With the ever-increasing costs of tuition and the nation mired in an extended recession, it is getting harder for parents to afford to send their children off to school.
And their choices just got fewer.
Two separate options to save money to send students to college with the North Carolina College Foundation are being dumped due to under-performance during the current recession.
The two funds, the College Horizons Fund and the Balanced Fund are being cut out because of diminished profitability tied to the performance of the stock market and cost of managing them.
“It’s really hard to tell exactly how many people (participate in the programs), because one person may have an account for several different children, or different people may have funds for one child,” College Foundation Representative Ben Kittner said.
He said geographic information such as how many people in Richmond County participate is not tabulated, but did share the dollar amounts and percentages of the entire program they represent.
The CollegeHorizons Fund represents approximately $89 million of investment, or roughly 22.7 percent of the entire amount of money invested with the College Foundation. The Balanced Fund represents approximately $37 million or 9.5 percent of the total amount of money invested.
What sets these funds apart from many of the other 11 choices is that they are aggressively managed. In other words, they require financial services from stock brokers and money managers.
The CollegeHorizons Fund is an age-based fund, meaning as the student gets closer to college age less money is tied up in volatile investment sources.
Seligmann Investments manages the CollegeHorizons Fund, while the Balanced Fund has been handled by Wachovia.
“In good times, it paid off, because the fund was doing well,” Kittner said. “The fact that they are not doing as well now would appear to be a reflection of the current state of the economy.”
While there are some aggressively managed funds available among the remaining 11 choices and investors may choose to move their money into these accounts, by default the money from the two discontinued funds will be moved into the Vanguard Age-Based Fund.
This is something akin to a money market account that is passively managed.
“We would encourage parents and students when they are planning for college to explore all of the options are to save and plan for college,” said Richmond County Schools Public Information Officer Ashley Simmons. “The earlier parents start planning the better because as the economy evolves, if they have started out early they will likely be better off in protecting their investments.”
She said guidance counselors in the district assist parents and students in higher education planning.
“I don’t know that our guidance counselors have directly said, ‘You should consider 529 plans, but I do know that they have encouraged parents to look at different ways to prepare themselves for the expense of college,” she said.
He said the Vanguard fund already has 21.5 percent of the total investment in the foundation’s college savings program, meaning more than 43 percent of the total investments are currently in age-based programs.
“I think people recognize, the earlier you start saving when your child is young, the more money you’ll have when it’s time for them to go to college,” Kittner said.
Kittner cited the MCM fund as one of the options still being offered in the college savings program which is aggressively managed.
“People should talk to their accountants before choosing which option they’d like to go with, it may be an age-based fund, or it may be one of the aggressively managed ones,” he said.
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