PA 529 program sees ‘break’ in fees
$1.50 per year? State fee cut for college savers won’t pay for that dorm meal
Pennsylvania families saving for college can look forward to getting a break on fees if they’re using the state’s 529 college savings plan. But they shouldn’t get their hopes up too high.
The average family will save less than $1.50 per year.
While the fee reduction announced last week by state Treasurer Stacy Garrity will result in a combined savings of $220,000 for all families across all accounts invested in the PA 529 College and Career Savings Program Investment Plan, the average savings of $1.41 per account won’t even buy a glass of lemonade.
There are 156,330 investment account owners paying total fees ranging from 0.21% to 0.31% annually, depending on their investment choices. Ms. Garrity approved the reduction of the state fee collected on the accounts from 0.06% to 0.055%, effective Aug. 20.
“I’m pleased to lower fees for families who are saving for their child’s future,” Ms. Garrity said. “We’re committed to constantly reviewing the fees in Treasury’s savings program, cutting them whenever that can be done in a fiscally prudent way.”
Funds in the state’s 529 savings investment plans are invested in mutual funds that rise and fall with stock market conditions. Pennsylvania’s 529 program had its best year ever during the fiscal year 2020-2021, Ms. Garrity said.
Families also can choose to save with the PA 529 Guaranteed Savings Plan, which is a lower risk plan that bets against future inflation by letting families pay tomorrow’s tuition at today’s rates.
The fee reduction doesn’t apply to families savings in the guaranteed savings plan accounts.
Total funds invested in the PA 529 Guaranteed Savings Plan amount to $2.4 billion. Total funds in the state’s 529 investment plans add up to $4.4 billion, according to the Pennsylvania Treasurer’s Office.
The major advantage of saving money in 529 plans are the tax benefits. The money grows on a tax-deferred basis and can be withdrawn tax-free if it’s used to pay for qualified higher education expenses associated with attending colleges and universities as well as community colleges, technical schools and apprenticeship programs.