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529 E-ditorials

00-15: Don't fence me out
Joe Hurley
Thursday, July 27th 2000

I’ve been a fan of the University of North Carolina basketball team for many years, ever since Sam Perkins played his college ball there after graduating from a high school near my hometown of Schenectady, New York. I’ve informed my two kids (in a joking sort of way, of course) that one of them will be allowed to attend UNC while the other attends Syracuse University. That way I’ll have a shot at getting good seats for the basketball games at both of these schools.

Kim Dimitri is a summer marketing intern here at Her family lives in Rochester, New York but she attends the University of Maryland. She selected that school for its strong business program and its proximity to Washington D.C. and Baltimore.

The point here is that a lot of students, for any number of reasons, decide to attend other states’ public universities, even if it means paying the higher nonresident tuition rates. It would be nice if parents could use the 529 plans in those states as a way to save for this possibility and take advantage of any benefits that are currently restricted to residents only.

Why won’t the states with prepaid tuition plans let me purchase a contract? I would simply have to make up the difference between resident and nonresident tuition with other resources. Perhaps a state could even design a contract pegged to nonresident tuition rates. Now that would be a nice option!

I believe the states that restrict their prepaid tuition plans to state residents are missing an opportunity. Opening up their plans to nonresidents will serve to increase the number of out-of-state families (especially among alumni) interested in sending their kids to the states’ public universities. Isn’t this something these states desire? The result is more tuition dollars brought in along with the bright students who obviously see some special reason for leaving their own state.

Speaking of Maryland, at least they have shown the good sense to invite District of Columbia residents into their prepaid tuition plan. This is easy money. Under the law, DC families pay the resident tuition rates at any public university in the country. The institution still charges the nonresident tuition rate, and the federal government picks up the difference (up to $10,000 per year). The prepaid tuition plan wins (higher participation), the DC resident wins (lower tuition costs), and the public university wins (higher tuition revenues). So why doesn’t every prepaid tuition plan invite DC residents in the same way that Maryland does?

So here are the steps we would really like to see in the prepaid tuition states. First, invite DC residents to join your plan. Then, while you’re at it, invite everyone else, too. Why not?

» 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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