A new college investment vehicle, the Independent 529 Plan, is being implemented at private colleges across the nation and will allow parents and students to pay for tomorrow’s private school tuition at today’s cost.

The Independent 529 Plan is the first national prepaid tuition program. The plan is similar to other 529 plans, which are state-run investment vehicles used to save for college.

With the plan, students can prepay tuition that will be accepted by a large group of private schools across the country. This protects the investor against future increases in the cost of tuition.

Schools in Iowa that are part of the plan include Central College in Pella, Graceland University in Lamoni, Loras College in Dubuque, Luther College in Decorah, Northwestern College in Orange City, Waldorf College in Forest City and Wartburg College in Waverly.

The plan does not guarantee a student will be accepted into a particular college, and money contributed is not valid at schools that are not part of the plan.

The option of a pre-pay plan for public institutions, such as Iowa State, would be more difficult than for private colleges, said Roberta Johnson, associate director of student financial aid. She said private schools can control their tuition costs and don’t receive state funding. These factors would complicate a prepay option for public schools, she said.

Karen Sinclair, deputy treasurer for college savings, unclaimed property and administration of Iowa, is program manager of Iowa’s 529 plan, College Savings Iowa.

“[College Savings Iowa] was developed in 1998… over a concern about the rising cost of tuition,” she said.

“Every state has at least one 529 plan.”

Sinclair said there was broad support for the College Savings Iowa plan when it was enacted.

“Any way you can get people to save for college is a good thing,” Sinclair said.

“This was a bill that passed unanimously in the state legislature,” she said. “In terms of the program itself, we’ve been named one of the top 529 plans in the country.”

The College Savings Iowa plan allows for tax-exempt contributions and tax-free earnings on money contributed, but it is not a prepay plan like Independent 529, Sinclair said.

“The money they put in can be deducted from state income taxes and that income [earned on the investment] is state tax exempt,” she said.

Johnson said the rising cost of tuition is a result of the loss of federal money for programs such as fire safety and security, in addition to increased funding of international commitments.

“[It’s] a shift in their budget priorities,” she said.

“This administration is shifting resources towards the war in Iraq.”

A result of that loss of funding is that states now have to pay for other programs in addition to education and there is less state money for college, Johnson said.