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Frequently Asked Questions

Select a topic to access questions and answers:

• Program sponsorship
• Participating colleges
• Program basics
• Tax considerations
• Plan requirements
• Financial Aid Impact
• Other considerations

PROGRAM SPONSORSHIP

Who sponsors Independent 529 Plan?

More than 270 private colleges across the nation have joined together to form Tuition Plan Consortium. This not-for-profit organization sponsors Independent 529 Plan, the first private college-sponsored, national, prepaid 529 plan.

Who is the program manager?

Independent 529 Plan is administered by TIAA-CREF Tuition Financing, Inc. (TFI), the country's leading manager of Section 529 programs. TFI provides administrative, service, and marketing support to the program. TFI's affiliate in the TIAA-CREF group of companies, TIAA-CREF Trust Company FSB, is the trustee for the program trust within which Independent 529 Plan is required to hold all program assets. The TIAA-CREF organization is the nation's largest pension fund manager.

Is my tuition investment guaranteed?

Yes, the member colleges and universities guarantee your tuition benefit at the pre-purchased discounted rate. Most of these institutions have been established for over 100 years, and they have ample resources to honor their obligations.

PARTICIPATING COLLEGES

Who are the participating colleges?

Independent 529 Plan includes a wide range of private colleges and universities to fit the talents and interests of all students when they're ready to select a college. Member institutions include: historically Black colleges, religiously-affiliated colleges, research universities, science & engineering institutions, traditional liberal arts colleges and women's colleges—with more colleges joining every month. You can view the list of participating colleges by state or alphabetically.

Do I have to choose a specific college when I purchase a certificate?

No. You do not choose a specific college when you purchase a certificate. When you open your Independent 529 Plan account, you'll have the opportunity to select up to five “sample” colleges to monitor. Each quarter you will receive a statement that displays the value of your account in terms of accumulated tuition benefit based on your “sample” colleges.

While designation of a particular college as a benchmark has no bearing on admission to that school, it's a good way to illustrate where you are in terms of your goal. Your selections can be changed at anytime, so you can view the tuition value you've purchased at any of the participating institutions in the plan.

And while you don't choose the college in advance, you are locking in tuition costs at all the participating colleges. Your Independent 529 Plan certificate can be redeemed at any participating college as long as a student is accepted for admission and enrolls.

Will there be more colleges to choose from by the time my child goes to college?

Since the program started in September 2003, more private colleges and universities have joined, and the list is growing all the time. Member colleges welcome other independent colleges to join them in an effort to help families save for tuition. Families that purchase tuition certificates now will be able to use their tuition benefits at any college that joins later, provided the beneficiary is admitted. If you don't see your favorite private college on our member list, call the college's alumni or admissions office and encourage them to join!

Can the private college I'm interested in end its Independent 529 Plan membership? If so, what happens?

If a college should ever withdraw from Independent 529 Plan, it would still be obligated to honor all certificates that were purchased prior to its withdrawal. However, no certificates purchased after its withdrawal will be honored by that specific college.

How do I know that a college will honor my tuition certificates?

See above, “Can the private college I'm interested in end its Independent 529 Plan membership?”

The member colleges and universities guarantee your tuition benefit at the pre-purchased discounted rate. Most of these institutions have been established for over 100 years, and they have ample resources to honor their obligations.

Can a college change the amount of its discount?

Yes. A college can change its discount rate annually, effective July 1. A change would apply only to new certificates; existing certificates will continue to bear the same discount rate as when purchased until redeemed. Each participating college offers a discounted rate of at least 0.5% less than current tuition rates.

How can I be sure my child is accepted at one of these colleges?

Participation in Independent 529 Plan does not guarantee admission to any college or university. If your child is not accepted at any of the participating colleges, you have options:

1. You can get a refund and retain all the tax benefits for the withdrawal portion, if the funds are used for qualified higher education expenses.
2. You can change the beneficiary.
3. You can roll over an Independent 529 Plan account tax-free into a state-sponsored 529 plan.

PROGRAM BASICS

What is Independent 529 Plan?

Independent 529 Plan is the first private college-sponsored, national, prepaid 529 plan. Independent 529 Plan gives you a new tool to help make paying for your child's or grandchild's college education achievable by allowing you to lock in future tuition costs at less than today's price. This unique way to pay for college offers the security of a guarantee against tuition inflation and the flexibility to choose from some of the nation's top colleges. The plan has no start-up fees, no maintenance fees and no annual fees—and is free from federal taxes.

