan.
Persons can open an Independent 529 Plan account at no charge as well as locate member institutions and learn about refund policies and other plan features by calling 1-888-718-7878 or by visiting their website at www.independent529plan.org.
For more information, contact Piper at 540-432-4107; e-mail: firstname.lastname@example.org.
Posted: September 25, 2003