The College is Whacking 6% off our Principal Value, Every Year.
Let's pretend for a moment that one of your students' families managed to - against all odds - earn a 5% annual return over the last five years on their 529 investment.
We added "against all odds" there because almost ALL of the largest 529 Plan's investment options have LOST money over the last five years. But play along.
So this family delights in the fact that their 529 earned 5% more than invested (529 additions are investments," not "contributions" - we wonder why Wall Street calls them user-friendly "contributions?"). They further delight in the fact that Steven Student is going to attend a prestigious college that meets 100% of Need with its loan-free financial aid packages.
Then they are faced with the ugly truth: Prestige U is going to reduce the financial aid package by 6% (actually 5.67%) of the 529 Plan balance, every single year (for the total 529 balance of ALL kids in the family). Time for a quick quiz:
Family earned 5% annually. College will reduce aid by 6% annually. Was the 529 scheme a great idea?
What if there were far safer 529 alternatives that did NOT cause reductions in need-based financial aid? What if they also provided principal-protection? What if you and your friends at Education Funding Solutions discussed these so you spend less on college? Contact us.
Why don't stockbrokers elect to offer such alternatives?