The amount of tuition you prepay (by purchasing certificates) won't change, no matter what happens in the investment markets or how much college tuition rises. You don't choose a college when you purchase a certificate; your prepaid tuition will be valid at any participating college, provided the student is accepted and enrolls*. Independent 529 Plan offers the same federal tax benefits as any 529 prepaid tuition plan or state-sponsored 529 college savings plan.

* Participation in Independent 529 Plan does not guarantee admission to any college or university, nor does owning a certificate in any way affect admissions decisions.

How does Independent 529 Plan compare to other plans?

Independent 529 Plan is the only 529 specifically tailored for families who wish to send their children to private colleges. See this chart to see how Independent 529 Plan compares to other plans.

What are the risks of participating in the plan?

Participating institutions carry the investment risk and protect you from future tuition increases. The tuition you purchase today is guaranteed to satisfy costs at the time your child enrolls. So, if you purchase a half year of tuition today, you get a half year of tuition in the future. The primary risk is whether your beneficiary will attend one of the member colleges. If your beneficiary does not attend a member college, your certificate's refund value (which is capped at 2% per year) is likely to be less than its value would be if used at a participating college. And, withdrawals not used for qualified higher education expenses will be subject to tax. (See What is the Refund Policy?) A secondary risk is that the price of tuition will fall, though given historical inflation, that situation is unlikely.

What is the certificate discount and how does it work?

All member colleges offer a discount of at least 0.50% (one-half of 1%) per year off their current tuition, which means that you are actually paying less than today's price for tomorrow's tuition. The value of the certificate discount compounds between the time you purchase a certificate and when you redeem it. That means the longer you hold a certificate, the greater the value of your purchase. See an example here.

What am I purchasing, given that each member college has its own individual pricing?

For each Independent 529 Plan program year (July 1-June 30 annually), you are purchasing a percentage of future tuition at any one of the participating private colleges. That percentage will vary for each school, depending on its current tuition rate and “certificate discount” rate.

TAX CONSIDERATIONS

What are the Estate Planning and Gift Tax Benefits?

Independent 529 Plan offers you significant estate and gift tax benefits. Your contributions are completed gifts, and $12,000 annual exclusions may be used. Contributions reduce the taxable value of your estate, while you retain complete control of the account.

If you are married, your spouse may elect to split the gifts made to purchase a tuition certificate for a beneficiary, thereby doubling the amount of the annual gift tax exclusion—from $12,000 to $24,000.

529 plans enjoy the benefit of a federal 5 year-averaging provision. You can elect to treat up to $60,000 as having been made in 5 equal gifts over a 5-year period ($120,000 if married and filing jointly). If you contribute more than $60,000 in one year, the excess would be a taxable gift in the year of contribution.

Independent 529 Plan also features high contribution limits. For the 2007-2008 program year, the maximum lifetime contribution limit is $177,500. This amount would cover the cost of tuition for five years (for a newborn) at the highest-priced participating institution in the program today.

What if my child goes to a non-member college?

Additional colleges are joining Independent 529 Plan all the time. However, if your child goes to a college or university that is not participating in Independent 529 Plan, you have options:

1. You can get a refund and retain all the tax benefits for the withdrawal portion if used for qualified higher education expenses.
2. You can change the beneficiary.
3. You can roll over an Independent 529 Plan account tax-free into a state-sponsored 529 plan.

What if my child doesn't go to college?

Even if your child chooses not to go to college, you have options:

1. You can leave the account open for future use—for up to 30 years.
2. You can change the beneficiary to another “member of the family,” within the federal 529 rules—even yourself!
3. You can also take a refund adjusted for fund performance.

What if my child gets a full or partial scholarship? What happens to my Independent 529 Plan funds?

If the beneficiary receives a scholarship that covers the cost of qualified expenses, you can withdraw the funds from your account up to the amount of the scholarship without penalty or additional tax. Earnings that are refunded due to scholarship are taxable income but are not subject to the 10% additional federal tax on earnings. You can also change the beneficiary to another “member of the family,” within the federal 529 rules—even yourself!

