The non-profit Tuition Plan Consortium offers a 529 Plan that is tailored for private colleges. The plan will be administered by TIAA-CREF.
TIAA-CREF pools collected money and invests in a stock and bond portfolio. Payouts will be made to the appropriate college as certificates are redeemed. There are currently 274 member colleges and universities including several Ivy League schools and many other elite, private schools.
The independent 529 Plan is a prepaid tuition plan for private colleges and universities. Participants are able to purchase a certificate that is redeemable for a pre-established percentage or tuition at any member school. Individual schools decide the percentage discount the certificate will entitle the holder. For example, if you deposit $10,000, the certificate might be worth 75% of tuition at College X but only 50% at College Y. The fractions do not change if the stock market decreases or if college tuition costs increase.
Account holders do not have to commit to a particular school when they purchase certificates. They are requested to submit their top five choices and will receive quarterly reports showing how their investment works at those schools. The account holder can change their schools as necessary.
Additional Features of the Plan:
- The maximum contribution limit is the cost of five years of full-time undergraduate tuition and mandatory fees at the highest-cost participating institutions.
- There are no federal tax consequences for redemption of certificates, so the account owner is not subject to federal income tax if a tuition certificate is used to pay for tuition at a member institution.
- Buyers must hold the investment at least 12 months (one year) and can receive a refund capped at a maximum of 2% per year.
- If your child decides not to go to school or to one of the member schools, you can request a refund and receive your original deposit back adjusted for fund investment performance.
As with all prepaid tuition plans, the independent 529 Plan will affect your child’s chance of receiving federal financial aid. Also, the college your child attends might be less inclined to offer a scholarship or tuition discount, considering you have already paid for a portion of tuition. For more information regarding this topic, contact Henssler Financial at 770-429-9166 or experts@henssler.com.
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