In the best of times, sending a child to college is a daunting prospect as tuition sticker prices — in many cases totaling hundreds of thousands of dollars over four years — continue their inexorable rise.
But economists warn the Trump administration’s wide-ranging but vacillating tariff moves could reignite inflation, and it’s a safe bet that colleges and universities will pass along increased costs as tuition hikes.
Americans’ inflation fears are rising, according to a consumer sentiment study by the University of Michigan. Inflation expectations for the coming year reached their highest level since 1981 in April, the fourth consecutive month of large increases. Expectations of long-run inflation also rose in April, as Democrats, Republicans and independents all expressed heightened concerns about rising prices, according to the study.
How can financial advisors learn about options that can help families cope with tuition inflation? One step is to attend a complimentary webinar on Private College 529 Plan, a novel tuition prepayment program. Register now to learn about the program before tuition rises when the new plan year begins.
Private College 529 Plan offers a choice of nearly 300 private colleges and universities to its participants. In contrast, other tuition prepayment programs are mostly offered by a handful of states and apply only to a state’s public colleges and universities.
One Parent’s Quest for College Options
That variety was important for Private College 529 Plan participant Gabi Zolla, who started saving for her children’s college educations early. She recalls looking into her newborn daughter’s eyes and wondering about the future. “What are you going to be?” she thought. “What are you going to grow up to want to do?”
One thing was certain; she would go to college. It was a family tradition that began with Zolla’s maternal great-grandfather, who spoke four languages but had no formal education. “Yet he knew how important it was,” she says. “When he came to this country and lived with my grandparents, he put away money for my mom to go to college. My parents were the first generation going to college, and it changed the trajectory of their lives.”
Zolla continues that tradition as a college and law school graduate and a vice president at Southern New Hampshire University. Her attorney husband’s family followed a similar arc; a grandmother was one of the first women to graduate from the University of Chicago.
“It goes back generationally,” says Zolla, who has two children with her husband. “The commitment we made to them was that we would get them through undergrad debt-free.” But as an executive in higher education, she is keenly aware of the fast-rising costs of college. That’s why she and her husband chose Private College 529 Plan to help fund their daughter’s education.
Beating Tuition Inflation, But with More Choices
“When families are saving and making contributions, they’re locking in on a percentage basis at every one of the member colleges in the plan, close to 300,” says Jonathan Sparling, VP of strategic partnerships, noting that each state prepayment program applies only to the limited selection of schools in that state. “We work with private colleges across the country, a wide range from large research universities to smaller liberal arts schools, some that are very selective, some that admit a large percentage of applicants.”
Locking in tuition can make a big difference in how much a family pays for college. Sparling gave examples of average annual tuition and fee increases over 10 years at several PC529P member schools:
- Syracuse University – 4.6%
- Baylor University – 4.4%
- Vanderbilt University – 4.4%
- Stanford University – 4.0%
Founded in 2003 by a consortium of private nonprofit colleges and universities, Private College 529 Plan has about 7,000accounts and has hosted about 15,000 in total, Sparling says. Families in the program have redeemed about $200 million in prepaid tuition dollars in the program’s two decades. Parents like Zolla who wonder about the direction their children will take have a wide variety of schools to choose from.
“We have specialty-focused colleges, STEM institutions like MIT, Case Western, Stevens Institute of Technology, Wentworth Institute of Technology,” Sparling says, ticking off some of the many noted schools among the almost 300 in the program. “We’ve got schools that are certainly more competitive to get in — Princeton, Stanford, Washington U. We’ve got schools in the city: Boston University, George Washington, Georgetown; schools that are in more rural areas; women-only colleges. Obviously, the trace is that they’re all private, not for profit. That’s the one common thing across all of them.”
The most popular schools for families in the plan are the University of Notre Dame, Stanford University, Baylor University, Washington University, Princeton, the University of Chicago, Vanderbilt University, St. Olaf College and Wake Forest University, Sparling says.
