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529 E-ditorials

01-1: The 2001 Growth Projection
Joe Hurley
Monday, January 29th 2001

Everyone wants to know the growth projection for 529 savings plans. So I have decided to tell you. Please note that my projection does not include the 529 prepaid tuition plans. For some reason, people do not seem so interested in the growth projections there. But maybe I'll tell you that figure as well….we'll have to see how this part goes first.

Okay, no beating around the bushes. The total amount of assets in 529 savings plan at the end of this year 2001 will be….

Ten billion dollars.

Ten billion dollars -- an increase of four-fold from the $2.5 billion that I counted in 529 savings plans at the end of 2000. A huge increase. But then again not so huge if you compare it to the single largest mutual fund in the world, the Fidelity Magellan Fund, with over $90 billion in assets. It is only one-ninth of that amount.

Ten billion dollars. It may seem to you like I just picked a nice round number. Not so. My projection is the result of precise calculations that just happened to come to exactly ten billion dollars. A coincidence really.

I have calculated the projection on a state-by-state basis and summed all the separate figures. Unfortunately I cannot share those details with you here. But they totaled exactly ten billion dollars. I have factored in the effect of federal and state tax law proposals that I'm sure will or will not be enacted. It's not fair that I tell you fate of specific proposals before the President even sees them. (Hint: I was particularly challenged by the prospect of federal tax exemption of 529 earnings.) I have incorporated into my projection the 2001 investment performance of all the different investment options available in 529 plans. Unfortunately, the SEC won’t let me tell you all the performance statistics in advance.

A projection would not be worth much if it did not take into account the other important indicators and factors, including web traffic at; projected consumer purchases through; advertising and marketing budgets of the 529 plans; number of parents giving a copy of “The Best Way to Save for College – A Complete Guide to 529 Plans” to the grandparents last Christmas; and let us not forget El Nino. Please, don't ask for all the data as it is happily stored away in my Cray Supercomputer.

But here is what I can give you. The number -- ten billion dollars. Not penny more and not a penny less.


That didn't take so long. So I guess I'll mention the prepaid tuition plans. Being much harder to count (they tend to have different fiscal years, some count invested assets while others include committed purchases, etc.), I can't be quite as precise. There were approximately $6.5 billion in prepaid plans at the end of 2000. There will certainly be more dollars committed to prepaid plans in 2001, but there are also a few plans that are in high “payout status”. So my crystal ball says $8 billion at the end of 2001.

Now before I leave you I need to make a slight confession. The projection for the 529 savings plans I talk about above do not include all the 529 savings plans. You may be interested to know why. Here is the story.

There are some state 529 plans that were thought to be prepaid tuition plans when they were first born. They had certain characteristics common to prepaid tuition plans. And in fact, they lived the first few years of their lives as prepaid tuition plans. But then they began to realize they were actually 529 savings plans. And they really wanted to be seen as 529 savings plans. So a couple of them did something about it. They went back in for some doctoring, had a few changes made, and came out as full-fledged savings plans. More precisely, they are now known as “guaranteed savings plans”. So far, Ohio and Pennsylvania have had the operation. The Colorado, Tennessee, and Washington “prepaid” plans are candidates for it.

I do not include the over $700 million in combined assets in the Ohio and Pennsylvania guaranteed savings plans in the $2.5 billion figure for total assets in 529 savings plans at December 31, 2000. I may or may not include them in that category when I count assets at the end of this year 2001. It depends on whether I need them to get to the $10 billion mark. Am I not entitled to a fudge factor?

There, now having confessed, I feel much better.

» 05-4: The 529 marshals have arrived - 08/30/05
» Our 5.29th-year anniversary - 06/29/05
» 05-2: 529s and the new Bankruptcy Act - 04/28/05
» 05-1: Reform or Deform? - 02/27/05
» 04-6: Perspectives on the 529 debate - 12/28/04
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