What if I have only saved part of the tuition required? What if I have saved more than is needed? What are my options?

If you have not pre-purchased the full amount of tuition and mandatory fees through Independent 529 Plan, you will be responsible for the difference at the then current rate for that college. If the value of your certificate is more than the full amount of tuition and mandatory fees, you can save the excess for a subsequent year. You may also transfer the benefits to another family member or obtain a refund. (See What is the Refund Policy?)

What is the refund policy?

You may receive a refund at any time after the one-year (12 calendar months) anniversary of purchase, adjusted for fund performance. As with any 529 program, if you do not use the money for qualified higher education expenses, any increase in the value of your initial purchase amounts (the difference between your contribution amount and the amount refunded) will be subject to federal income tax as well as an additional 10% tax. If you take a refund, rather than redeem your certificate for its intended purpose, the refund will be adjusted based on the net performance of the Program Trust, subject to a maximum increase of 2% per year and a maximum loss of 2% per year.

What is the "sunset provision" and how does it affect the federal income tax treatment of 529 Plans?

Federal income tax-free treatment of qualified withdrawals and other federal tax benefits are now permanently in place for 529 plans through the passage of the Pension Protection Act of 2006. The Sunset Provision is the provision of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) that stated that the law allowing federal income tax-free qualified withdrawals was set to expire December 31, 2010. For more information, see the Independent 529 Plan Disclosure Booklet (PDF, 347KB)

PLAN REQUIREMENTS

Who can participate in Independent 529 Plan?

There are no special eligibility requirements to take advantage of Independent 529 Plan, and there are no income limits for participation. If you are an adult U.S. resident who wants to help fund a private college education for children, grandchildren or any loved one, you are eligible.

And with Independent 529 Plan's built-in flexibility, you can open an account for a named beneficiary or in the name of a trust, estate, or business for a scholarship for unnamed beneficiaries.

What can Independent 529 Plan funds be used for?

Currently, Independent 529 Plan funds can be used for undergraduate tuition and mandatory fees. In general, mandatory fees are those fees required to be paid by all students attending the particular college as a condition of enrollment.

Are there any fees associated with the Plan?

There are no sales, application or maintenance fees assessed to Account owners. All costs of administering the program, managing the assets, and running the Tuition Plan Consortium office are paid for by an annual management fee, which is picked up by the member colleges. That means that your entire contribution is applied directly to tuition.

How quickly can a certificate be redeemed?

A certificate must be held a minimum of 36 months before it can be redeemed for tuition.

How much can I contribute to Independent 529 Plan?

Because every family's resources are different, Independent 529 Plan offers a number of ways to participate—from prepaying the full cost of several years to paying a set amount each month. The more and earlier you prepay, the greater the percentage of tuition you can lock in at less than today's price. However, you can also elect to participate in an automatic contribution plan by contributing as little as $25 a month as long as a minimum of $500 is accumulated within two years of the initial purchase date. The maximum contribution per beneficiary changes annually and is equal to the cost of 5 years of full-time tuition at the most expensive member college for a newborn. For the 2007-2008 program year, that amount is $177,500.

Can I pool money in one account and then draw on funds as needed for different children in my family? Do I need more than one account?

We typically suggest two options:

1. Open an account for each beneficiary (remember that as an account owner you pay no per-account fees).
2. Open an account for one beneficiary, and then transfer all or part to another beneficiary at a later date. A maximum of one change of beneficiary is allowed per program year.

FINANCIAL AID IMPACT

Does Independent 529 Plan affect eligibility for financial aid?

Congress has passed a new law that significantly improves the financial aid rules governing prepaid 529 plans. Simply put, Independent 529 Plan accounts are now treated the same as any other parent asset, including 529 savings plans. This new law means that, beginning in 2006, prepaid 529 plans — such as Independent 529 Plan — will no longer be treated as an available student resource when determining your potential financial aid award. Now, no more than 5.6% of your 529 college savings will be used to assess need if you apply for financial aid under federal guidelines.

OTHER CONSIDERATIONS

What is a 529 Plan?

