NJ reaps $2 billion excess in tuition savings plan assets

New Jersey's rapidly appreciating college savings plans will not have a significant effect on instate students' financial aid from the University.

Robin Moscato, director of undergraduate financial aid, said that, "from the financial aid point of view, the amount that the family has in these events is simply like any other parent asset. It counts toward the family resources we consider when making a determination of the amount parents are able to pay."

Earlier this week, the New Jersey Higher Education Student Assistance Authority (HESAA) and Franklin Templeton Investments announced an excess of $2 billion in assets for New Jersey's 529 plans.

The state established the New Jersey Better Educational Savings Trust Program (NJBEST) under Section 529 of the Internal Revenue Code of 1986. It allows family members and friends to create an account in which to set aside money for the higher education expenses of a specified New Jersey resident.

Contributions to the account are invested by the trust in one or more investment portfolios as designated by the people who set up the account. Account earnings, which are based on the market performance of the investments, are generally exempt from federal income taxes. HESAA administers the trust program and selects investment managers, sets regulations and oversees other functions necessary for the program's operation.

At Princeton, there is currently only one student whose family is using New Jersey's 529 savings plan, Moscato said.

Undergraduate tuition, room and board for this year cost $43,980 on average at the University.

In general, Moscato said, students with 529 plans, whether from New Jersey or another state, do not receive financial aid from the University. Most 529s work not as savings plans but as ways of prepaying tuition, allowing for the purchase of tuition at today's rates to be paid in the future, when the beneficiary actually attends college. The performance of these plans depends on the inflation of tuition.

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While many savings plans also offer risk-based investment options, "for the prepaid tuition plan, you have a guaranteed rate of return," Moscato said. In all, "no more than a dozen or two" current undergraduates use the prepaid tuition plan.

Because the 529s are offered by individual states and not the University, "[the Financial Aid Office doesn't] have any more involvement with it than we would have with any other parental investment," Moscato said.

HESAA client service representative Camille Perry said she was unable to release any information about the combined assets of Princeton students using 529 plans due to privacy concerns.

The financial aid directors at other New Jersey schools, such as Rutgers, Drew University, Monmouth University and Rider College, could not be reached for comment.