VA 529 Plan for College Savings (Madison: student loans, buying, schools)

[capitalhockey]

Hi all,

My wife and I are trying to decide what is the best way to save for our newborn son's future college costs. We have opened up a VA 529 Plan to start saving. We have 18 years in front of us and want to make the best decision possible.

I want to hear from people who has had the experience of saving up and paying their kids college's costs. We are deciding between the 529 prepaid plan (buying semesters at today's prices) vs. 529 invest plan (like a 401k).

1) Were you better off prepaying the semester than putting money in the 529 invest plan and hoping the stock market will go up?

2) Was it a big disadvantage to prepaid but your child ended up going to a private college or out-of-state?

3) If you had to do over again, would you just put your own money into an investment account (outside of 529 plan) and letting it grow. This way you are not restrained by only spending funds on education eligible expenses?


Thank you in advance for your insight.

P.S. My wife and I are fortunate that we are able to max out our retirement savings and have an emergency fund in place. College savings will not take away funds what those two accounts.

[Germany2DC]

We took a look at the VA Pre-Paid plan but it's extremely expensive. For our daughter (who's just starting Kindergarten this year), it would cost over $8k per semester or roughly $67k for four years at a University. We also have a younger son so multiply those numbers by two and that's what we'd have to pay. I doubt those amounts are "today's rates." The monthly payment plan is also ridiculously expensive (nearly $700 per month FOR ONE CHILD!) and when I calculated the number of months that I'd be paying, it's nearly $30k more overall than if paid up front (I guess you are charged interest or some kind of fees with the monthly payment option). We are doing the 529 plan which will probably not completely pay for our childrens' college but it will help a great deal when the time comes.

[lovnova]

We got into the pre paid plan when VA started to offer it many years ago.

The first two entered instate colleges in 2008 and 2010. We did the monthly plan (4 year university) when they were about 4 and 6yo. The total mo payment was around $325.00 combined for both. Ended up out of pocket about 20k and 22k each. Our last will enter instate college next fall. We did the lump sum payment (4 year university) when she was about 1 year old. It was $16,000. The first two 4 year tuition total was around 40k and 42k and last projected 45k. Bottom line we put in out 58k and got 127k in tuition.

It was a good deal for us I think especially for the last @ 16,000 for 4 years of tuition starting in fall 2018. We did out of pocket on the room and board part. And will do the same for the last child.
We would do it again. We liked the fact that it was guaranteed to pay future tuition costs.

Edit: I will say that we had a hard time making the $325.00 payment some months. And barely scraped the $16,000 together. Today's prices would be out of the question for us. We were not making that much money back then. Also saving for retirement at the same time.

[spleuchan]

We decided against the prepaid plan and have been doing the 529 plan. If I lived in MD, where their plan actually was pay today's rates for tomorrow, I would do the prepaid plan, but unfortunately that is not the case in VA. The prepaid plan is much more expensive than today's rates. You might come out a little ahead with the prepaid plan, but for me it is not worth the risk. If your child winds up in an out of state school, you move to a different state, etc., you only get the money you put in plus their reasonable rate of return, which is currently near 0.

[kiddhan625]

We are doing the 529 plan as well but not the pre-paid. The pre-paid guarantees in state tuition only. So if you kids decides to got out state you would pay the "current" rate. Additionally, with 529 you get a lot more flexibility. If you kid scores a scholarship you can use the 529 money for room/board/books etc.

[Fallout Zone]

Also doing the "Invest" option. I'm not sure if it is the right move, but it feels like there is more flexibility.

[lovnova]

Originally Posted by kiddhan625

We are doing the 529 plan as well but not the pre-paid. The pre-paid guarantees in state tuition only. So if you kids decides to got out state you would pay the "current" rate. Additionally, with 529 you get a lot more flexibility. If you kid scores a scholarship you can use the 529 money for room/board/books etc.

Our thinking was that VA offers a wide selection of very good in-state schools for different academic levels. We told our children they can choose private or out of state but they would have to get student loans for the difference in tuition.
My son went to James Madison. He had a partial scholarship each semester for 4 years. Our guaranteed pre-paid (cost 20k got +40k in tuition) took care of tuition and the scholarship was applied to room and board.

[FCNova]

Originally Posted by capitalhockey

Hi all,

P.S. My wife and I are fortunate that we are able to max out our retirement savings and have an emergency fund in place. College savings will not take away funds what those two accounts.

I'm glad that's the case. A lot of people are putting significant dollars into a 529 yet not maxing out their retirement, which is a big mistake. You can take out loans for college and pay them off with future earnings. You can't do that with a lack of retirement funds. We've put a little into 529 but not much because we've really been focusing on maxing the retirement, but will ramp up our 529 savings down the road. I will say I chose to go the 529 route over the prepaid, because many of the reasons already mentioned(flexibility, extremely high cost of prepaid).

[RecessionCasualty]

Don't quote me- but isn't VA one of the states where while you prepay you are not guaranteed future tuition at that rate? If their numbers are really off I think you still have to come up with the difference yourself. I think I read that somewhere. But like I said, don't quote me on that.

[LuvVA]

We have chosen prepaid 529 option for our 2 kids. They still have several years to go.
Hope I have made a good decision in opting for prepay option.