Baylor Among More Than 200 Private Colleges Joining New National Tuition Program

Sept. 3, 2003

by Lori Scott Fogleman

Baylor University is participating in Independent 529 Plan, a new prepaid college tuition plan tailored specifically for private colleges. Responding to a national call to make higher education more affordable and more accessible to students, Baylor has joined with more than 200 other private colleges and universities across the country to offer an income tax-advantaged way for families to save for tuition.

In addition to Baylor, other major universities participating in Independent 529 Plan are Rice, Southern Methodist and Texas Christian in Texas, Pepperdine, Stanford, Emory, Notre Dame, Princeton, Wake Forest and Vanderbilt, among others.

"We see this new plan as part of our ongoing effort to make higher education accessible to more families," said David R. Brooks, Baylor's vice president for finance and administration. "Independent 529 Plan allows contributors to lock in tomorrow's tuition at less than today's price."

(Read what BusinessWeek says about Independent 529 Plan by clicking here.)

Section 529 Plans, named for the IRS code that defines them, have gained in popularity over the last decade. Families have been attracted to these plans because accounts generate no federal income tax if used as intended, benefits are transferable to other members of the family, and refunds are available if the child receives a scholarship or decides not to attend college.

For purchasers, the effectiveness of Independent 529 Plan is not dependent on the performance of the stock or bond markets. Rather, contributions are actually pre-purchasing tuition, in part or in whole, at less than today's prices.

"Independent 529 Plan proceeds can be used at any of the participating colleges. Think of it as buying a shopping certificate for use at any of the stores at a mall," said Doug Brown, president and CEO of Tuition Plan Consortium, the Albuquerque, N.M.-based nonprofit group that oversees the plan. "Students don't choose their college at purchase but after they have applied and are accepted in the regular manner."

The purchase of a tuition certificate does not guarantee admission or enrollment at a participating institution, and may have an adverse effect on the beneficiary's eligibility for financial aid.

"For example, let's say private Colleges A and B have agreed to honor certificates purchased under Independent 529 Plan. College A has a tuition cost of $30,000 for this current year and College B, $10,000," Brown said. "A person who makes a $10,000 contribution into Independent 529 Plan this year would receive tuition certificates that would cover 33.3% of a year's tuition at College A or a whole year at College B, regardless of how high tuition may be at the time the student eventually chooses to use the certificates."

In fact, because participating institutions must offer a discount off their current tuition fees, the certificates would cover slightly more tuition at each college in this example. At a minimum, institutions must offer a half percent per year off current tuition rates.

Individuals can open Independent 529 Plan account at no charge as well as locate member institutions and learn about refund policies and other plan features by calling (888) 718-7878 or by visiting their web site at www.independent529plan.org.

Other features of the Plan include:


• No fees of any kind to the consumer


• A parent, relative or friend at any income level can establish an Independent 529 Plan for a beneficiary (eventual student) and may also transfer use of the tuition certificates to a wide range of relatives of the beneficiary.


• Accounts can be opened for as little as $25 provided contributions total at least $500 within two years. The maximum lifetime contribution limit is equal to five years worth of tuition at the most expensive participating college in the Plan.


• The number of participating colleges and universities may increase over time.

Contributions are made on an after-tax basis and any increase in value realized when a tuition certificate is redeemed at a member college will be free of federal and state taxes. However, a sunset provision in the current tax law calls for the tax-free features of all 529 plans to end in 2011. Future changes in the law may create adverse tax consequences, or lead to termination of the plan.

If the tuition certificates cannot be used by the beneficiary, they can be transferred to a wide range of relatives of the beneficiary or the adjusted value of the certificates can be rolled over into another 529 plan without penalty. Or, a refund of the amount will be given capped at plus or minus 2% of the Fund's performance in any year contributions were made. The refund may be used to pay for college expenses at non-member institutions without incurring federal income tax or penalties on any investment gains. If, however, the refund is not used within one year or to pay qualified higher education expenses, the account owner will be subject to taxation on any gains and to a 10% additional tax.

Tuition Plan Consortium is a nonprofit organization based in Albuquerque, New Mexico, and was formed in 1996 to make education at independent colleges and universities more affordable and more accessible for families in the United States.

TIAA-CREF Tuition Financing, Inc. will administer the plan and TIAA-CREF Trust Company, FSB, will manage its investments. The TIAA-CREF companies constitute a $282 billion* leading financial services organization, including the premier retirement system for colleges and universities. Purchasers should read the Disclosure Booklet, including the Enrollment Agreement, carefully before making purchase decisions. Teachers Personal Investor Services, Inc. distributes the Independent 529 Plan Tuition Certificates.

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