When it comes to saving for college, using the right tool can make all the difference. 529 savings plans have been steadily growing in popularity, but another option to consider is Private College 529 Plan. Private College 529 is a prepaid tuition plan that allows you to save on the cost of college by paying for future college tuition at today's lower prices. Your prepaid tuition is guaranteed by the nearly 300 colleges and universities that participate in the Plan.
If you're leaning toward a private school for one or more of your children here are three reasons to consider Private College 529 as part of your overall strategy for paying for college:
According to a recent report from the College Board, the average student at a four-year private university paid just over $16,500 for one semester of tuition and fees in 2016. And if costs continue to rise at their current pace of 3.6% per year, you'll pay close to $31,000 in 18 years.
But, if you open a Private College 529 Plan account, you'll be able to purchase tuition at today's lower prices. And the sooner you contribute funds, the more you will save on the cost. Parents of a newborn could save $14,500 per semester if tuition increases 3.6 percent for the next 18 years. But even if your student is older and college is only eight years away you could end up paying $5,200 less with Private College 529.
Your prepaid tuition can be redeemed at a participating college or university for up to 30 years, no matter how much tuition increases. What's more, unlike nearly all other 529 plans, Private College 529 Plan charges no fees. One hundred percent of what you contribute to your account will go toward the purchase of tuition.
The value of most college savings accounts will go up or down based on the investment option you choose and the performance of the underlying investments. With Private College 529 Plan - you simply buy tuition. There are no investment options to select and families can rest assured that their prepaid tuition is guaranteed - even during a market downturn.
As your child gets closer to college, you may want to consider transferring funds held in more risky assets into the Private College 529 Plan. Experts recommend reducing your equity exposure significantly during the final years of high school, and increasing your allocation to bonds. Yet bonds, too, are subject to market risk, and can lose principal when interest rates rise. Instead of shifting to bonds, you can roll funds into Private College 529 plan - a fixed asset that is guaranteed by participating colleges and universities regardless of market conditions.
State-sponsored prepaid tuition plans offer a number of benefits to families saving for college, but they generally aren't available to everyone. Of the 18 state-sponsored prepaid plans, only 10 are accepting new applicants and most have limited enrollment periods. And with the exception of the Massachusetts U. Plan, all of these plans have state residency requirements. Private College 529 Plan gives families more options when it comes to pre-paying tuition. In fact, any U.S. citizen of legal age can open an account any time of the year.
If your state does offer a prepaid 529, remember that these plans were designed to save for an in-state public university. While this might be a suitable option for some families, others may want a broader selection of schools to choose from. Private College 529 Plan has nearly 300 participating colleges and universities - from small liberal arts schools, to larger, well-known institutions. You can view a complete list of schools here.
But there's no need to rush into a school decision just yet. You won't make a commitment until it's time to redeem your prepaid tuition, so your child will have plenty of time to find a college that matches his or her talents and interests.
If for whatever reason your child decides not to attend one of the participating schools, assets in a Private College 529 account are still yours. You can always roll the funds into another 529 plan or change the beneficiary to another qualifying family member without tax consequences. Another option is to request a refund from the Plan to pay for expense at any school. You'll retain all of the tax benefits on the amount you withdraw as long as it goes toward qualified education expenses.*
Learn more by visiting PrivateCollege529.com or calling 888.718.7878.
* The Refund Amount is the amount refunded to an Owner upon cancellation or expiration of a Tuition Certificate. A refund of a Tuition Certificate may occur at any time beginning one year after its Issue Date. The Refund Amount will be the amount paid for the Tuition Certificate, adjusted by the net investment performance of the Program Trust, capped by a maximum return of 2% per annum and limited to a maximum loss of 2% per annum (in each case, compounded annually).