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Prepaid Tuition Plans Are 93% Funded

Jun 5, 2012

According to The College Savings Plans Network (CSPN), on average for this fiscal year, Section 529 prepaid tuition plans are 93% funded. This an increase over last years report of 91% funded. In total, $22.4 billion has been saved in more than 1.6 million prepaid tuition accounts administered by 20 states.

This may still concern you that the plans are not 100% funded. But consider the country's public pension funds are only 76% funded.

Betty Lochner, vice chair of College Savings Plans Network, said the levels of funding on the plans in the survey are at ideal levels. In fact, Lochner said that having plans 100% funded is unnecessary due to the way these savings plans are structured.

"Having a plan 100% funded means that if everyone when to school today and took their money out—including all of the babies—you could pay for everyone," she said. "When you are over 90% funded, you are really well off, because not everyone is going to go to school today. The babies will go in 18 years."

Lochner says the uptick in tuition funding is due to the climb out of the recession over the past year.

"People have more confidence and are starting to prioritize," Lochner said. "We saw the dip in 2008 and 2009 when the crisis hit and the stock market crashed—investments didn't do as well."

Many families are turning to 529 plans because they see it as a great way to head off the rising costs of college tuition.

Each state has made there 529 plans able to withstand good and bad economies. The states have triggers in their plans to cover budget shortfalls and to keep the plans stable. Even if some unforeseen problems arise, the plan holders will never lose more than they have put into the plan.

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