May 27, 2024

Bucks: New Questions About Prepaid 529 Plans

In this weekend’s Your Money column, I review the curious case of the College Illinois prepaid 529 college savings plan.

A number of families had not realized that the state did not guarantee the protection the plan offered against tuition inflation. The plan, however, markets itself aggressively, so much so that many people don’t read the fine print. And now that the plan is underfunded due to losses in its investments, everyone is worried about this program and similar ones.

So should the state be marketing “peace of mind” when there is no true guarantee behind it? Should any new families be buying in at this point? And should taxpayers be liable for half a billion dollars, as they now are in Alabama, to protect the interests of families who probably paid less than they should have for the plans in the first place, back when nobody realized that tuition was going to rise as fast as it has?

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