Finally, a tiny sliver of good news on the college financing front. Although the cost of a four-year degree continues to climb, one modest fee associated with saving money for college is declining.
The Massachusetts Educational Financing Authority and Fidelity Investments, the administrator of the state’s college savings plan, said Friday that the program management fees will be cut by 40 percent.
For a typical account balance of $10,000, the fees will drop by $6, to between $19 and $29 a year depending on the portfolio, said Keith Bernhardt, the vice president of college savings at Fidelity.
That reduction would make the state’s U.Fund 529 Index Portfolio fees among the lowest nationwide, Bernhardt said.
More families have been investing in 529 college savings plans, and with more assets, the costs of running these programs are declining as companies are able to achieve economies of scale, Bernhardt said. The 529 plans, including the Massachusetts U Fund, are essentially college savings investment accounts with an added benefit. Earnings are exempt from taxes as long as the funds are used to pay higher education expenses.
Massachusetts residents have opened 150,000 U.Fund accounts, according to Fidelity.
Nationwide, management fees for college savings funds have decreased, especially those that are offered directly to consumers, through state agencies like MEFA, said Andrea Feirstein, a managing director with AKF Consulting Group, a New York company that which counts MEFA as a client.
College savings plans sold through financial advisers, though, are seeing less pressure to reduce fees, she said.
Fidelity could also reap some benefits from lowering fees. Since out-of-state residents can put their money in Massachusetts’ plan, the lower fees could attract more customers for Fidelity, Bernhardt said.