Largest expense reduction ever for MOST College Savings Plan
Program costs dropped 44 percent, saving Missouri families $18.5 million over the next five years.
Jun. 15, 2011
The result of a competitive partnership bid this past February will save Missouri college students millions of dollars, according to a news release from State Treasurer Clint Zweifel.
As of June 6, Missouri’s 529 College Savings Plan, known as MOST, began a partnership with Upromise Investments and Vanguard that has cut prices by 44 percent, the release stated. The agreement will expire June 6, 2016.
MOST 529 is a low-cost, tax-deferred plan created in 1999 to help Missouri families save for their children’s higher education expenses, including tuition, books, mandatory fees and some room and board expenses at two-year, four-year and vocational institutions.
According to the release, age-based, index-based and conservative options that previously cost 0.55 percent will now cost anywhere from 0.29 to 0.38 percent. Actively-managed portfolios will now cost anywhere from 0.53 to 0.60 percent, a decrease from the previous range of 0.87 to 1.58 percent. An account can be started for $25.
The total asset-weighted cost of the MOST 529 Plan is now the fifth lowest of its kind in the nation.
“When Treasurer Zweifel came into office, his number one goal for (the MOST Plan) was to see the costs come down while maintaining choice, and we didn’t reduce choice and he was able to get costs to come down,” Zweifel’s Director of Communications and Policy Jon Galloway said.
Galloway said since Zweifel took office, the amount of assets in the MOST Plan has grown by 59 percent. The number of accounts has risen 11 percent.
“What this says is ‘Yeah, economic times have been tough, but Missourians have remained dedicated to saving for college,’” Galloway said.
Current numbers for the 2011-12 school year indicate that 44 students are using the savings plan at MU out of 56 total in the UM System, pending financial aid confirmations.
The number of students using the MOST 529 Plan has continued to rise over the last few years, said Nikki Krawitz, UM System vice president for finance and administration.
Krawitz said it is a great way for families to save for college and the UM System began a scholarship several years ago to encourage families to participate in the program.
“We’ve dedicated $40,000 at the system level, and we will award up to 80 scholarships of $500 each to eligible applicants annually,” Krawitz said.
This scholarship is available to students whose families have participated in the MOST savings plan for a minimum of five years prior to an April 1 deadline. Students are eligible to receive the scholarship for four years.
As of March 31, more than 128,000 people have invested a total of $1.6 billion into the MOST 529 Plan.
Galloway said this program allows young adults to have more money available to them whether they begin schooling at a two-year, four-year or technical institution. He said this cost reduction will keep more money in the pockets of investors instead of going toward fees and maintenance.
“We all know the power of compounding,” Galloway said. “The more you can keep in that account and the longer you can keep it in there, the longer it compounds and the more money ultimately there will be for a child’s higher education.”