Too many parents saw their children’s education go from Harvard University to Hudson Community College as a result the economic crash. For those who no longer wish to subject their child’s college dreams to the vagaries of the market, Private College 529 Plan is here to help.
Farmer says the plan works like this: If, for example, a semester of college is worth $25,000, and the parents invest at that level, they now “own that education,” meaning if the price rises to $50,000 in 10 years time, no matter, $25,000 is all they will pay. There are no investments to choose, no performance indicators to watch and no worries about market downturn.
“You buy a portion of the tuition, and that portion is then fully paid for, regardless of whether the price rises,” she explains. “After the market’s crash in 2008, many parents put the children’s college savings into money market accounts to protect against loss. The problem is that tuition inflation is running 4% to 6% a year. There is no way a money market return will keep pace.”