To help families navigate the list of 293 participating schools, PC529 offers a search tool on its CollegeWell website that uses filters to narrow down the choices. Schools can be screened by academic program type, state, school size and setting.
Learn More Before Tuitions Increase on July 1
Contributions made within the plan year — from July 1 to June 30 — lock in that year’s tuition rates on a percentage basis at all participating schools. For example, if a family contributes $10,000 in one plan year, it would lock in a quarter of tuition at a participating school where the current year’s tuition is $40,000.
With the 2024-2025 plan year ending June 30 — after which tuitions increase — PC529P is offering a webinars for financial advisors to learn more about the program.
The Public/Private College Choice
Zolla notes that she also attended a small private liberal arts school, Knox College in Galesburg, Ill. Her husband attended the University of Michigan, which is a state school and so not a participant in Private College 529 Plan. Their daughter also applied to Michigan and was accepted, but she opted for much smaller Pitzer. “She got in and made her own decision,” Zolla says.
Sparling says, in many cases, parents enroll their children in PC529 because of their own positive experiences in a private college. “We definitely see a lot of legacies,” he says. “We see folks that went to private college themselves, either one of our member colleges or just a private that isn’t in the membership, but definitely a lot of member institutions.”
Private colleges offer distinct advantages over public schools, including comparatively lower student faculty ratio, higher median earnings 10 years after graduation, and typically higher four-year graduation rates than the national average, Sparling says. But there are less-tangible benefits. “For private colleges, it’s that personalized experience and ability to connect with folks on campus; you have more of an advantage than if you were at a larger institution,” he says.
Sparling notes that although private colleges tend to have higher “sticker prices” than many public universities, once discounting and scholarships are factored in, “the price becomes a lot more affordable for folks.”
Private College 529 Plan Money-Back Guarantee
In the case that a student enrolled in Private College 529 Plan but decides to attend a school outside of the consortium, the family will get its money back, Sparling assures. “If you don’t utilize one of the member colleges, you can get a refund plus up to 2% annual return compounded yearly. But we don’t recommend the plan to folks who are fairly certain their kids are going to go to a public university. There are other options out there, certainly, for folks to take advantage of.”
Military Family on the Move Needs the Nationwide Reach
Christopher Chatelain decided to use a college prepayment plan for his children because he wanted them to have a clean financial start after finishing school. “That’s my focus, making sure my kids don’t have a mountain of debt when they leave, because that’s a good start to life,” he explains.
As an Army attorney, Chatelain has had to move his family repeatedly as he has been assigned postings around the country and overseas. That makes PC529’s nationwide reach more appealing than state prepayment plans for him. “My daughter has expressed the desire to go to Pepperdine, and it’s one of the schools on the plan. But there’s lots of schools on the plan. There’s not a state that I know where I’m going to land. This is a prepaid plan that has colleges all over the U.S., whereas the other prepaid plans are all state plans.”
Disclaimer: The views presented are those of the speaker and do not necessarily represent the views of DoD or its components.
Diversifying College Savings
For Aaron Gerrick, Private College 529 Plan was a way to diversify his children’s college savings. “Once we had our third and youngest, we’d already been saving in traditional 529s for a few years. And so, at the time, I saw it as insurance, or a level of diversification, given that all the regular 529 investments were stock mutual funds. With three of them, it seemed like a reasonable bet that at least one would wind up at a participating school.”
That’s common among participating families. “Utilizing both plans is a smart strategy,” Sparling says, noting that PC529 is for tuition and mandatory fees only, not room and board. “We recommend an approach using both accounts because then your traditional 529 gives you a little more exposure to the market. And this is a nice balance. It’s treating (the Private College 529 Plan investment) as a fixed-income portion of your college savings portfolio.”
Chatelain’s family was scarred by financial losses, so the “insurance” and low-risk aspect of PC529 is important to him. “I have experienced a lot of financial ups and downs and instability at (age) 40. He pointed to the 2008-09 financial crisis and how its effect on his father influenced him. “He lost a lot of his retirement, so, he ended up working way longer than he planned. I would have felt really bad if my kids needed that money to go to college.”
