By Timothy A. Reese
College costs too much for too many, and the price continues to rise. To meet those costs, many Pennsylvanians are forced to choose between thousands of dollars of debt or the harsh realities of never achieving their dream of higher education.
Today, college graduates leave school with more debt than ever. There has been a tremendous increase in those who carry student debt compared with the previous generation. In 1993 less than half of new, four-year graduates had loans. As of 2015, 68 percent of our graduates had college loans.
The problem is especially acute when considering that the average cost of published tuition and fee prices. Between 2011 and this school year, those costs rose by 9 percent in the public four-year sector, by 11 percent at public two-year colleges, and by 13 percent at private nonprofit four-year institutions, after adjusting for inflation, according to the College Board. In fact, Pennsylvania has the fifth-highest tuition costs in the country, according to the CollegeCalc's website.
Sadly, according to the Institute for College Access and Success, Pennsylvania students face an average loan debt of $34,798 - the second highest in the country. Seventy-one percent of the state's graduates carry some debt.
It doesn't have to be that way.
The Pennsylvania Treasury offers two 529 college savings plans that allow residents to save for their choice of higher education for as little as $15 a month. The plans grow tax-free and are tax exempt when used for qualified higher education expenses, such as tuition, room and board, mandatory fees, and textbooks.
Both plans provide flexibility to pay for college expenses at most higher education institutions across the country, be they colleges, trade schools, or vocational options. The primary difference between the plans is the way savings grow.
The PA 529 Guaranteed Savings Plan (GSP) is a lower-risk plan in which savings help keep pace with the rising costs of tuition without worrying about the volatility of the stock market. The PA 529 Investment Plan (IP) features low fees and more than a dozen conservative and aggressive investment options.
Both plans are a good investment:
An almost record $467 million was contributed on behalf of 207,000 beneficiaries saving for higher education with the PA 529 College Savings Program.
Significantly, families who used their PA 529 GSP accounts for higher education collectively gained $58 million in growth by saving in the plan in the last fiscal year and almost $548 million since the plan's inception, a nearly 43 percent cumulative growth.
The GSP fund is actuarially funded at slightly more than 116 percent as of Sept. 30.
Families taking withdrawals this year from the PA 529 IP plan had collective gains of $26 million - $106 million since the plan's inception.
Every dollar saved in these plans is a dollar that doesn't need to be borrowed to pay for higher education. In addition, when you save for college, the interest works for you. When you borrow for higher education, interest works against you. Ultimately, by relying on loans to fund education instead of savings, the total out-of-pocket cost could be more than double.
The choice is clear. Saving even a small amount for higher education is a sound strategy - save as much as you can within your means. Higher education is a great investment. Over a lifetime, the gap in earnings potential between a high school diploma and a higher education degree is more than a million dollars.
This holiday season, I urge you to consider a gift with impact. Inspire big dreams by opening or contributing to a Pennsylvania 529 College Savings Program account for your children, grandchildren, or another future student. Our plans are simply one of the best ways Pennsylvanians can save for whatever their choice of higher education might be. By doing so, your gift can transform lives and shape futures in profoundly positive ways.
To learn more, visit www.PA529.com or call 800-440-4000.
Timothy Reese is the treasurer of Pennsylvania. TreasurerReese@patreasury.gov