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Old 10-28-2014, 06:31 PM
Whu Whu started this thread
 
Location: Shores
22 posts, read 38,909 times
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I have a five year old and a six year old. The previous plans make no sense, but the new ones seem more reasonable.

We cannot afford lump sum, so the total payments for us on the 2+2 come in around $28k. Not a bad deal in my opinion, but others I know are recommending maxing out my Roth IRA instead, and using that for college instead. The idea being that if they don't use the prepaid, you have lost nothing and the loot is in a Roth.

Please post any and all thoughts you've had. I haven't been able to find much.
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Old 10-31-2014, 11:09 AM
 
Location: western East Roman Empire
6,555 posts, read 10,626,337 times
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Quote:
Originally Posted by Whu View Post
I have a five year old and a six year old. The previous plans make no sense, but the new ones seem more reasonable.

We cannot afford lump sum, so the total payments for us on the 2+2 come in around $28k. Not a bad deal in my opinion, but others I know are recommending maxing out my Roth IRA instead, and using that for college instead. The idea being that if they don't use the prepaid, you have lost nothing and the loot is in a Roth.

Please post any and all thoughts you've had. I haven't been able to find much.

It certainly is a much better deal now that they've basically halved the price.

I view the prepaid college plan as an insurance policy rather than an investment (I also view a primary residence as a consumption center rather than an investment), and in certain respects Florida statutes treat it as such.

Prepaid college is one insurance that you hope to use; if you don't use it, the program refunds your total premium, but you lose the opportunity of investing the funds over the course of the years that you hold the policy. Also, if the beneficiaries decide to go to a more expensive college or university than covered in the policy, then you have to cover the difference in cost out of pocket.

So, at the least, you receive the benefit of a minimum guaranteed outcome, while bearing some opportunity costs. As a result, to achieve maximum value from the policy, both you and the beneficiaries have to be committed to the Florida state system at the undergraduate level.

Anecdotally, I have a cousin who achieved just that; after attending FSU, his two children are now gainfully employed in a specialized and lucrative field close to home in southern Florida.

Ideally, I would say "all of the above" if you can afford it (prepaid college plus investment accounts such as 529(k) and IRAs), but of course that is not feasible for everyone. In some situations, such as yours perhaps, the Roth IRA is good, but just remember that in such an account there is no guaranteed outcome at the exact time that you may need it.

So you have to choose whether you want a guaranteed minimum outcome or to shoot for something possibly higher.
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Old 10-31-2014, 07:00 PM
 
2,888 posts, read 4,689,193 times
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Hell no, people already got taken a few years back with this. Just open a savings account specifically dedicate for this, it might have less benefits but it is more secure and will be there when you or your children need it.
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Old 10-31-2014, 08:08 PM
 
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My two kids graduated fsu in 2005 and 2008 using the prepaid tuition only plans. Oldest one also had bright futures so she was basically covered and youngest lived at home at times and at times on campus. We felt it helped us a lot with their college.
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Old 11-01-2014, 04:28 AM
 
Location: western East Roman Empire
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Originally Posted by straight shooter View Post
Just open a savings account specifically dedicate for this, it might have fewer benefits but it is more secure and will be there when you or your children need it.
Actually you provide a very good reason in favor of the prepaid college "insurance" plan: a bank account is not more secure (where were you in 2008-2009?, what if you are involved in a civil lawsuit?, what if you have to spend the money for some other emergency, just to cite a few examples of what could go wrong with a simple bank account) and it may not be there when (You? Really? You?) your children need it.

The college prepaid "insurance" plan is a dedicated account, asset protected by Florida statute, guaranteed by the taxing and insurance power of the State of Florida, and it will be there when your children (and not you) need it.

Again, it should not be viewed as an investment, and not even as a monetary instrument (even though it involves the transfer of money). It should be viewed as an insurance trust with a minor beneficiary and very specific rules on distribution of trust assets. It is a federally tax-exempt completed gift, the grantor does not own the account, even though the plan's terminology does phrase it that way; but the owner is also the "custodian", a more appropriate terminology, whose job is to guide the minor on a path that leads to a post-high school education; if the custodian dies while the child is still a minor, the rules allow for the appointment of a successor custodian, such as an aunt or uncle, or godparent, whose duty then also becomes to guide the minor on a path that leads to a post-high school education.

The investment, then, is responsible parenthood and the child's basic college education. The prepaid college plan is a minor's (not yours) insurance trust with only one asset: the providing of a guaranteed minimum of a child's basic college education. Period.

Now that they have halved the price (premium), it appears that much more attractive.

As with any other insurance policy, the policy owner/beneficiary may or may not derive maximum monetary benefit from the premiums paid, depending on the circumstances and how the policy fits in with such circumstances, but they have the assurance of a minimum guaranteed outcome.

To be sure, there are many other choices out there that could possibly achieve something beyond that, or less than that, depending on the monetary investment outcome and the myriad circumstances in life.

All of the above if you can, guaranteed minimum if you can't.

Last edited by bale002; 11-01-2014 at 05:18 AM..
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Old 11-01-2014, 08:09 PM
 
2,888 posts, read 4,689,193 times
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Bale, you omitted the most important part of my statement "people already got taken a few years back with this". How can something that fluctuates with the stock market be safer than a savings account that is FDIC protected up to $100,000. Like I said, the prepaid college funds have many attractive benefits but they also have risks associated with them that many people are not aware of.
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Old 11-01-2014, 09:25 PM
 
Location: Niceville, FL
7,647 posts, read 16,029,989 times
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It's a good deal if a public university actually offers a program your child wants to enter, and the child can get into it. And looking ahead 10-15 years in that regard can be kind of iffy. I know a lot of people who feel like there's a big quality drop off after U of F and New College, and if their kid can't get into one of those, they'd be better paying to send them private or out of state instead of settling for USF.

