As a graduate of the University of Notre Dame, I am intimately familiar with the incredible value and opportunity provided by a highly ranked, private college education. I am also all too keenly aware of its cost. And with three small children of my own now, how we will afford to support them in their future education is definitely something that keeps me up at night. And I know I’m not alone. The family finance question I get more than any other is how to start a college fund to begin saving for their children’s future education.
The Value of a Private College Education
I applied to the University of Notre Dame early decision my senior year of high school. I got my acceptance letter in the mail just before Christmas. It was the most amazing gift, and lifted a huge weight off my shoulders knowing I was going to my dream school the following year. But that weight was quickly replaced by a new one as my parents and I stared at the enormous cost of tuition, room and board, and travel associated with my attendance at a private university clear across the country from my childhood, Texas home.
Luckily, just as the University does for students today, I was fortunate to receive a hefty financial aid package, plus additional merit scholarships. But without any college savings going into school, I still graduated with $60,000 in student loan debt. Due to the generous aid package I received from Notre Dame, my out of pocket cost would have been similar or even more at a public state university.
Fortunately, the benefit of a highly rated, private university degree generated an ample return. Through an incredible alumni network, I secured a summer internship my junior year on Wall Street, had a full-time job offer by the Fall of my senior year from Morgan Stanley, and my subsequent decade in finance before retiring to mommyhood paid off those loans and then some.
The Cost of a Private College Education
When I went to Notre Dame, it cost $28,000 a year my freshman year, and increased to $32,000 by my senior year. While researching for this post I took a peek to see how much a year at ND costs today – my jaw nearly hit the floor. For the 2017-2018 school year, it is estimated to cost $69,395, including $51,505 in tuition and fees, $14,890 for room and board, plus additional expenses for books, travel and personal costs.
Notre Dame is not alone in this tremendous cost increase. Over the last decade, tuition at private, non-profit four-year institutions has increased by 2.4% annually on average. Public four-year institutions have seen tuition grow even faster, at 3.5% a year on average, due to government spending cuts. Huge growth rates when median income has grown at just 0.4% over the same time period.
I graduated from Notre Dame (*gulp*) 13 years ago, and it will be another 13 years before my first child goes to college… if tuition costs double again during that time period, it could cost her well over $0.5 million for a four-year college degree. What if you could freeze the cost of tuition today, when your child graduates from preschool, and pay that when they graduate from high school? With Private College 529 Plan you can do just that, and I only wish we had started one when my daughter was first born 5 years ago!
How to Start a College Fund
With numbers like that, it’s no wonder the most frequently asked family finance question is how to save for your child’s college education. Hands down, the best option for any college savings is to open a 529 Plan. These plans receive beneficial federal tax treatment from the IRS. For most traditional 529 Plans, you contribute after-tax dollars, invest it in various funds offered by your plan, and any gains accrue on a tax-deferred basis. As long as the funds are withdrawn for educational purposes, the gains remain tax-free.
However, with a traditional 529 Plan, your savings is invested and subject to market risk and volatility. And you still face the risk of continued college tuition inflation. But there is another option, one that eliminates both those risks – Private College 529 Plan, saving families on the future cost of college.
The Private College 529 Plan Difference
Private College 529 Plan is a unique prepaid tuition plan created by nearly 300 participating private colleges and universities. It is unique in two ways. First, you are not investing your money as you would in a traditional 529 Plan, so you don’t have market risk or investment fees. All fees of the Plan are paid by the participating schools. Second, you also eliminate tuition inflation risk.
The money you contribute to a Private College 529 Plan account buys tuition at today’s rates at any of the nearly 300 participating schools. As tuition rates increase, so does the value of your Plan. Also, just like with a traditional 529 Plan, the increase in value is tax deferred, and as long as the funds are used for educational purposes, the increase is tax-free. The end result is tremendous savings for families on future private college tuition.
Participating schools include highly-ranked universities like Notre Dame, Stanford, and Princeton, and regional favorites like Amherst, TCU and Fairfield University. You can see a complete list of participating schools at the Private College 529 Plan website. The prepaid tuition is redeemable at any of the participating schools. What if your child enrolls somewhere else? The funds can be transferred to another beneficiary, rolled over into a state-sponsored 529 Plan or refunded per the terms of the Plan.
More questions? Learn more about exactly how this unique 529 Plan works by visiting PrivateCollege529.com. Call today to speak with a non-commissioned education specialist, to address all of your questions and learn how to start a college fund for your child today.
Have you started your child’s college fund yet? What is your plan for their long-term education? You can learn more about college savings plans in general here. Don’t just aim to scrape, save and budget – aim to make your family finances savvy! Find all of these and more on my Family Financial Savvy board on Pinterest.
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