Prepaid tuition plans: Sprint to lock in 2011 rates

June 17, 2011

If you’re looking for another way to diversify your child’s 529 college savings plan, sprint to the finish; you have two weeks left to consider locking in prepaid tuition at 2011 rates.

There are currently more than 270 private colleges and universities across the nation that participate in the Tuition Plan Consortium, a network that allows you to pay for future tuition and fee costs in current dollars while retaining their value for 30 years.

While a regular 529 college tuition plan usually carries some exposure to volatile markets, the national Tuition Plan Consortium is simply a contractual obligation for any college or university participating in the network to honor your prepaid tuition plan. In other words, you can minimize your market risk.

“Especially for today’s savers, prepaying tuition is not an investment so you don’t have to worry about fluctuations in the market,” says Nancy Farmer, president of Tuition Plan Consortium, a not-for-profit organization that sponsors the Private College 529 Plan.

“When you open an account with us, you don’t have to worry about what’s happening with the market, you don’t have to worry about what’s happening with tuition inflation; our schools take the risk.”

This means if you open an account with $25,000, you own $25,000 worth of tuition at any of the participating schools and do not need to commit to any one school until admissions, effectively keeping your beneficiary’s options open.

If your beneficiary wishes to enroll at a school that does not participate in the prepaid tuition program, and it does not want to join the consortium, you can rename the beneficiary or roll your Private College 529 Plan into a regular 529 plan without risk of tax liability (though you might suffer an earnings/losses penalty of about plus/minus two percent).

“We’re not a security; you’re not going to make a whole lot of money if you prepay tuition and don’t use it at one of the schools, but you’re also not going to lose much either,” says Farmer, noting that prepaying tuition also protects you on the down side.

Curious about purchasing power? Here’s what $25,000 in prepaid tuition in 2011 can buy you for the next 30 years:

– more than half a year at Vassar College

– nearly two-thirds of a year at University of Chicago

– two-thirds of a year at Amherst College

– more than two-thirds of a year at Stanford University

– nearly one year at Spelman College

The deadline for prepaying tuition and fees at 2010/2011 rates is June 30, 2011.

For a list of participating colleges and universities, or to inquire about how to purchase prepaid certificates, visit


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