Florida Prepaid College Fund advice sought

[Flasch186]

So Im thinking of signing up for this since Aiden Roth will be here in November and there are 3 options:

Prepaid Tuition Plans
Single Payment Plan Monthly Payment Plan 5-Year (55 Month) Payment Plan
4-Year State University $14,359.77 $95.80 $280.36
2-Year Community College Plus 2 Years State University $12,254.37 $81.76 $239.26
2-Year Community College $4,972.20 $33.17 $97.08



Thoughts? Suggestions...Advantages/disadvantages......all of the above are doable although the one lump sum would be a real ass kicker to the balance sheet.

Im looking for some advice here that maybe you parents or financial gurus might know.

thanks in advance...

Florida Prepaid | Prepaid College | Florida 529 Plans

[Farrah Whitworth-Rahn]

Flasch, why are you 1) Only considering prepaid plans? and 2) only focusing on Florida?

[stevew]

For the cost of a KIA payment the 5 year looks doable. What are the disadvantages though? Transferable to another family member? Say he gets into Harvard. Are you out all the money?

If you put 4K a year into another savings fund would you feel less restricted?

[Flasch186]

Originally Posted by Farrah Whitworth-Rahn

Flasch, why are you 1) Only considering prepaid plans? and 2) only focusing on Florida?

1) Prepaid guarantees tuition (locks it in) as opposed to investing to try to catch up to what it could be...

2) in state.

[Flasch186]

Originally Posted by stevew

For the cost of a KIA payment the 5 year looks doable. What are the disadvantages though? Transferable to another family member? Say he gets into Harvard. Are you out all the money?

If you put 4K a year into another savings fund would you feel less restricted?

Disadvantages? I guess I could invest it elsewhere and perhaps make more?
Transferrable? No, but refundable yes.
Harvard? No, I would get my money back (without interest, I think)
4K, probably more worried that a downturn in an investment timed wrong could prevent him attending OR my investment not keeping up with costs of tuition...

[tarcone]

My sister lives in Florida and did this. She absolutely loved it. Got one kid through University of Florida and is getting another through a community college right now.

[CU Tiger]

Historically speaking college tuiton rates will not keep track with very good CDs, much less things like the S&P 500...then there is always the concern that kid decides no college for me, or you need the money in the interim...

If itt were me (and obviously its not) I would set up an acccount just for this purpose but not tie it up in a 529...

[Flasch186]

Originally Posted by CU Tiger

Historically speaking college tuiton rates will not keep track with very good CDs, much less things like the S&P 500...then there is always the concern that kid decides no college for me, or you need the money in the interim...

If itt were me (and obviously its not) I would set up an acccount just for this purpose but not tie it up in a 529...

If the kid decides not to go you get it back but I think would lose out on accrual. So youre saying setup a special savings account and put money in on your own?

[Farrah Whitworth-Rahn]

Originally Posted by Flasch186

If the kid decides not to go you get it back but I think would lose out on accrual. So youre saying setup a special savings account and put money in on your own?

We chose to go with a 529 plan out of New Hampshire for Boy-Rahn. Our main concern was flexibility. We like the flexibility of school choice with the particular plan we chose. Boy-Rahn won't be restricted to Universities in our state. When he gets accepted to USC or Standford, we can use our 529 money there.

Plus, with our 529 plan, if Boy-Rahn decides he wants to be a Marine and skips college, I can name another beneficiary of the funds, including myself, so long as they are relatives. I set up 529 plans for my sister's kids and set a little money aside for them every month.

[Flasch186]

Why NH?

[DaddyTorgo]

Originally Posted by Farrah Whitworth-Rahn

We chose to go with a 529 plan out of New Hampshire for Boy-Rahn. Our main concern was flexibility. We like the flexibility of school choice with the particular plan we chose. Boy-Rahn won't be restricted to Universities in our state. When he gets accepted to USC or Standford, we can use our 529 money there.

