529 college savings VS. the Prepaid Plan (funds, pay, rate, transfer)

[midlifeman]

I have a 3 year old in a 529 Vest Plan and I looked at it the other day and realized the market has done squat for the growth of this plan. Then I looked at the cost of education at UVA and VA tech, both which have increased by 10% this year.

Analysis:
Why am I bothering with a 529 vest plan? These tuition hikes are out of control so I am leaning toward the preapaid plan.

What are your thoughts gang? Why did you choose one over the other?

[StinaTado]

Here's the thing, a prepaid savings plan severely limits your options and that may mean your student missing out on an educational experience that would suit their needs.

I'll use myself as an example. My mom went to Berkeley and just assumed my brother and I would both go there some day as well. I remember being five years old and walking around the campus with my mom pointing out landmarks. My Berkeley application was the first one mailed off.

My dad, just for the heck of it, took me on a tour of the college he was doing his Ph.D. at. It was a much smaller, prettier school. I met several professors on my first tour. I came out of it realizing that I didn't want a huge state school, I wanted a much smaller school. I ended up going and I thrived with all the personal attention and close knit community.

Now, if my parents had pre-paid into the UC system, I would have been stuck at a UC, which I probably would not have enjoyed as much. I went to a large school for my Master's and it was definitely not an academic environment I relished. If you use a 529, you can use that at any school, not just a couple of state ones. For all you know, your child may want to go to welding school and a 529 can cover that as well. If your 529 isn't doing well, maybe you should invest money in something else for a while and just know that it's for college.

A prepaid plan doesn't necessarily mean your child will get an education that benefits them the most. A 529 means your child can find a school with an academic program and social environment which are a very good fit. Not to mention that outside of a recession, 529s have historically outperformed rising tuition costs.

[midlifeman]

It doesn't matter where you go to school with the VA prepaid plan. You can transfer it over to any other institution out of state and it will pay the average tutiton rate at a UVA school towards an out of state tuition cost, so you are not limited.

Tuition costs are the next great bubble in our society. It's outpacing healtcare costs and inflation. Unless your Warren Buffet I don't see how you can beat a 7-10% cost of tuition hike that has occured recently. STocks go up and down, but tuition always goes up, so from a pure numbers play the prepaid plan makes sense vs. a 529 vest account which invests in conservative mutual funds.

[midlifeman]

What say ye parents? I'm trying to get some views on the prepaid 529 plans or other thoughts and How you are personally saving for college.

[DressageGirl]

I have no idea which would be the better route to take but the 529 plan I started for my son seven years ago has done very well. While I did lose some ground the last two years, I just pulled my Dec 2009 statement (and yes I realize it has probably gone down since then a little more but I couldn't find my June quarterly statement, it is in a large to be filed stack) and it had done about 30%. I put in one lump sum in 2003 and havent put in a penny more since so my number is very easy to determine.

[MattNJ]

I wish NJ had prepaid plans