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Virginia's College Saving Plan Strained By Rising Tuition

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As Virginia's schools get more expensive, fewer would-be students are investing in 529 college savings plan.
Travis Ekmark: http://www.flickr.com/photos/sayholatotravis/3796435103/
As Virginia's schools get more expensive, fewer would-be students are investing in 529 college savings plan.

With more than 2 million accounts, Virginia has the nation's largest 529 college savings plan. Even so, program applications have declined in recent years as the costs of contracts skyrocket.

The program offers prepaid contracts for guaranteed coverage of future base tuition and fees at Virginia's public colleges and universities. When it began in 1996, nearly 18,000 people applied, and three-quarters bought contracts for four years of tuition. When tuition began to rise rapidly in the last decade, participation rates again increased. But the Plan's CEO, Mary Morris, said that because contract prices must go up as tuition rises, in recent years, fewer people have been able to afford them.

"So, '96 a four-year contract cost, for a kindergartener starting, $15,357," said Morris. "Last year, that same contract would cost $54,600."

Morris said that as a result, the governing board decided to try a new strategy.

"We're going to offer semester contracts this year for the first time, rather than one-year contracts, to try to again increase the affordability of it by reducing the cost of entry," she said.

Overall, since its inception, the program has earned an average 6.2 percent return on its investments.

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