Pennsylvania Prepaid 529 Plan

Pennsylvania offers two types of 529 plans: an investment plan using stock and bonds funds, and a prepaid tuition plan described here.

The name of the plan is the Pennsylvania 529 Guaranteed Savings Plan, or PA 529 GSP for short. Despite its name, the GSP is not guaranteed by the Commonwealth of Pennsylvania. The "guarantee" refers to the plan's promise to match tuition inflation regardless of the plan's investment performance, and to return unused contributions at a minimum.

Although this is known generically as a "prepaid" plan as distinct from an "investment" plan, the GSP has much more flexibility than some prepaid plans. The PA 529 GSP offers payments to virtually unlimited choices of colleges, with tuition inflation determined only at the time of withdrawal. This makes the PA 529 GSP more attractive than "prepaid" tuition plans locked into a particular school, set of schools, or schools within a single state.

Notable features of the plan
The features of the plan are described informally at the official web site, and formally in the disclosure statement. The following section summarizes some important distinctive features of the plan, but does not approach all the details of the plan that may be important to some investors in special circumstances.

Tuition credits
Contributions to a GSP account purchase "credits" priced approximately at one-twelfth the price of a semester at the chosen school or type of school, based on the cost of a semester at the time of the contribution. When a qualified withdrawal is requested, the GSP prices the same credits at the credit rate at the time of the withdrawal, based on the cost of a semester at the time of the withdrawal. In effect, the contributions grow at the rate of the semester price increase between the time of the contribution and the time of the withdrawal. While the concept of the plan paying back contributions with tuition inflation is simple in concept, the GSP has details that can be complicated and sometimes counter-intuitive. The (prospective) account owner should be aware of these details to properly plan for college costs and avoid surprises at withdrawal time.

Tuition levels
The GSP defines and prices tuition credits at specific Penn. publicly-supported schools, as well as a handful of levels priced at average tuition costs in a class of schools. Almost 100 separate Penn. college programs of study are priced, with separate in-state and out-of-state student credit prices for each.

In addition to the many specific Penn. public college levels priced by the GSP, there are five average tuition levels available. These are the generic tuition levels available to choose:
 * State system of higher education (average of 14 separately-tracked colleges)
 * State-related universities (average of 4 separately-tracked colleges)
 * Pennsylvania community colleges (average of 14 separately-tracked colleges)
 * Pennsylvania private four-year colleges average
 * Ivy League school average

Although all but the Ivy League average tracks only Pennsylvania schools, qualified withdrawals at a chosen level can be used at any college, not just Pennsylvania colleges. See Credit Level at Withdrawal below.

Maximizing benefits of the plan
Based on the rules of the plan, account owners can choose to use certain techniques to maximize their benefits. The use of these techniques may not benefit owners in the future if the rules in the plan change, or may even become counter-productive. An account owner should be familiar with the disclosure statement that defines the plan rules and monitor changes to it. Note that the plan rules can change at the discretion of the the Treasurer of the Commonwealth of Pennsylvania, or due to changes in applicable Pennsylvania law.

Contribution timing
TBD: when to contribute

Exploiting multiple accounts
TBD: using multiple accounts and transfers to minimize fees and maximize returns

More maximization advice items here
TBD