The Private College 529 Plan is looking to encourage new colleges and universities to become a part of the program.

Private College 529 Plan, a prepaid tuition plan for private colleges and universities, has announced a new president who said he’ll be “hitting the road” to encourage colleges and universities to join Private College 529 Plan. In 2017, nine additional schools became members, expanding the plan to nearly 300 institutions.

Robert Cole, the former director of Strategic Partnerships and Community Impact at American Student Assistance (ASA), has been named president, succeeding Nancy Farmer. In his 20 years at ASA, Cole’s concentration was assisting families with establishing financial capabilities and managing their student debt.

“For two decades I’ve seen families take on increasingly higher amounts of debt to pay for college,” Cole said in a press release. “Given that every dollar saved or prepaid today is a dollar that won’t be borrowed in the future, I’m a huge proponent for educating Americans so that they understand how critical planning and saving can be in finding a solution to this $1.4 trillion national problem.”

How the Private College 529 Plan Works

The plan’s contributions are created as tuition certificates and applied to the participating schools’ tuition costs for the school year; tuition levels are annually reset, according to ThinkAdvisor. During the year, the plan calculates all account contributions, keeping an ongoing count of accumulated tuition credits for participating schools. If a student decides to attend one, such as American University, Duke, or MIT, credits will be applied to offset tuition costs and other qualified fees; but it excludes room and board.

If a student doesn’t attend a participating school, account balances can be transferred to a traditional 529 savings plan without penalty. However, tax-free earnings have a 2 percent annual gain cap and 2 percent annual loss cap. Certificates must be kept for 36 months from the purchase date prior to redemption, and for up to 30 years they can be used at any participating school.

Federal Interest Rates Lowered for 2016-2017 Academic Year

Participating institutions guarantee fixed tuition costs and operate account balances similar to other 529 plans for financial aid.

With the plan, contributors do not choose among investment options; an investment committee executes this, and Oppenheimer is the plan manager. According to Cole, investments encompass a balanced diversified portfolio with equities and fixed income funds; this has been created to match increases in tuition throughout time.

Traditional 529 Plans

While there are similarities between the Private College 529 Plan and traditional 529 plans, here are traditional 529 plan characteristics that differentiate the two:

  • Gains or losses are not capped.
  • Accountholders can select their investment options.
  • Plans are operated by a state or educational institutions.
  • Plans can meet costs of nationwide qualified colleges. Almost every state has a minimum of one 529 plan available.
  • Beginning on Jan. 1,2018, 529 plan savings can pay for tuition expenses other than college: private, public, or religious elementary or secondary schools. This is capped at $10,000 annually per beneficiary.

While the plans have their differences, opening one of each may be beneficial, especially with traditional 529s’ cap exclusions.

Pairing a 529 plan ­of either type can help offset the need to borrow to attend school. In addition, it can be helpful to narrow your search to the colleges that offer the most scholarships.