Hope Joins National
Prepaid Tuition Consortium
Posted March 9, 1998
HOLLAND -- Hope College is the first Michigan
institution to join a growing coalition of private colleges
and universities creating a prepaid tuition program designed
to allow families to cover tomorrow's tuition at today's
Although still in the planning stages and awaiting
final federal approval, the program would offer $1,000
certificates that would pay a percentage of the future
tuition at any of the colleges and universities
participating in the consortium, named "Tuition Plan Inc."
Families could even purchase enough certificates to cover
100 percent of the cost of four years at any of the
"With this plan, the certificates will purchase
future tuition benefits at any of the participating
institutions, and the decision as to what institution to
attend does not have to be made until the student is of
college age," said William K. Anderson, vice president for
business and finance at Hope. "There are presently 33
colleges in the consortium and the number is growing
"This program will be ideal for grandparents and
others who may want to give the gift of education because
they needn't wait until the child starts college," he said.
The consortium began with a group of schools in
the south and has since expanded nationwide. Members so far
range from DePauw University in Greencastle, Ind., to Emory
University in Atlanta, Ga., to Rice University in Houston,
Texas, to Vanderbilt University in Nashville, Tenn.
According to Anderson, the advantage for families
is that if the goal is to save for college tuition, they are
likely to experience a higher "investment return" by
participating in the program than investing in traditional
investment plans. The colleges and universities,
conversely, are gambling that the earnings on the
certificates will outpace future tuition increases because
the funds will be invested by professional money managers
similar to endowment investments.
Although it's too early to guarantee specifics,
according to Anderson the program would work something like
this: a $1,000 certificate purchased in 1999, for example,
might be guaranteed to cover seven percent of a year's
tuition at "College A" and 15 percent at "College X."
Schools would commit in advance to the percentage of their
costs to be covered by each certificate, thereby allowing
families to know how many certificates they would need to
buy to guarantee total tuition at any given school.
"The per-share pricing method, with certificate
maturity dates based on a child's age at the time of
purchase, is key since private college tuition varies
dramatically around the country," Anderson said. "Initial
consortium projections suggest that future guaranteed
tuition, room and board could be purchased for an eight-
year-old for about 75 percent of today's costs."
Unlike many state-sponsored plans, which according
to Anderson are more rigid in design and investment options,
the private colleges' program would be transferable among
schools in different states.
Anderson noted that Congress needs to enact
legislation that exempts families from taxation on the
growth of their investment in private plans before the
program can become a reality. A bill has recently been
introduced in the House that would exempt prepaid private
tuition from federal income tax. It is hoped that the
program could be marketed to families by next year.
© 2006 Hope College, Holland, Michigan 49423