529 refers to Section 529 of the Internal Revenue Code. 529 plans are tax-advantaged programs that help families save for college. Residents of any state can invest in any 529 Plan, you do not have to be a resident of a particular state to invest in that state's plan. There are three types of 529 plans:

Independent 529 Plan. A prepaid tuition program designed to provide you with an opportunity to prepay undergraduate tuition for a beneficiary at participating private colleges and universities throughout the United States. By participating in Independent 529 Plan, you can pay for your beneficiary's tuition and certain fees today and lock in current tuition rates and a discount for your beneficiary's future enrollment at a Participating Institution. Independent 529 Plan offers the same federal tax advantages as the 529 savings plans originally specified by the Internal Revenue Code.

State-sponsored college savings plans. The value of these plans fluctuates with the markets. They can be used at eligible public and private colleges nationally and some colleges abroad. Some state plans offer state tax advantages in addition to federal tax advantages. Before investing in a 529 plan, you should consider whether the state you or your designated beneficiary reside in or have taxable income in has a 529 plan that offers favorable state income tax or other benefits that are only available if you invest in that state's 529 plan. Qualified higher education expenses typically include: tuition, mandatory fees, books, supplies, and equipment required for enrollment or attendance; certain room and board; and certain expenses for "special needs" students.

State-sponsored prepaid plans. These plans are designed to allow parents to lock in today's tuition rates at eligible public and private colleges or universities. Qualified higher education expenses typically include tuition and fees at in-state colleges and universities. Some have provisions to include room and board.

With all 529s—both savings, and prepaid programs—there is no income or age limit for participation. You can even open an account for yourself.

How do 529 Plans vary?

529 Plans vary in a number of ways, including contribution limits to the account (defined by the sponsoring agent), fees to open and maintain an account, in-state tax treatments such as a state tax deduction, investment options offered, and the financial services company that manages the plan. There may also be other differences, such as special programs or benefits defined by the particular plan.

Before investing in a 529 plan, you should consider whether the state you or your designated beneficiary reside in or have taxable income in has a 529 plan that offers favorable state income tax or other benefits that are only available if you invest in that state's 529 plan.

How does a 529 Plan compare to other investment choices, such as custodial accounts?

To compare features of 529 plans and custodial accounts, use our comparison chart.

How will I be kept informed about my progress in Independent 529 Plan?

When you open your Independent 529 Plan account, you'll have the opportunity to select up to five “sample” colleges to monitor. Each quarter you will receive a statement that displays the value of your account so that you can see exactly what percentage of tuition you have purchased, using your sample colleges as examples. If you have a personal financial advisor who is helping you monitor your progress, you can request that we send a copy of your quarterly statement to your advisor as well.

While designation of a particular college as a sample has no bearing on admission to that school, it's a good way to illustrate where you are in terms of your goal. Your selections can be changed at anytime, so you can view the tuition value you've purchased at any of the participating institutions in the plan.

And while you don't choose the college in advance, you are locking in tuition costs at all the participating colleges.

Does Independent 529 Plan affect eligibility for financial aid?

Congress has passed a new law that significantly improves the financial aid rules governing prepaid 529 plans. Simply put, Independent 529 Plan accounts are now treated the same as any other parent asset, including 529 savings plans. This new law means that, beginning in 2006, prepaid 529 plans — such as Independent 529 Plan — will no longer be treated as an available student resource when determining your potential financial aid award. Now, no more than 5.6% of your 529 college savings will be used to assess need if you apply for financial aid under federal guidelines.

What if I or my beneficiary dies before a certificate is redeemed?

When opening an account, you must also appoint a contingent certificate owner. The contingent certificate owner would assume ownership of the account upon death of the certificate owner, with all the rights of the original owner. In the event of the death of the designated beneficiary, the owner may change the beneficiary to a family member of the deceased beneficiary or may request a refund. In this case, the 12-month holding period for refunds is waived.

What else do I need to know?

Please be sure to read the Disclosure Booklet including the Enrollment Agreement carefully before making purchase decisions. The "Additional Considerations and Risk Factors" section contains important product feature considerations unique to this product.

Participation in Independent 529 Plan does not guarantee admission to any college or university.

The tax information herein is not intended to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties. It was written to support the promotion of Independent 529 Plan. Taxpayers should seek advice based on their own particular
circumstances from an independent tax advisor.

TIAA-CREF Individual and Institutional Services, LLC distributor

Participation in Independent 529 Plan does not guarantee admission to any college or university, nor does owning a certificate in any way affect admissions decisions.