Investing In The Future

March 29, 2006
Whether you are a student or a parent, you've probably thought about how to pay for college tuition. Some Baylor alumni are taking advantage of the University's participation in Independent 529 Plan, a prepaid tuition plan specifically for private colleges.
Baylor is one of more than 250 institutions nationwide that belong to Tuition Plan Consortium -- the group of colleges that offers this program. Started in fall 2003 and administered by TIAA-CREF Tuition Financing Inc., the plan allows individuals to purchase certificates that equal a percentage of tuition at a consortium college.
Regardless of any rise in tuition, when a certificate is redeemed, it will cover the same percentage tuition as when it was first purchased (i.e., a purchase equal to 50 percent of a year's tuition today will equal 50 percent of a year's tuition a decade from now). Another benefit is that certificates are offered at a .5 percent discount off tuition costs at the time of purchase.
According to TIAA-CREF officials, about 190 plan holders nationwide have listed Baylor as one of the five benchmark schools -- institutions at which they are considering redeeming their certificates. More than 10 percent of all Independent 529 Plan holders live in Texas, partly due to the large number of participating schools in the state, and the average account size is $18,500.
Bob Spence, assistant vice president for financial services and treasurer at Baylor, said that the plan was named by BusinessWeek magazine as one of the best financial products of the year in December 2003.
"The Independent 529 Plan is a good option overall for Baylor alumni and the University," Spence said. "I think it provides the opportunity for alumni who are parents or grandparents to lock in future tuition at current prices, and as tuition continues to increase ... they've locked it in on a tax-exempt basis."
Most 529 plans are subject to market fluctuation. With tuition rates increasing nationwide faster than wages and inflation, the Independent 529 Plan offers protection against rising tuition and market downturns, said Gregg Eppler, BBA '86, who joined Independent 529 Plan in 2004. "I just like the idea of having a known amount of tuition paid," he said.
Eppler and his wife, Diana (Woods), BSE '87, have two daughters who are interested in attending Baylor after high school. "I was running out of years to take chances with market volatility and I thought that this [plan] offered some peace of mind that I needed," he said.
If a beneficiary does not attend a consortium institution, another beneficiary can be named or funds can be rolled into another 529 plan. Refunds will be adjusted according to the fund's performance during those years when contributions were made, capped at plus or minus 2 percent of the money invested. If the certificate is redeemed or the refunded money is used to pay for tuition, the owner is not subject to federal income tax.
By planning ahead, Eppler hopes that money will not be an issue for his children when it comes to choosing the right college. "How do you put a dollar value on attending Baylor?" he said. "Looking back, the best four years of my life were there."
Accounts can be opened for a minimum single deposit of $500 or an automatic contribution of $25 a month with no fees as long as contributions equal $500 within two years. There is no annual contribution limit. A certificate must be held for a minimum of 36 months before being redeemed.
For more information on the Independent 529 Plan, visit the TIAA-CREF informational Web site,, or call the Baylor financial services office at
(254) 710-3731.
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