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  • Prepaid college plans

    Any thoughts about prepaid college plans? I have set one up for my older child before #2 was born in addition to a 529 plan but had some buyers remorse. The instate school is pretty good but who knows how it will be in 10 years.

  • #2
    My general rule is to avoid them in favor of the investment type plans. But if your kid goes to an in-state school you're basically guaranteed to earn at the rate of college tuition inflation.
    Helping those who wear the white coat get a fair shake on Wall Street since 2011

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    • #3
      My BIL in law set one up for his son in FL about 8 years ago and his son now attends FSU. Basically you pay today's tuition costs for future enrollment. If the legislature has capped the rate of increase  as it has in my state, then the returns will not be as dramatic as the costs for private colleges.

       

      My daughter does not want to go in-state at this time. So we have not enrolled her in a prepaid plan in our state.

       

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      • #4
        I have not done this because I wasn't sure my kids would want to go to an in-state school nor that one would be the best fit for them.  In addition, I figured there was a good change we would move at some point (which we did)

        I think if you know your level of support is likely to be limited, you have one or more good in-state options and are likely to stay put they are a good option.

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        • #5
          The closer you are to having a child enter college, and the surer you are they will be happy at an in-state public school, the more it might make sense.

          We had that option when our boys were born, but we opted for a standard 529 rather than the pre-paid tuition plan. Far too many variables at the time, and in hindsight, we clearly made the right choice, as we are no longer residents of that state.

           

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          • #6
            You should be able to use the prepaid plans anywhere.  One of my partners used our state fund for two expensive out-of-state colleges.  He made a good return on his investment.  I looked at the fine print and it just seemed too much of a Ponzi scheme--there is no guarantee that the fund will still be solvent.  Of course you can lose cash in a 529 stock fund...but google "prepaid tuition plan bankrupt" and it chilled me enough not to invest.  Besides, if my kid doesn't use her 529 plan, I will reassign it to myself and take spanish courses in Patagonia or auto shop at the local community college or even get that MBA.

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            • #7
              Thanks for everyone's input. What encouraged me to go ahead with committing to the plan was the fact that money can be used at any institution public or private, in-state or out of state based on the weighted average tuition at that time. Also, it's a hedge against a serious downturn in the market just prior to needing that money. Although most 529 plans are more conservative when approaching the target date can you imagine needing to pay private college tuition bills in 2008-2009?

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