Name: Mrs. Michelle L. Stephens - Oklahoma Christian University

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3Waysto save or pre-pay for collegePennies saved now makefuture OC education moreaffordableThanks (or no thanks) to inflation, thecost of going to college goes up every year.Since 1958, national averages haveshown tuition rate increases of 8 percentper year, which is about twice the generalrate of inflation. In recent years, some stateuniversities have raised tuition by 10 to 20percent from one year to the next.While OC’s recent tuition increases havebeen minimal by comparison, it’s safe toassume tuition will cost more in two tothree years than it does now.But that doesn’t have to be the case foryou.Beat inflation by pre-paying tuition attoday’s prices through the Independent529 Plan or invest in a Coverdell and/or529 Savings plan and let the magic ofcompounding interest work for you! Readon for more information. If you still havequestions, feel free to call us at (405) 425-5190.State-Sponsored 529 PlansNamed after a section of the InternalRevenue Code, the Qualified State TuitionProgram (or 529 Plan) formally recognizesthe need for families to set aside money forcollege.Due to federal and state tax advantages,Section 529 plans quickly have become thecollege savings plan of choice for manyAmerican families. 529 plans allow yourmoney to be set aside and grow federally(tax free) as long as it’s used for futurepost-secondary education, tuition, fees,supplies, books and certain room andboard costs. Assets can be used at any accreditedpost-secondary institution in theUnited States.Programs are administered by a stateagency and differ from state to state.Because students are not required to attendcollege in the state where their 529 planmoney is invested, you have the freedomto invest in whichever 529 plan you believeis best. However, most financial advisorsagree it’s usually wise to check your homestate’s plan first. Many plans offer adeduction on your state income tax.To get started, simply visit www.savingforcollege.com for an informativeoverview of all the various state-sponsoredplans.Enrollment in a 529 savings plan is easy,and everyone is eligible!Independent 529 PlanThe Independent 529 Plan is the first529 plan to be sponsored by colleges ratherthan by the states. Administered by TIAA-CREF Tuition Financing, Inc., this plan isdifferent from any other 529 plan becauseit guarantees the purchaser at the outsetthat when the beneficiary enrolls at a membercollege, the certificate may be redeemedfor a specific percentage of tuition.This is how the plan works: Obtain VISION SPRING 2006 Transforming lives for Christian faith, leadership, and service.
an enrollment kit by calling (888)718-7878 or visiting the websiteat www.independent529plan.org. Thenpurchase a certificate that guaranteesa certain percentage of tuition, whichvaries depending on each of the 250participating institutions’ current tuitionand certificate discount rate set by thatcollege for the year the certificate waspurchased. (A certificate purchased for$10,000 might guarantee a year’s worthof tuition at College A or one-half year’stuition at College B.)The website provides a tool tocalculate the tuition benefit at differentmember colleges. Students choose theircollege after they have applied andbeen accepted through the standardadmission process. (Oklahoma Christianis an Independent 529 Plan participatinginstitution).Certificates are held for three yearsminimum before redemption and aretransferable to other family members,including first cousins and in-laws.After one year, they may be refundedor rolled over into another 529 plan;withdrawals used for enrollment at nonmembercolleges, including publics, arenot subject to federal income tax.The Independent 529 plan offersseveral unique advantages. First, theIndependent 529 plan charges no feesof any kind to the consumer. Second,colleges must offer a minimum of 0.5percent per year off current tuitionrates. Third, because it is a prepaidtuition plan instead of a savings plan,your investment is protected against anymarket risks. Assuming tuition increasescontinue at their historical rate, theIndependent 529 plan may provide thebest financial return possible.Coverdell Education Savings AccountCreated in 1997 as Education IRAs,and improved dramatically in 2001,Coverdell ESAs are a compelling savingsvehicle for parents who meet the contributionlimits. Parents filing jointly withadjusted gross income below $190,000may contribute up to $2,000 per child,per year, to a Coverdell ESA.The contribution is not deductible,but all earnings grow tax-deferred, to bedistributed tax-free if used to pay thebeneficiary’s college expenses. $2,000per yearmay not seem like much, but it adds upif you start early. Contributing $2,000 peryear for 18 years with an earnings rateof 10 percent would accumulate around$100,000.While both Coverdell ESAs andSection 529 plans offer the prospect ofpotentially tax-free earnings, Coverdellsoffer the flexibility to choose the specificinvestments you desire, unlike Section529s. This is a big advantage for thosewho want to direct their own investmentprogram. (Most fund companies orbrokerages can set up a Coverdell ESAfor you, allowing you access to their fullrange of investment products).In addition, the favored tax treatmentof Coverdell earnings extends to coverelementary and secondary schoolexpenses. The list of qualified expensesis lengthy and includes obvious items liketuition and books, as well as non-obviousitems like uniforms, transportation,computers and Internet access for thefamily during the years the beneficiary isin school.Contributors now are allowed tocontribute to both a Coverdell ESAand Section 529 plan in the same year(although contributions to both typesof plans are combined for gift taxpurposes). This is great for parentswho want to save more than the $2,000per year allowed in a Coverdell, or forparents who want to save for collegein a 529 plan while also saving forelementary and secondary school costs ina Coverdell ESA.College FundingOptions forGrandparents:Grandparents paying collegeexpenses for grandchildren havean additional option by fundingan Oklahoma Christian UniversityDeferred Charitable Gift Annuity.Oklahoma Christian can restructurea standard gift annuity agreementso that instead of payingincome to the donor over one ortwo lifespans, the gift annuity payoutoccurs over a set number of years,and is payable to the grandchild topay for educational expenses.Here’s how it works. A grandparentmakes a tax-deductible gift toOklahoma Christian. OC then issuesa deferred gift annuity agreementthat will pay income to the grandchildduring his or her college years.This arrangement is especiallyattractive when funded with gifts ofhighly-appreciated property such asstocks or land. These gifts escapemuch of the capital gains tax thatwould normally be paid if the assetwere sold outright and the moneywas given directly to the grandchild.In addition to the friendly capitalgains tax treatment, an OklahomaChristian University Deferred CharitableGift Annuity also will providean excellent income tax deduction– even moreso than a standard giftannuity agreement since the annuitypayout is compressed into a shorterterm.For more information, or toreceive a personalized OC CollegeGift Annuity illustration, contactStephen Eck at (405) 425-5118 orby email at stephen.eck@oc.edu.Transforming lives for Christian faith, leadership, and service.VISION SPRING 2006 10
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Name: Mrs. Michelle L. Stephens - Oklahoma Christian University

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