Plus, with our 529 plan, if Boy-Rahn decides he wants to be a Marine and skips college, I can name another beneficiary of the funds, including myself, so long as they are relatives. I set up 529 plans for my sister's kids and set a little money aside for them every month.

sounds very interesting. what plan is this - can you name it?

[Farrah Whitworth-Rahn]

A couple of reasons.

We liked the managed portfolios offered - they were better than the Arizona 529 plans. There are no state tax consequences on withdrawals from the plan for out of state participants. Arizona does not tax qualified withdrawals of residents, regardless of what plan you're in. But some states tax withdrawals if you have a plan in that state but don't live there. And at the time they offered a credit card where 5% (I think) of your purchases were deposited into the plan as a kind of cash reward plan. I thought that was kinda cool.

I used this website for a lot of my research: Savingforcollege.com - The internet guide to funding college and Section 529 college savings plans.

[Farrah Whitworth-Rahn]

Originally Posted by DaddyTorgo

sounds very interesting. what plan is this - can you name it?

Not off the top of my head. But I could probably find the prospectus around here somewhere.

[DaddyTorgo]

Originally Posted by Farrah Whitworth-Rahn

Not off the top of my head. But I could probably find the prospectus around here somewhere.

don't go trying to dig it up right at the moment or anything - i can check out that website and probably figure it out too, but if you happen to come across the prospectus or a statement or some sort of something that might be cool - it sounds like a pretty flexible plan and although i'm childless it might be nice to do something for say my two little nieces who are 5 and < 1.

[Farrah Whitworth-Rahn]

Originally Posted by DaddyTorgo

don't go trying to dig it up right at the moment or anything - i can check out that website and probably figure it out too, but if you happen to come across the prospectus or a statement or some sort of something that might be cool - it sounds like a pretty flexible plan and although i'm childless it might be nice to do something for say my two little nieces who are 5 and < 1.

That would be very thoughtful of you. I put a little away and I know it won't be a lot for them when the time comes, but it's more than my sister has the ability to provide. At least it's something.

We actually started the plan for Boy-Rahn well before we were surprised with the news we were having a kid. I named myself as the beneficiary, and then changed the beneficiary once he was born.

Once I make it through my deadline on Tuesday, I'll look for my most recent statement.

[DaddyTorgo]

Originally Posted by Farrah Whitworth-Rahn

That would be very thoughtful of you. I put a little away and I know it won't be a lot for them when the time comes, but it's more than my sister has the ability to provide. At least it's something.

We actually started the plan for Boy-Rahn well before we were surprised with the news we were having a kid. I named myself as the beneficiary, and then changed the beneficiary once he was born.

Once I make it through my deadline on Tuesday, I'll look for my most recent statement.

that's my plan actually...little bits for each of my nieces (although hopefully my sis and her husband will be okay) and one like you did where i have it "ready and waiting" in case I ever do end up having a kid (unlikely)

[Flasch186]

found that it is tranferrable out of state and to other kids.

[lynchjm24]

My concern with the Florida plan would be that the state could honor their end of the deal 18 years from now. At least in something like Social Security in theory you'll always have workers to tax. If the residents of Florida stop signing up for this program how does the state make up the gap between what today's people prepay versus what the costs are 18-22 years from now.

Of course you might better off having someone in the program, since they will have to invent new taxes to cover the liabilities, and if you are going to get stuck paying for others you may as well get some benefit from it.

[digamma]

I would read the fund documentation very carefully. You might also want to do some research on the Alabama PACT fund, which is embroiled in litigation right now, and may run out of money in the next 5-7 years. Compare that to Florida to see how it is run.

[flere-imsaho]

We're doing this with Illinois for little Sam. We made sure, however, that it was transferable, and if he goes private, we get the cash equivalent.

