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Unique 529 Reports Pair Tuition Costs With Minimally Acceptable Returns


Money Management Executive this week has released a comprehensive, unique set of 529 data to help mutual fund companies, financial advisers and their clients more accurately plan college savings in both the short- and long-term.

Using exclusive data compiled by 1693 Analytics of Williamsburg, Va., the MME State Tuition Index and Datasheet reports are the first definitive public college tuition data indexes and absolute return benchmarks. Each report weights the college and university tuition and fee averages depending on the institution's size. They are the first installment in MME's 529 Risk-Adjusted Performance (RAP) Report series.

Tuition, room and board, and offsetting financial aid/tuition grants data has been broken down and is available for all 50 states.

More importantly, the proprietarily developed database analyzes changes in tuition, both at the state and national level, since 1990 to project a minimally acceptable return (MAR) that a 529 investor would need to meet future college costs.

Also included is data showing the upside risk and downside potential of each state's tuition costs rising at a rate greater than, or less than the national average, respectively.

"We felt it was important to develop a core set of absolute return benchmarks for each individual state, and to be able to allow for drilling down beyond the usual national statistics that are frequently bandied about," said Burt Baker, chief architect of the data and president of 1693 Analytics. "We think it gives more of an accurate picture than a national average which doesn't give the full picture and can often provide misleading answers."

For example, while the national average for tuition room and board is $12,949 for the 2006/2007 school year, with costs increasing an average of 5.9% over the past 15 years, parents of students attending New Jersey schools of higher learning are in for a much bigger sticker shock, currently paying $18,564 a year to send their child to a state college. And New Jersey's tuition, room and board has risen slightly higher than the national average, increasing 6.35% over the past 15 years.

By contrast, public colleges and universities in the states of Connecticut, Delaware, Illinois, Maryland and Pennsylvania charge less than $16,000 a year on average, and schools in Arkansas, Idaho, Mississippi, South Dakota and Wyoming charge under $10,000 per year. Students at Louisiana-based colleges pay the lowest average all-inclusive costs of under $9,000 per year.

These figures compare to an index of 25 leading private universities, which, on average, cost $41,446 per year in total expenses before discounts. The index of private universities has seen an average rise in costs over the past 15 years of 5.21%, 0.81% less than the national index of public colleges.

The reports are designed for financial planning professionals, the mutual fund industry's college savings plan sponsors, 529 college savings plan consultants, accountants, academics and state officials to gauge their own state's tuition landscape and then compare those to national averages or even other state's costs and benchmark returns, Baker said.

"The MAR statistics give mutual fund companies another metric for evaluating the appropriateness of investment offerings in a 529 plan," he noted. "In states with higher MAR values, you fail an investor if you're not providing investments that can meet the college costs needs, or worse, in some cases investors may be taking on more risk than they actually need to in order to meet the goal.

"In states with higher MAR values, you fail an investor if you're not providing investments that can meet the college cost needs," Baker continued. "After all, exactly how successful can one consider a college savings strategy where even though the portfolio outpaced its benchmark by 3.5%, it still managed to underperform the tuition inflation rate by 4%?"

Calculating what an individual will need in their retirement years is much more elusive and is based more on an individual's unique lifestyle and desired quality of life in their golden years, Baker said. College costs, on the other hand, can be much more precisely determined when annual college costs are known and investment planning can encompass the absolute return necessary to meet those expected college costs, instead of using relative returns that benchmark closely to arbitrary equity indexes or other indexes not specific to escalating college costs, he added.

Each state report costs $99, with a full set of 50 state reports discounted to $2,995. They can be obtained exclusively at Money Management Executive's website by clicking the top banner at www.mmexecutive.com, or by calling Anthony Noe at 212-803-6099.

(c) 2007 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

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