<p>From Kim Clark at U.S. News & World Report today: </p>
<p>
[quote]
Parents of students planning to attend expensive private colleges can lock in big discounts if they can scrape together a few extra thousand dollars by June 30.</p>
<p>The discounts are being offered by the 272 private colleges that belong to the Independent 529 Plan. The plan offers parents and other relatives a tax-free way to prepay tuition at many small liberal arts colleges around the country, as well as expensive private universities such as Brandeis, Duke, MIT, Princeton, Rice, Stanford, and Vanderbilt.</p>
<p>Through June 30, the Independent 529 will allow parents to buy tuition at member schools for years 2013 through 2043 each for less than the school charged for tuition in 2009. (The Independent 529 requires investors to wait at least 36 months before redeeming their investments, and guarantees tuition for 30 years.) On July 1, the plan will change its nameto Private College 529and temporarily stop accepting new contributions. It plans to reopen in mid-August with a slightly more expensive pricing system: Parents can still lock in tuition, but at each college's full 2010 rate.
<p>Given the big bucks being bandied about here, the "Financial Aid & Scholarships" forum may not be the perfect home for this post, but I wasn't sure where else to stick it. I guess it works, if you're willing to consider that any help you're giving yourself might qualify as "aid." ;)</p>
<p>When son was a rising senior in high school and it was looking like he would attend a private college that was part of this plan, we prepaid part of his junior year tuition. When he actually enrolled, we scraped up the cash to fully fund his senior year tuition bill after merit aid. We will cash the first certificate in this summer. I’m not sure how yet much we “earned” in the past three years, but it sure beats a savings account earning .0001%.</p>
<p>A very interesting proposition! Thanks for sharing. If I’m understanding this correctly, the most you can lose is 2% of your investment (if the fund doesn’t do well and student doesn’t attend the school) If my daughter, who was just accepted at one of these schools, can pay for her senior year now (2013), she only has to pay the 2009 tuition rate. Did I get that right?</p>
<p>Tuitions are going up at around a 3-4%/year rate right now, so it’s not like you are going to see a huge ROI unless we see a return to high inflation. And if the increase rate drops, you might as well just buy a cd.</p>
<p>The schools must be very confident they can generate returns in excess of 3-4%/year or they would never participate.</p>
<p>And if you don’t go to one of those schools, you are getting virtually no return on your money.</p>
<p>Also, through June 30 you get to pay LESS THAN the 2009 rate. All participating colleges are providing discounts of AT LEAST 1/2% But many schools, such as Dickinson offer a discount of up to 4 percent. These discounts will end June 30.
Kim Clark</p>
<p>keep in mind; this 529 plan is only for tuition and fees; no room and board permitted on withdrawals (unlike other qualifying 529 plans where room and board is permitted for full time students who reside)…</p>
<p>This was a terrific plan at it’s inception if your student attended one of the participating institutions; we pre-paid our daughter’s junior and senior year and will cash out starting this September…plus she was has merit $$ which made it even cheaper…</p>
<p>not sure the new program will be as attractive (plus my other daughter’s list of potential schools does not match up…)…we will probably transfer out of the program when she is done…</p>
<p>Most colleges will give you a guaranteed protection from any future increases in tuition and room/board if you stroke the check in advance all at once. But who has 200k laying around to give to a university? This works ONLY for those who are not receiving financial aid.</p>
<p>Sally…Can you move this to the Parents’ Forum? People that may be interested in this may not be reading the Financial Aid and Scholarships Forum, as ghostbuster suggested.</p>
<p>Regardless of the amount, under what considerations would this be ill advised? Let’s assume the money is available has been set aside for education, we assume tuition will rise, and there is a 4-5 year horizon. Refundable of course, if the the student transfers or stops attending.</p>
<p>I wasn’t aware this option was available. Just curious.</p>
<p>Does anyone know if this applies to transfer students? I read the article and I didn’t see a mention of it (but I’m running on four cups of coffee so I don’t trust my mind at its current state.)</p>
It would be more accurate to say “most participating colleges are offering 0.5%, some offer 1.0%, a few are higher.” And that’s great, but we’re talking a few hundred bucks max.</p>
<p>toledo–This thread is featured prominently on the CC discussion home page, so I think it’s very visible. So, rather than move the thread, I’ll put a note on the Parents Forum. Thanks for the suggestion.</p>
<p>This isn’t a new option. When my daughters were young we prepaid tuition to Washington State colleges through the Washington State Guaranteed Tuition Plan (GET). We were guaranteed 5 years of tuitions (full purchase) at future tuition costs based on a then-current per unit price. We were able to use that tuition at ANY college, not just Washington State colleges. This was the best investment we ever made. I’d say the investment was worth 100% more than the original price. </p>
<p>It’s true that 1 year of tuition (tuition only- not tuition plus room/board) at an in-state public school doesn’t cover the full tuition of my daugthers’ private colleges but the return on investment is still significant and still helps to cover their annual tuition.</p>
<p>Hi, can you guys provide some insight on how specifically this program works for a rising freshman this fall at Duke (in my example) with a lot of financial aid? My parents will be paying roughly 10K a year and we’ll get a bill for first semester in july, so I would like to know what I can do from now until then to help make college a bit more affordable for my parents with this plan. Thanks!</p>
<p>BallerDuke - this might not be the ideal option for your situation. </p>
<p>The biggest advantage will be for those who have the ability to put down a good portion of what they will owe for tuition during the senior year of college, now, by June 30th (with diminished but still anticipated benefits for those who start their contributions after 6/30/2010.) Investors can’t start withdrawing from the plan for 36 months. </p>
<p>If you are on substantial financial aid, your family may not be in a position to come up with a significant enough lump sum within the month, or next few months, to make the fourth year payments less burdensome- they are likely budgeting hard just to come up with this year’s contributions.</p>
<p>Additionally, the savings under this plan can only be applied toward tuition. So you would want to be sure your existing aid did not already fully cover tuition. </p>
<p>The point made in the article about this being especially great for incoming Freshman is that there is a really good chance that, when they first become eligible to withdraw (their 4th year), they WILL be attending one of the schools participating in the plan (There is obviously a risk for parents of younger children that they will not ultimately attend a participating school ).</p>
<p>Maybe these big businesses (colleges and universities) could lower their tuition by 1% or at least tie it to the rate of inflation!!! What a scam.</p>
<p>Too many Oppenheimer cooks (aka money managers) spoil the soup.</p>
<p>For people who have a home mortgage, pre-payment of the loan saves the apr minus whatever one loses in tax deductions. That will be ~ 5% apr ‘growth’ for lots of people, and at least historically will keep up with education cost inflation. This approach has other advantages too:</p>
<p>Your money is more liquid;
No worry about non-attendance and poor fund performance, or fund bankruptcy;
Better FAFSA bottom line (I think);
F*** the money managers. Their benefit is your loss.</p>