Virginia529 prepaid vs Invest

[Anonymous]

I am thinking about opening one for my baby. Which one is better? Prepaid or Invest?

Thanks.

[Anonymous]

I wouldn't personally lock into a pre-paid because I don't want to be stuck with that choice and I'd rather invest in the market than make a guess about the increase in college costs over a 18 year time frame - which is what prepaid fundamentally is.

[Anonymous]

Invest. The 529 fees really add up.

[Anonymous]

Meant to add, I got a full merit based ride + cash for my state school. I don't know how prepaid deals with that.

[Anonymous]

There is a lot about the comparison on the VA 529 Web site, but it all boils down to:


-- Prepaid will basically buy you the equivalent of X years of tuition (assume 4?). The ROI is linked directly to whatever the rate of inflation for tuition is. A decade ago that inflation was crazy high. More recently it's been slower. All you're buying is in-state tuition, you'll have to cover board and any difference between the cost of in-state tuition and private school if your kid doesn't go to a UVA state institution. Risk is relatively low.

-- Invest is higher risk since your money is literally in the market. However, the potential for a higher ROI is there. Your money could grow more, giving you more buying power for private school or help pay for the cost of board.
But you could also lose money.

[Anonymous]

Anonymous wrote:I am thinking about opening one for my baby. Which one is better? Prepaid or Invest?

Thanks.

I bought 4 years of VA tuition 15 years ago for <20K. I think it was a good investment.

[Anonymous]

We did too. It was $16K 16 years ago.

[Anonymous]

Anonymous wrote:We did too. It was $16K 16 years ago.

Interesting question. That would be about $51,000 today if invested since 2000 at 7.4% interest.

[Anonymous]

^^ I mean ROI, not interest, of course. That's what the S&P 500 has returned since 2000, on average.

[Anonymous]

We did a prepaid and wen we got that paid off did a 529.

[Anonymous]

Either way is fine, the key is to start early.

[Anonymous]

Invest. We didn't want to limit ourselves to va schools. Maintenance fees were also lower on invest.

[Anonymous]

We are doing invest, may do some prepaid as a hedge (we have three, at least one would have to go in state). The problem I have with the prepaid is that if you go out of state you get your contributions back, plus a rate of return similar to a money market, which is basically zero. The thought of money out there for 17 years getting a zero % return is enough to keep me out.

I also think (hope) that the current tuition inflation will see some downward pressure, as it is completely unsustainable. State school tuition should not be out of reach for 90% of the population, with school banking billions for rainy days.

[Anonymous]

Prepaid. We paid for both kids in VA at once with lump of inheritance. Watched a few of my co-workers lose have of their initial investment right in the middle of their kids education in in 2007-2009. Glad that money is safe and we are locked down.

I have enough investments outside of college funds.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We did too. It was $16K 16 years ago.

Interesting question. That would be about $51,000 today if invested since 2000 at 7.4% interest.

Where exactly are you drawing that 7.4% risk free interest? UVA tuition today is 12K/yr, or about 50K for four years assuming some increases. 16K in 2000 invested in the S&P 500 gets you right around 32K today with dividends reinvested. Of course, depending upon when you invest (say post dot.com crash) you could get much better returns.