Nancy Farmer
President, Private College 529 Plan
April 6, 2015

“How come anything you buy will go on sale next week?” – Erma Bombeck

American humorist and columnist Erma Bombeck died before 529 plans became a common vehicle for families to save for college. But I think she would have approved of 529 prepaid tuition plans. They each offer college education in the future, at guaranteed prices.

And unlike Erma’s wistful complaint, the 12 states and one private college organization that sponsor prepaid college tuition plans don’t make any secret of when you can buy their products on sale. In fact, they advertise trying to get more and more families to take advantage of the benefits.

Why use a prepaid tuition plan?  Here are several reasons:

    • Pay less. If you spend $15,000 to buy one year’s worth of tuition that your child won’t use for 10 years, assuming tuition is valued at $25,000 by the time he or she enrolls, you’d be saving $10,000, which is not taxed!
  • Gain peace of mind. With a prepaid plan, you don’t have to worry about volatility in the financial markets. Your benefit is guaranteed. One of the account holders in our plan told us in a recent survey that her decision to purchase a prepaid tuition plan was reinforced when she saw friends with high school juniors and seniors lose half of the money they had built up in other investment in 2008. Her children, by contrast, got all the education she’d paid for.
  • Increase certainty. You will know what the cost of college will be for your daughter or son five, 10, or 18 years into the future. The College Board tells us that both public and private school tuition is not rising quite as rapidly as it was several years ago, but it still is rising faster than family incomes. The more education you buy at today’s prices the less you need to worry about higher tuition.

This is not to say that prepaid tuition plans are all you need. Remember they are designed to pay tuition and certain fees at colleges and universities. If you also have a 529 investment plan, those funds can fund room and board, books and other expenses not covered through prepaid tuition.

If you’re currently thinking that now is the right time to start saving for higher education for children or grandchildren, mount a shopping expedition. If you live in a state that offers a prepaid tuition plan or you think private college is right for the child, make sure you stop by the prepaid aisle in the store to see what a prepaid plan has to offer.

About the author:
Nancy Farmer is president of Private College 529 Plan, the only college savings plan sponsored by 278 private colleges and universities across the country. It was created by authorization of the U.S. Congress for colleges and their consortia to help families save for college and increase the affordability and accessibility of higher education. She also is a former state treasurer of Missouri, where she directed its MOST college savings plan.