Ask the Expert: Here’s Why Your Family Can Afford a Private College
Many New Jersey families consider private college options for their children. But so many others don’t because they mistakenly believe that they can’t afford it.
If you’re in the second camp, consider some basic truths:
- Don’t focus on sticker prices. Private schools give generous aid packages. The average private school student paid a net $14,000 in tuition during the 2016-17 academic year, after discounting, according to the College Board’s latest statistics.
- Consider graduation rates. Nearly 80 percent of private school students graduate in four years, compared with only half of public school students, according to the U.S. Department of Education. Private school graduates pay tuition for fewer years and earn a paycheck sooner.
- Nearly 300 private colleges and universities help you cut your cost. They are members of Private College 529 Plan, a consortium of schools that enables families to prepay today’s prices for tomorrow’s education. Participating schools guarantee the tuition no matter what happens with investment markets or how much tuition increases in the coming years. Prepaid tuition can be used at any participating school, and you do not pick an institution until the child enrolls. The plan charges no fees, so every dollar contributed goes directly to your child’s tuition.
“Where can we use this plan?” you ask. Participating colleges and universities range from coast-to-coast – Princeton to Stanford and everything in between. That includes the likes of Sarah Lawrence, Johns Hopkins, Notre Dame, Duke, Emory, MIT and Wellesley. There are large research universities, small liberal arts colleges, faith-based institutions, STEM schools, and more.
Private College 529 plans can potentially help you save thousands on college costs. Here’s an example of how it works.
- Assume tuition at College A is $35,000 a year now.
- You open a Private College 529 account for your 8-year-old child with $35,000.
- If College A’s tuition increases 4% a year for 10 years, tuition would be $51,809 when he or she arrives on campus.
- Your tax-free tuition savings would be $16,809.
Remember, you are not locking in a particular school – your prepaid tuition is honored at all of the Plan’s current and future participating schools.
Congress created 529 plans to provide an incentive to families to save for college costs. There are two kinds of 529s – savings plans and prepaid tuition plans.
- Savings plans are really investment accounts. Almost all states – including New Jersey – sponsor them. Families deposit funds, select from the investments offered by the sponsor, and later use the assets to pay for any qualified college expenses like tuition, room and board, books, etc. Account gains are federal tax free, if used for college. However, these plans can lose value. In retirement terms, they are similar to Roth IRA's.
- Prepaid tuition plans are offered by about a dozen states and Private College 529. (Private College is the only 529 that is sponsored by its participating schools, not by a state.) They enable families to lock in today's lower tuition rates for future schooling, thereby saving on the cost. New Jersey does not offer such a plan. Families don’t need to worry about investment results or tuition increases. Prepaid plans can be used only for tuition and mandatory fees; books, room and board andother college expenses must be covered by separate funds, such as a 529 savings plan. Think of prepaid plans as you would a defined benefit pension.
Like to know more about how you can afford to pay for college? Sign up for my free webinar on either Saturday, April 29 or Monday, May 1.
Next month, I will have more to say about how families can find money to put away for college so check back here to learn more about the smartest ways to save.
Nancy Farmer is President of Private College 529 Plan, a consortium of nearly 300 private colleges and universities. She has been helping families save for college for nearly two decades. Email her at email@example.com.
Private College 529 Plan is sponsored by Tuition Plan Consortium, LLC. OFI Private Investments Inc., a subsidiary of OppenheimerFunds, Inc., is the program manager. Participation in the Plan does not guarantee admission to any college or university, nor does it affect the admissions process.
Purchasers should consider the risks associated with purchases and refunds of Tuition Certificates. The Disclosure Statement contains this and other information about the Plan, and may be obtained by visiting privatecollege529.com or calling 1.888.718.7878. Purchasers should read these documents before purchasing a Tuition Certificate. Tuition Certificates are not insured or guaranteed by the FDIC, TPC, any governmental agency or OFI Private Investments Inc. or its affiliates.