The S&P did not exist before the 1950's, so I don't know how you can examine it from the 1870s. Assuming the data is correct, however...perhaps you meant the DOW JONES 30 stocks...it still doesn't prove that stocks are a good place for college money. Even if your minimum 10 year number was "only" minus 1.2%, that does not take into account the rampant inflation of 1966-1982. OK, so your principal stayed intact in dollar terms but got nuked in terms of purchasing power. I agree, however, that investing in bonds in 1966 would have been almost as awful.
While, frankly, I have not explored the "prepaid" options beyond the PATAP plan, my point is that ANY AND ALL prepaid options (Collegesure CDS?) should be done, in my humble opinion, before doing ANY asset allocation plan (meant stocks OR bonds). Basically, a prepaid plan is a bond with an college inflation guarantee. It doesn't get much better than that.
Also, I have a hard time believing that minus 1.2% was the WORST 10 year stock period from the 1870s. I can't imagine anyone investing in early 1929 was "whole" by 1939. Study after study has said that this did not occur until the late '40's or early '50's depending on if you reinvested dividends or not and taxes on those dividends. Perhaps you only examined the round-number decades (ie 1870-1880, 1880-1890 etc)? Are you sure you used ROLLING 10 year periods (1870-1880, 1871-1881, etc.)?
Finally, I want to state unequivocally that I am NOT "anti-equities". I have about half my personal portfolio invested in them FOR USE STARTING 22 years from now. And I'll only be withdrawing a teeny-tiny bit of my overall nest egg each year...so my effective holding period is even much longer. Unlike college where the money COMPLETELY withdrawn in 3.5 years (typically).
Sorry to belabor my point. But so many Americans have kissed early and even regular retirement good bye because they didn't understand the risks in stocks. Kissing junior's trip to State U. goodbye forces the damage to the next generation.
The financial industry, in my humble opinion, is guilty of salesmenship instead of stewardship.