Saving for College with the Virginia529 Tuition Track Portfolio
Jennifer Luzzatto, CFA, CFP®, AIF®
My daughter is a senior in high school this year, so college is a big topic (and a source of stress) in our household. I cannot quite convince her that no matter the outcome of the college admission process, she will be OK. The stress around this has caught me unprepared because she is not normally given to drama. There is a lot that can be controlled with regards to college and a lot that cannot be controlled. One thing that we can control, especially if we start early on, is being intentional about putting money aside for college. My daughter’s education will mostly be funded by the Virginia 529 InVest plan. However, Virginia 529 has introduced a plan that may be attractive to many parents and grandparents.
There has been very little press about Virginia’s reimagined Pre-Paid Tuition Program, the Tuition Track Portfolios. The Pre-Paid Tuition Program stopped being offered in 2019. In 2021, Virginia 529 introduced the Tuition Track Program.
The Tuition Track Program has some similarities to the Pre-Paid Program, except that units can be purchased in smaller amounts, making it accessible to more people. Here are the highlights of the program:
— With each purchase you “lock in” the current cost of college. The average cost of Virginia’s public colleges is calculated and divided into 100 units. One can purchase units via monthly, one-time, or random contributions. When it’s time to use the units, 100 units = 1 year of that current year’s average tuition. (For reference, the average tuition cost for 2023-2024 in the state of Virginia is $15,100, so each unit currently costs $151.)
— The cost of new units is recalculated once a year, around July 15th.
— Only VA residents are eligible to purchase units in the plan, but the funds can be used for colleges outside of Virginia.
— The funds grow tax-free and purchases are eligible for the VA state tax deduction $4000 per account. You can have more than one account per child and receive the full deduction of $4,000 per account.
— Unlike the old Pre-Paid Tuition plan, Tuition Track funds can be used for room & board, books, computer, and other qualified expenses. The old plan only covered tuition.
— The funds can be used at any qualified higher education institution in the country, including vocational school and trade schools.
— Units can be purchased up to June 30th of high school graduation year.
— You must hold the units for 3 years before you can use them.
— You can use the Tuition Track Calculator to determine how many units you need to purchase or how many units you can afford.
The Virginia 529 folks seem to have been quiet about this rollout, as I have only seem them present the information recently. As always, if you have any questions, please let us know!
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