Inflation? Ha!
Since 1993, Pennsylvania has promised residents it would pay their children’s college bills if they set aside money at today’s lower tuition rates.
The 529 Guaranteed Savings Plan pays private advisers about $270,000 a month to invest that money in U.S. and foreign stocks, bonds, real estate, venture capital, and buyout funds. From late 2007 through March 2009, those investments lost about $400 million.
To make up the loss to the fund (now worth about $1 billion), state Treasurer Rob McCord did what earlier treasurers did when markets went south: He boosted next year’s fees.
Pennsylvania told savers last week it would replace the $25 yearly fee with a 0.49 percent charge on the value of parents’ accounts and slap “premium” surcharges on parents’ annual payments, starting Aug. 31.
Not everyone pays alike. If you’re squirreling cash for Junior to attend Bloomsburg University, Community College of Philadelphia, or other moderately priced state- or county-run schools, there’s no extra premium.
If you’re saving for more costly Temple, or St. Joseph’s, and some other private colleges, or Penn and other Ivy League colleges, the plan will clip you an additional 2 percent surcharge.
But if you’ve signed up for Penn State or Pitt, be prepared to add a full 8 percent to your bill.
Why do Lions and Panthers pay more? Penn State and Pitt “have seen the greatest rate of tuition inflation,” deputy treasurer Doug Rohanna told me. Now participants will pay a sort of inflation penalty.
Though Pennsylvania still has a Guaranteed Savings Plan, Rohanna said most other states don’t guarantee tuition payments but let investment values fluctuate with markets, like a 401(k) plan. (Pennsylvania has a separate plan like that, too.)
Tilt
The …
Read the original article at Philly
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