The college savings plan that beat the hedge funds This 529 plan generated 5.5% returns throughout the financial crisis

Thanks; AnnaMaria Andriotis

A college investment plan designed to help parents cope with rising tuition costs ended up yielding such outsize returns that officials had to shut it down.

Prepaid tuition plans are a type of 529 plan that allow parents to purchase tuition at a lower price than what it will actually cost to attend college when their kids enroll. It is up to the plan, rather than the parents, to figure out how to invest the funds it receives so that it will be able to pay out the dollar amount promised to investors. In most cases, experts say, parents make withdrawals when their children enter college and deplete their account by the time they graduate.

But in Colorado’s prepaid plan, which was administered by CollegeInvest, many parents decided the returns they were earning were too good to drop, so they held off on making withdrawals and stayed in the plan long after their children finished school. By August, around half of the roughly 1,500 households that had this prepaid plan had children who were four to nine years past their college enrollment date and may have already finished college, says Angela Baier, the CEO of CollegeInvest, which is shutting the plan for good in November.
Prepaid tuition plans are a type of 529 plan that allow parents to purchase tuition at a lower price than what it will actually cost to attend college when their kids enroll. It is up to the plan, rather than the parents, to figure out how to invest the funds it receives so that it will be able to pay out the dollar amount promised to investors. In most cases, experts say, parents make withdrawals when their children enter college and deplete their account by the time they graduate.

But in Colorado’s prepaid plan, which was administered by CollegeInvest, many parents decided the returns they were earning were too good to drop, so they held off on making withdrawals and stayed in the plan long after their children finished school. By August, around half of the roughly 1,500 households that had this prepaid plan had children who were four to nine years past their college enrollment date and may have already finished college, says Angela Baier, the CEO of CollegeInvest, which is shutting the plan for good in November.

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