And between the prepaid programs and the chronic underfunding of the state university system on a per-student basis, you get more and more students trying to get into a holding steady or decreasing number of slots in many of the selective programs and schools. (U of F has gone back and forth with Tallahassee in recent years and threatened to shrink their freshman classes unless state general fund spending there increases because they felt like they couldn't maintain basic quality at state funding levels)
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Old 11-02-2014, 03:14 AM
 
Location: western East Roman Empire
6,555 posts, read 10,626,337 times
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Originally Posted by beachmouse View Post
I know a lot of people who feel like there's a big quality drop off after U of F and New College, and if their kid can't get into one of those, they'd be better paying to send them private or out of state instead of settling for USF.

And between the prepaid programs and the chronic underfunding of the state university system on a per-student basis, you get more and more students trying to get into a holding steady or decreasing number of slots in many of the selective programs and schools. (U of F has gone back and forth with Tallahassee in recent years and threatened to shrink their freshman classes unless state general fund spending there increases because they felt like they couldn't maintain basic quality at state funding levels)
To me this is the biggest risk: underfunding may lead to lack of quality; but, as the saying goes, you get what you pay for.

On the other hand, beyond a few high powered majors and select programs and schools (which still seem to have a privileged position according to the new law), if you view a basic college education as, let's say, 13th grade or in any case a basic degree factory for the average student, it doesn't really matter that much: the point of prepaid college insurance is to assure at least that minimum outcome (and the current price reflects that); if the individual student is better than that, then, yes, there have to be complementary and alternative sources of funding for something better.

Look, Florida is a young state, it is not Massachusetts. Give it time, like maybe another three hundred years? Maybe a bit less. If one cannot wait, then go to Massachusetts (I did).

In any case, the effort to cram everyone at least somewhere into the system at a lowest common denominator level of price and quality reflects how the US is structured in general, including the health care system: the many average subsidize the relatively few elite.

And when was it ever any different anywhere, despite any propaganda to the contrary?

Really, what do people expect?

It is also worth mentioning that an education program is also only as good as the student foremost (the teachers and the physical infrastructure secondarily). Perhaps it used to be that, generally speaking, the high school process winnowed out the more skilled from the less skilled, while today that process plays out at the undergraduate level and the more skilled, generally speaking, proceed to the graduate level for which, again, there have to be complementary and alternative sources of funding.

And again, the prepaid college program is like an insurance trust, by State statute, for a minor beneficiary with very specific rules on the distribution of its sole asset: to assure the minimum outcome of a basic college education in the State of Florida system (it is not a stock market investment, it is not a private bank account, which are governed by very, very different sets of laws and regulations, regardless of whether some people have no clue as to the huge, huge differences).

Foolproof? Are you kidding? But better than nothing to start with. If you want better, then complementary/alternative sources of funding. Whatever, we always take our chances.

Life is movement and risk.

Last edited by bale002; 11-02-2014 at 03:33 AM..
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Old 12-01-2014, 12:58 AM
 
672 posts, read 1,658,597 times
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Sorry for the bump.....

But we are very close to pulling the trigger on this.

I'm planning to call them soon.... but can anyone confirm what happens in these scenarios:

Let's say the plan was paid up-front (lump sum) at $28K
  • Child gets full scholarship. From the master contract, it would appear that you would get refunded at the prevailing credit hour rate. So if the current average Florida rate is $500 per hour, would you get refunded $500 per hour?
  • Child goes to Out-of-State/Private School. It appears the plan pays out at the prevailing credit hour rate. Again, if current Florida credit hour rate is $500, would the plan pay the Out-of-State/Private school $500 per credit hour.
  • You decide to terminate the plan (without using any of it) five years in and ask for a refund. Do you only get $28K back? Or do you get back what the prevailing value would be?
If the answers are what I hope they are, we will definitely be moving forward with this.

Thanks!
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Old 12-01-2014, 09:50 AM
 
672 posts, read 1,658,597 times
Reputation: 585
Quote:
Originally Posted by volk2k View Post
Sorry for the bump.....

But we are very close to pulling the trigger on this.

I'm planning to call them soon.... but can anyone confirm what happens in these scenarios:

Let's say the plan was paid up-front (lump sum) at $28K

  • Child gets full scholarship. From the master contract, it would appear that you would get refunded at the prevailing credit hour rate. So if the current average Florida rate is $500 per hour, would you get refunded $500 per hour? Yes, you would get paid out at the current rate.
  • Child goes to Out-of-State/Private School. It appears the plan pays out at the prevailing credit hour rate. Again, if current Florida credit hour rate is $500, would the plan pay the Out-of-State/Private school $500 per credit hour. No. You would only get paid out at the rate you paid when you started the plan.
  • You decide to terminate the plan (without using any of it) five years in and ask for a refund. Do you only get $28K back? Or do you get back what the prevailing value would be? You can get a full refund after being a plan participant for 2 years, but only receive what you paid in.
If the answers are what I hope they are, we will definitely be moving forward with this.

Thanks!
Called them today.... My findings in red.... Sorry if this was obvious to others, but for those that weren't aware, here ya go

I was OK with the refund bullet point.... but the second "Out-of-State/Private" bullet looks like the deal breaker.
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