Local
3:30 pm
Tue May 29, 2012

PA 529 Programs Cut Tuition Costs

Tuesday May 29th (5/29) has been dubbed 529 Day to raise awareness about the need to save money for higher education through the Pennsylvania 529 College Saving Program.

Pennsylvania Treasurer Rob McCord said Pennsylvania's students are carrying about 10% more debt than the average student in the country.

"You can get really tremendous benefit and cut the cost of college roughly in half if you save in advance using a tax-advantaged 529 account," McCord said.

There are two options Pennsylvanians can take. The Guaranteed Savings Plan (GSP) involves the state Treasury Department putting the participants' contributions in a GSP Fund account which is separate from the state's general fund and then handling it via investment managers who trade stocks and bonds in an effort to at least match tuition increases. The growth of the accounts though is based on tuition inflation, not how well the investments do. This leaves the fund responsible for money lost in the investment process, not the individual.

McCord said the participant gets state and federal tax deductions on the contributions made.

"Basically you get the benefits of compounded growth without taxes, and the initial contribution is also tax deductible, so you get that huge return in that first year not just of appreciation but of that tax deduction," McCord said, "and then a lot of people make contributions steadily over time."

McCord noted funding for the program is healthy, and that the PA 529 programs are "in great shape. Unlike the pension funds across the commonwealth, we're better than 99.5% funded as from March 31st in the guaranteed savings plan."

The other option is the Investment Plan, where the participant can choose from one of 13 options offered by Vanguard. McCord said the vanguard programs are directed by the holders of the program.

Participants can enroll online at pa529.com or call1-800-440-4000.