New savings program may reduce final cost of college

The University is participating in a new college savings plan that may let parents save on tuition.

The group introducing the Independent 529 Plan has made arrangements with 224 universities to give parents a rebate on tuition, depending on how much they invest in the plan. If successful, the plan will enable current tuition investments to keep pace with future tuition increases.

"[It] is not a plan that is beneficial for everyone, but in certain circumstances, it's appropriate," said University Treasurer Christopher McCrudden. "This is basically a program that's appropriate for people who really need the equivalent of an insurance plan."

The group responsible for the plan, the Tuition Plan Consortium, has made arrangements with the universities — though none besides Princeton in the Ivy League — so that, should the group's investments not keep pace with the rise in tuition, the individual colleges would supply the difference, plus an additional small percentage on top.

The rebate plan for the University, which went into effect Sept. 3, will be one percent of current tuition rates for the funds parents invest, compounded every year. This is consistent with the rebates offered by other universities in the plan.

"Princeton wants to support as broad a variety of options as possible to make sure that higher education is as affordable as possible," McCrudden said, adding that other 529 plans might be more appropriate for those with more flexible financial situations.

Any adult can deposit money to the plan in a student's name. The plan has no maximum limit to contributions, but requires a minimum initial deposit of $25 and deposits totaling at least $500 in the first two years. The adult retains ownership of the deposited funds and can receive a refund if the student does not attend a member college.

The money will be invested and then transferred to the institution the student attends. The universities will receive whatever rate of return the Tuition Plan Consortium receives on its investments.

Tuition Plan Consortium has received many inquiries regarding the plan, and almost 11,000 people have expressed interest through their website, said Nancy VanDevender, vice president of Tuition Plan Consortium.

The idea for the plan was created by a group of administrators from small colleges in the South. These administrators, primarily business officers, were concerned about the growing problem of student debt and believed parents needed another incentive to save, she said.

The University became involved in March 1998 and was the 39th college to become a member of the Consortium.