We went with this option over 529s or just putting money into a generalized savings account for the following reasons:

1. Given the rate that tuition has increased, we're unlikely to find investment vehicles that match that rate of return. So the value of that prepaid tuition will be higher when Sam goes to college than if we had just dumped the money into a 529 or investment fund. It's also a lot less risky than simply investing the money, especially if we're headed for a 10-year or even 5-year recession.

2. The problem with 529s and just socking money away, to me, is that when the little guy eventually applies for financial aid, any and all assets he and his immediate family have will count against him. Given the way tuition has increased and the pool of money for loans has decreased, it's more-or-less a way to guarantee him getting nothing from the FAFSA process. (Having said that, both of us make good money so he probably wouldn't get anything anyway....)


Thanks very much to Farrah for the advice, however, and I'll be checking in to learn more. I'm not an accountant or a financial adviser, and this is obviously a big thing, so it remains of interest to me.

[Marc Vaughan]

Can I ask what exactly this plan covers? - its possibly my kids will be going to university here in America and we're currently located in Florida so its of personal interest to me.

I believe the 'Bright Futures' scholarship which the state does covers the majority of college costs if they attend a university within Florida - am I correct in this and if so what do these savings schemes cover?

[Flasch186]

well if Im reading right, and briefly, I notice GPa and min SAT/ACT score requirements where this doesnt. For one.

[flere-imsaho]

Bump for a good thread and because we're about to pull the trigger on Illinois' program. Details here and here.

I dredged up this thread to check Farrah's post as to why she picked NH and confirm that I was looking for the correct features in IL's plan. So, I confirmed that we can transfer beneficiaries or get a refund, and there's some flexibility on when he uses the funds (and the funds are disbursed directly institution anyway). My concerns are, generally:

1. If the fund runs out of money, its recourse is to the IL legislature. Given the state of our budgets lately in the state... However, the fund is supposed to be "conservatively" managed, so....

2. If we move out of state we can no longer contribute with a tax advantage.

I'm going to check out some other plans, but I have only a limited amount of time for research and everything I've checked out looks OK. It still seems preferably to just socking money away.


Also, on an unrelated note, has anyone noticed that these plans are basically Ponzi schemes? The benefits that are paid out now are dependent (at least in part) on money coming in now, which fits the definition (if you ignore interest on investments, of course). Maybe I have the definition wrong, but I thought it was funny.

[flere-imsaho]

Farrah: Was this the plan with which you went?

New Hampshire: Fidelity Advisor 529 Plan Details

[lighthousekeeper]

you all still think college will exist in 15 years?

[sterlingice]

Originally Posted by digamma

I would read the fund documentation very carefully. You might also want to do some research on the Alabama PACT fund, which is embroiled in litigation right now, and may run out of money in the next 5-7 years. Compare that to Florida to see how it is run.

I thought I heard a story on NPR that quite a few 529s lost a bunch of money over the past 2 years and it wasn't just Alabama's that was in danger of defaulting.

SI

[sterlingice]

Originally Posted by lighthousekeeper

you all still think college will exist in 15 years?

I'm sure learning how to scavage for food in a post-apocalyptic world from a grizzled crazy ol' timer and joining a mercenary gang to learn how to shoot is still covered

SI

[Flasch186]

So we signed up for 2 things:

We did the florida Prepaid plan for tuition, to be paid in 5 years as opposed to one lump sum because it was only about 1 thousand more over 5 years and not the 18 year plan because that differential was way too high the other way.

We also set up a 529 for the extra stuff where people can put in gifts or we can dump extra monies over time.

I liked the guarantee of the Prepaid but wanted to add the 529 for the additional things.

[Flasch186]

I have a bit of a dilemma now.

I signed up for the 5 year plan on the prepaid and its about $350/mo. However, im getting a bigger than expected tax return this year and am wondering if I should change to a 1 time payment and save the ~1500 in interest over the 5 years (~10% in financing over the 5 years or 2%/yr). Think maybe borrowing the $ at that % isn't a bad idea or is this sort of anti-investment (in normal terms) not one that can be looked at as simply an interest issue?