It'll Cost You More to Lock in Tuition Prices

Tens of thousands of investors saving for college in Pennsylvania's Guaranteed Savings Plan will soon have to pay more to lock in future tuition expenses at today's prices.

The state treasurer's office said Tuesday that, effective Sept. 1, it will impose premiums of as much as eight percent on the tuition credits to offset a deficit that totaled more than $220 million at the end of June.

Effective Oct. 1, the treasurer's office also will charge investors an annual fee of $4.90 on every $1,000 they have invested, replacing the current $25-a-year maintenance fee.

The guaranteed plan is one of two 529 college-savings plans that provide tax incentives for parents and grandparents to salt away money for college education. The other plan allows them to choose from more than 20 mutual-fund portfolios offered by Vanguard and use their investing skills to build up their savings.

Both plans allow investors to deduct as much as $13,000 of their investments, per child, on their state income tax returns, said Carrie Fischer Lepore, a spokeswoman for the treasurer's office.

Nearly 89,000 people are enrolled in the guaranteed plan, through which tuition credits at schools across the country will continue to be sold at current rates through Aug. 31.

The highest premium will be applied to Penn State University and the University of Pittsburgh, reflecting the relatively steep increases in their tuition, while families looking to send their children to private colleges or Temple University will pay 2 percent.

No premium will be imposed for the 14 state-owned universities that make up Pennsylvania's State System of Higher Education or at the 14 community colleges.

Officials blamed the investment losses that prompted the premiums on the recent Wall Street meltdown. Similar premiums were imposed in 2003 but lifted three years later.

Actuaries project that the program will be back in the black within seven years, Lepore said. The status of the premiums will be reviewed annually as rates are set, she added.