So far, a total of 221 private colleges across the country, including Amherst, have joined a consortium to undertake and manage the plan. Under the plan, a family can purchase a certain percentage of college tuition at current prices. Eventually, if the child attends college (any one in the consortium of approximately equal price), he or she will already have that percentage of tuition paid for, regardless of the current price of the school. The maximum families can invest in the plan is five years' tuition at the most expensive college in the consortium, now $137,000, according to The Wall Street Journal.
As an added incentive to participate in the pre-pay plan, colleges in the consortium are also offering a discount on tuition for those who participate. Currently, Amherst's rate of discount is .5 percent. The discount rate is subject to change from year to year but will never be lower than .5 percent. Each institution determines its discount rate independently, according to The Journal.
The tuition fund for the consortium is managed by run the nonprofit Tuition Plan Consortium, according to The Journal. Funds may be transferred between children or paid back to the family in the case that one does not go to college or does not attend one of the 221 member schools. The returned investment will be adjusted for fund performance, with a cap at plus or minus 2 percent per year, according to The Journal.
This is not the first pre-pay plan in which Amherst is involved. The school is part of the Massachusetts U-Plan, which allows families to pre-pay for their child to attend any of a number of Massachusetts' colleges, both public and private.
Amherst College Comptroller Shannon Gurek says that the plan is designed to "encourage families to start saving for college today, and it allows people to set aside money in a tax advantaged way."
Director of Financial Aid Joe Case, the College's representative to the consortium of schools involved in the plan, added that it is designed "not so much for the wealthy folks, but more so for middle income families that need to think about college costs."
Although the colleges could benefit financially from the new plan if the money they receive from pre-paid tuition is invested wisely, Case added, "Our motivation is to promote private higher education, and it's much more from a public standpoint and not a personal gain standpoint."
The plan has been in the works since 2001, but came into effect this year. "We expect the plan to take off fairly slowly, but it may surprise us," said Case.
Those who choose to invest in the pre-pay plan, as opposed to the traditional 529 College Savings Plan-which allows parents to contribute money to a state managed account with a mix of stocks and bonds-may be eligible for less financial aid when they enroll in college. While college savings plans are considered a family resource, the money invested in the pre-pay plan is considered a "personal resource" of the beneficiary-the student. Therefore the child is considered to have greater assets and is less qualified to receive aid, but Case did say they are working to fix that situation.
So far, the consortium boasts a solid list of member schools such as Amherst College, Princeton University, Rice University and the University of Notre Dame. Middlebury College is the only other NESCAC school on the list.
Thus far people have been skeptical of the plan. "It sounds interesting, and it does seem that the cost of tuitions are rising at a greater rate than the cost of living, but when children are younger, so are their parents, and purchasing a significant percent of tuition years in advance might not be so easy," said Judy Reece, whose children attend the University of Pennsylvania and Trinity College, neither of which have signed up for the plan.
Edward Taylor, father of a first-year, echoed this sentiment. "I have three children and it would be a large burden to try to purchase enough tuition for all of them," he said.
Whether or not the financial aid issue is resolved, the Independent 529 Plan provides yet another way for families to plan for college and according to Case, "it is a way for families to contain education costs and assure some certainty of tuition."