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Redeem Your Prepaid Tuition
 When
your child enrolls at a member college,
you use your certificate/s to pay for the percentage of tuition
that you previously purchased.
To make Independent 529 Plan even more attractive, each member
college offers a discount. This increases your savings by allowing
you to purchase tuition today that your child can later use at any member college. Each college sets its own “certificate
discount” rate, but it will never be less than a half percent
per year and applies only to the amount of tuition pre-purchased.
Participating colleges can adjust the discount rate annually with
respect to future purchases.
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Assuming that private college tuition inflation continues
at an average rate of 6% per year and an Independent 529 Plan
annual discount rate of 1%, it's like earning a 7% increase
in value each year—tax-free.
In this example, instead of paying $44,770 for tuition in 10 years, you could pay just $22,610 by prepaying today! Of course, you don’t have to buy a whole year. You can buy a fraction of a year, and reap proportional benefits.
This is a hypothetical illustration, and assumes a 6% tuition inflation rate. Actual savings and tuition rates may vary.
Of course, results will vary based on actual tuition increases
and the discount rate at the college the child eventually
attends.
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| Independent 529 Plan
Savings With the Discount* |
| Today's price of one year
current tuition at college x |
$25,000 |
| What you will actually
pay now for one year of tuition to be used in 10 years (includes 1% discount) |
$22,610 |
| Projected price of one
year of tuition at college x in 10 years, assuming 6% average
annual tuition inflation |
$44,770 |
| Your savings with
the 1% discount (all federal tax-free) |
$22,160 |
When your child enrolls 10 years after your certificate
purchase a full year of tuition will have cost you $22,610
(your $25,000 certificate minus 1% discount), when others
without Independent 529 Plan will be paying the full $44,770.
The bottom line: you will be paying almost half of what
someone without Independent 529 Plan is paying for
the same education.
Note: For amounts purchased
that are less than a full year's tuition, the results
would be proportionate.
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» Next: The percent
you buy today is honored by member colleges
* Certificate discounts are prorated throughout
the initial year. To obtain the full discount, purchases must be
received by July 1 (program year runs from July 1 to June 30).
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