PLAN OVERVIEW
Private College 529 is the nation’s only prepaid tuition plan that locks in current rates at nearly 300 private colleges and universities, protecting against tuition inflation. Your contributions during the Plan Year (July 1 – June 30) lock in current rates at all member colleges. When your child enrolls at one of our member colleges in the future, that’s when you redeem your Tuition Certificates and receive your prepaid tuition savings.
Key Terms
Plan Year
The Private College 529 Plan Year runs July 1 – June 30. On July 1 each year, tuition rates reset. This aligns with the academic calendar at most of our member colleges. All contributions made during the Plan Year purchase tuition at the current rates. See our pricing guide for tuition information.
Tuition Certificates
At the end of the Plan Year (July 1 – June 30), all contributions from the previous twelve months are aggregated into a single Tuition Certificate, which represents a percentage of that same year’s tuition and fees at each member college.
Locking in rates
Think about “locking in” rates as the percentage of tuition and mandatory fees that you purchase for each college in the Plan. For example, if you contribute $10,000 during the Plan Year, and College A’s tuition and mandatory fees for that same year total $30,000, you have locked in 33% of one year at College A. No matter how much tuition and fees increase at College A, you will always own 33% of one year at College A. If tuition continues to increase at College A, the value of this percentage will also increase. For example, if tuition increases by 4% next year, the tuition value of 33% of one year at College A would be $10,400.
Contribution
Account owners have several contribution options, like making one lump sum or saving over multiple Plan Years. You can fund your account through ACH, a one-time transfer of funds from your linked bank account, a rollover from another 529 plan, or financial gifts from relatives and friends. The maximum amount you can contribute to your Private College 529 account is equal to five years of tuition and fees at the highest-priced college in the Plan. The more you contribute to your account early on, the more you’re likely to save.
36-month hold
There is a 36-month hold before you can begin redeeming a Tuition Certificate. The clock starts after the first contribution in the Plan Year. For example, if your first contribution in the 2023-2024 Plan Year was on February 1, 2024, the earliest you could use that year’s Tuition Certificate would be February 1, 2027.
SAVING IN THE PLAN - ONE LUMP SUM
Since the Plan allows you to save at hundreds of colleges and universities, and the cost of tuition is different at each school, the amount you purchase for each school will also be different.
Let’s say you open an account with $30,000. If annual tuition costs $30,000 at College A, you have purchased (or locked in) one full year of tuition and fees. At College B, where annual tuition costs $40,000, you have purchased 75% of one year, and at College C, which costs $60,000, 50% of one year.
College A
College B
College C
THE VALUE OF YOUR PREPAID TUITION
10 years after one lump sum
When you purchase tuition at the current rate, you’re essentially hedging against tuition inflation. The tuition value of your Tuition Certificate is guaranteed to increase at the same rate as the cost of tuition and fees at each member college.
It’s now 10 years in the future, and tuition and fees have increased 4% per year at Colleges A, B and C. Tuition and fees for one year at College A now costs $44,407, up from $30,000; College B is $59,210, up from $40,000; and College C is $88,815, up from $60,000. Because the value of your Tuition Certificate increased at the same rate as tuition and fees, you still own the same percentage of annual tuition at each college, now at a higher value.
If your child enrolls at College B, the redeemable value of your prepaid tuition (what you locked in) is 75% of one year of tuition and fees at the current rate, or $44,407 (75% of $59,210). In this scenario, that’s equivalent to approximately $14,407 in tax-free growth.
SAVING IN THE PLAN - MULTIPLE YEARS
While the previous example looked at a one-time contribution, many of our account owners save over multiple Plan Years.
Plan Year 1
In Plan Year 1 (July 1 – June 30), you open an account with $10,000. Current tuition and mandatory fees cost $30,000 at College A, $40,000 at College B and $60,000 at College C. Like the previous example, you are purchasing a certain percentage of tuition and fees at each college. But, because your initial contribution is lower, the percentages you purchase are lower too — approximately 33%, 25% and 17%, respectively.
Plan Year 2
In Plan Year 2, you make another $10,000 contribution to your account. We will assume College A, B and C’s tuition and fees have gone up 4%. College A now costs $31,200, College B $41,600 and College C $62,400. Since your contribution is the same ($10,000), but tuition and fees have gone up (4%), the percentages you purchase are slightly less — approximately 32%, 24% and 16%, respectively.
Plan Year 3
In Plan Year 3, you make another $10,000 contribution to your account. Again, we will assume College A, B and C’s tuition and fees have gone up 4%. College A now costs $32,448, College B $43,264 and College C $64,896. Since your contribution is the same ($10,000), but tuition and fees have gone up (4%), the percentages you purchase are even less — approximately 31%, 23% and 15%, respectively.
THE VALUE OF YOUR PREPAID TUITION
10 years after Plan Year 3
It’s now 10 years in the future, and we’ll assume you stopped making contributions after Plan Year 3. College A, B and C’s tuition and mandatory fess have continued to rise 4% per year. Tuition and fees for one year at College A are now $44,407, up from $30,000; College B is $59,210, up from $40,000; and College C is $88,815, up from $60,000.
If your child enrolls at College B, the redeemable value of your prepaid tuition (what you locked in) is approximately 72% of one year of tuition and fees at the current rate, or $42,631 (72% of one year of tuition at College B). In this scenario, that’s equivalent to approximately $12,631 in tax-free growth.
Choosing your strategy
Whether you contribute one time or over multiple Plan Years, you’re protecting against tuition inflation. The tuition value of your Tuition Certificates is guaranteed to increase at the same rate as the cost of tuition and fees at each member college.
The major difference between the two scenarios is time. In the first scenario, you contribute the full $30,000 in Plan Year 1. Whereas, in the second scenario, you spread out the same $30,000 over three Plan Years. You maximize the tuition value of your Tuition Certificate by paying for it in a lump sum as opposed to paying over multiple Plan Years, because contributions made in later Plan Years purchase tuition at higher rates. Still, you save well over $10,000 at College B either way.
How much you should contribute (and how often) is a decision that ultimately rests on your savings goal. Use our savings calculator with your numbers to see the buying power of different contribution amounts.