NEW YORK (AP) Parents have a new way to save for their children's college educations, especially if they want them to attend some of the nation's top private colleges and universities.
A consortium of private schools on Wednesday launched the Independent 529 Plan, which will let families lock in tuition and mandatory fees at more than 220 participating institutions.
''This is a major step forward in fundamental help for Americans to save for college,'' Tim Lane, vice president of TIAA-CREF Tuition Financing, told a news conference announcing the plan. TIAA-CREF will manage the program.
Almost all 50 states currently sponsor Section 529 savings programs, which take their name from a section of the U.S. tax code. Most of them are long-term savings plans that allow investments to grow tax-deferred and exempt withdrawals from federal taxes when they're used for educational expenses.
In addition, 18 of the states also offer prepaid tuition plans, which let families pay for tomorrow's tuition bills at today's prices for home-state colleges.
The new plan which will be available at the Web site www.independent529plan.org is similar to the states' prepaid tuition plan. The difference is that it's national, families will be able to use it to ''purchase'' tuition certificates at a discount for a variety of private colleges and universities.
Participating institutions range from Birmingham-Southern in Alabama to Pomona in California, Wesleyan in Georgia, the University of Chicago in Illinois, Tulane in Louisiana, Wellesley in Massachusetts, Oberlin in Ohio, Princeton in New Jersey, Ithaca in New York and Lawrence in Wisconsin.
Harvard and Yale are among the well-known universities that haven't joined.
Admission to the private schools isn't guaranteed, of course, so there are ways to get out of the program if a child doesn't qualify for a participating college or decides not to go to university.
Here's a description from TIAA-CREF of how it works:
Private colleges A and B agree to honor certificates purchased under the Independent 529 Plan. College A has a tuition cost of $30,000 for the current year, and College B has a tuition cost of $10,000. A family that makes a $10,000 contribution into the plan this year would receive tuition certificates that would cover 33.3 percent of College A's tuition for one year or an entire year at College B, regardless of what tuition costs are at the time the certificates are used in the future.
''It's like a spending certificate at the mall ... except it's good for a guarantee of a percentage of tuition,'' said Douglas M. Brown, president and chief executive of the Tuition Plan Consortium of Albuquerque, N.M., which operates the plan.
Brown said the goal was to appeal to a wide audience, so the plan is set up so a family can contribute as little at $25 a month.
Asked what would happen if a child didn't qualify for one of the private colleges, Brown said that parents had a number of alternatives. The money in the independent plan could to allocated to another child, rolled over into one of the state-sponsored Section 529 plans or refunded, though with a cap of 2 percent per year in earnings.
Brown also said that he expected the number of participating colleges and universities to grow to 400 by the end of next year. That would cover about one-third of all the private institutions in the nation, he said.
Joseph F. Hurley, president and chief executive of Savingforcollege.com and an expert on the Section 529 programs, said the new plan should be attractive to parents who want their children to go to a private college and worry about the steep rise in tuition.
''You pay now, so you don't have to worry about those increases, which have been substantial,'' Hurley said.
Hurley, who maintains the Web site www.savingforcollege.com, which compares Section 529 program, welcomed the independent plan, saying: ''The most options there are, as long as they're good options, the better.''
Liz Williams, treasurer of Southern Methodist University in Dallas, one of the founding institutions, said she thought the program would appeal to a lot of families.
''We're convinced that it would be important for parents and grandparents who want to create options for their children to have a plan that was national in scope and included lots of different private colleges and universities,'' she said.
In addition to encouraging families to save for college, the Independent 529 Plan will also help the private institutions, she added.
''The colleges themselves will be healthier in the long run, and our system of education with a mix of institutions will be healthier, if there are more options for families to prepare for a big (financial) commitment like this,'' Williams said.
Peninsula Clarion ©2015. All Rights Reserved.