Westmont Magazine Pay Now, Study Later

Westmont has joined nearly 300 other institutions in launching the nation’s first prepaid tuition plan for private colleges and universities. Known as the Independent 529 Plan, it resembles state-sponsored 529 prepaid tuition plans. However, participants can use these funds at independent institutions throughout the nation, rather than being limited to state schools. Under the program, families make payments now and receive certificates redeemable in the future at member institutions.

Current 529 savings plans don’t offer a tuition guarantee at any institution. Eighteen states have pre-paid tuition plans, but they are good only at those states’ colleges and universities. The Independent 529 plan is a prepaid plan that guarantees tuition in the future at private institutions in 42 states and the District of Columbia.

Here’s how it works. A family buys a tuition certificate worth, say, $10,000. That may guarantee a year’s worth of tuition at Institution A, but only a half-year’s tuition at Institution B. However, the commitment is guaranteed, no matter how much tuition may rise between the purchase of the certificate and its redemption. The certificates can be used at any of the institutions in the consortium, and any gain on their value is tax free at the federal level when used to pay qualified educational expenses.

The consortium is betting that the rate of return on the investments it makes with the money today will outpace tuition increase rates over time. As a result, each member institution agrees to discount its current tuition purchased by certificates. This creates a win-win situation — tomorrow’s tuition at today’s price minus a discount.

Contributions can be as low as $25 per month, and they can be made by others besides parents, such as grandparents. Also, the certificates are portable and can be used by other relatives.

The minimum contribution is $500 over two years; the maximum annually is equivalent to tuition over five years at the school with the highest tuition: $140,000 for the 2003-04 academic year.

For more information about participating in this program, see the Web site: www.tuitionplan.org.