Considering that the cost of a college education climbs every year, we recommend every Florida-based parent purchase a Florida PrePaid College Plan for their child and that they begin contributions as soon as possible after the child is born.
Benefits of the Florida PrePaid Plan
Florida tuition rates have increased 6.8% annually since 2006. Tuition at Florida universities is still a bargain compared to their peers, so we think tuition costs at Florida schools will continue to rise. We also think they are likely to experience jumps higher each time we enter a recession and the state’s budget has financial pressures. Tuitions rates can spike higher at the whim of the state legislature.
The advantages to participation in the PrePaid Plan is first, cost certainty; two words that are welcome when it comes to investing in your child’s future.
If Florida tuition rates continue to increase as they have over the past 12 years, we can think of a PrePaid Plan as a tax-free bond that pays 6.8% annually which compares very favorably to the 2.5% that the State of Florida tax-free bonds currently yield.
This theoretical 6.8% tax-free return on the Florida PrePaid College Plan would be the equivalent of earning 11.1% in a taxable investment.
During the last 12 years, the stock market has returned 7.9% pre-tax, so we view the Florida PrePaid College Plan as outperforming the stock market during the 2006 to 2017 time period.
The second favorable aspect for this college savings vehicle is flexibility:
The money can be used for in-state schools and can be applied to out-of-state schools.
If you move out of Florida, you can still use it to attend a Florida school and pay in-state rates.
Students have 10 years after completing high school to start college.
If your child doesn’t attend college, you can transfer the PrePaid plan to another student such as a sibling, cousin, or grandchild.
If you buy the university plan, you can use it if your student attends community college or a university.
As far as how to contribute, we recommend the Lump Sum Option, but recognize that not all new parents can budget the cost of the lump sum. A reasonable alternative is to buy one year of prepaid tuition at a time.
These are the types of considerations we look forward to discussing to develop a plan that is both realistic and successful.
If you would like help choosing and investing in a 529 or College PrePaid Plan, please contact me at email@example.com or (813) 282-7870. While we believe a college education is important, we also understand it is expensive, and the process is daunting.
We do not charge fees for helping with 529 Plan accounts. We get two benefits from helping you: 1) as parents ourselves, we feel good about setting you and your child on the correct path to pay for college and 2) it enables us the opportunity to begin a discussion about your other investment needs.
If you have a question beyond the scope of this article, feel free to visit our “Ask Us a Question” page or leave a comment below so we may assist you with your specific situation.