What makes PC529 low risk is that the nearly 300 participating colleges own and operate the plan, Sparling says families in the plan are buying tuition certificates that are guaranteed by participating membr colleges for up to 30 years.
Starting Early Reaps the Biggest Tuition Savings
While saving early in Private College 529 Plan is the best way to lock in maximum savings, some families start saving later, Sparling says. “We have young savers in the plan, but we also see folks — their child’s getting closer to college-going age, and they may put a lump sum in, or they may roll over from a traditional 529 plan and save in our plan. They’re not getting as many years of locked-in growth but they’re still going to get some years, and there’s a little more certainty that their kid’s going to go to one of these schools.”
But contributing early reaps the greatest tuition savings, he stresses “We’ve seen an increase of about 36% in the average tuition and fees over the last 10 years at our members. The return, or savings, is very much based on how long you’ve been in the plan, how much you contributed and spread out over time, and ultimately the school that you chose to go.”
An Important Role for Financial Advisors
Financial advisors have an important role to play for families considering college savings in general and Private College 529 Plan in particular, Sparling says.
“We view advisors as one of our most important partners and advocates,” he says. “We want them, first and foremost, to just be aware that this program exists. So, when they’re having these conversations about college savings with families, (they’re aware) we’re a tool in the tool belt, a consideration if the family is talking about private college. Or if they’re thinking about a way to balance their college savings portfolio, they know about us.
“It’s important not only for them to know, where it might come up in a conversation led by them, but also if when families learn about it, if they’re then going to their financial advisor. We want them to know about us and to have some level of awareness, so that when the family goes to them and says, ‘Hey, I learned about this plan through a campaign,’ they’ll have at least baseline understanding that this plan exists. The awareness and advice role is very important.”
They may just earn the gratitude of a client for whom Private College 529 is the perfect choice.
“We’ve already used the fund, and it was super easy to use,” says Zolla, who paid for her daughter’s first year at Pitzer with their Private College 529 savings. “We put the money away and tried not to think about it too much. It was a great experience for us.”
Alumni Special
Private College 529 Plan has a special offer for alumni of member schools, matching up to $500 of a first deposit made between May 5 and Sept. 30. For more information or to get started, go here.
CollegeWell and Private College 529 Plan (the Plan) are established and maintained by Tuition Plan Consortium, LLC (TPC), on behalf of the Plan’s member colleges. This material is provided for general and educational purposes only, and is not intended to provide legal, tax, or investment advice, or for use to avoid penalties that may be imposed under U.S federal tax laws. Catalis Regulatory & Compliance, LLC f/k/a Intuition College Savings Solutions, LLC (Catalis) is the Plan Administrator. Participation in the Plan does not guarantee admission to any college or university. Tuition Certificates are neither insured nor guaranteed by the FDIC, TPC, any government agency, Catalis or their respective subcontractors and affiliates. However, Tuition Certificates are guaranteed by member colleges solely for tuition and mandatory fee credits. Tuition Certificates must be held for at least 36 months from the issue date before they can be redeemed to pay for tuition at a participating school. The issue date of a Tuition Certificate is the first date during a plan year (July 1-June 30) that a purchase of a Tuition Certificate is made. Please read the Disclosure Statement and Enrollment Agreement carefully, and please consider your financial objectives and risks before purchasing a Tuition Certificate. TPC, Catalis and their respective subcontractors and affiliates do not provide financial, legal or tax advice. Please contact your attorney or other advisor regarding your specific legal, investment or tax situation.
The refund value of a Tuition Certificate is calculated as your total contributions adjusted for net investment returns up to a maximum increase of 2 percent per year compounded annually. If the refunded amount is not used to pay qualified higher education expenses, the earnings portion will be subject to federal income tax and an additional 10 percent tax penalty. See Disclosure Statement for details.