Prepaid vs. College America

[Anonymous]

Anonymous wrote:Where are you getting your info that Maryland has changed their policy of allowing the prepaid to be used at nearly any college anywhere in the country? If you look at the current policy online there is absolutely no indication of this. Currently you are able to switch your funds between prepaid and investment accounts as well. Our financial planner thinks the prepaid is a great deal and encourages the purchase of it even if you don't think your child will go to an in state institution.

I don't remember where I heard or read that, but I looked at the disclosures on line and I agree it seems to be clear that the information was wrong and they haven't changed the policy--

If your Beneficiary attends a Maryland public college, the
Prepaid College Trust will pay the full in-state or in-county
tuition and mandatory fees (Tuition) at that college or your
Minimum Benefit, whichever is greater.

If your Beneficiary attends a private or out-of-state college,
the Prepaid College Trust will pay Tuition up to either the
Weighted Average Tuition or your Minimum Benefit, whichever
is greater. You would then have to make up any difference.

sorry about that, but I feel better having tracked it down-- and I agree it's a great option whether or not your kid ends up at a MD state school

[Anonymous]

Not all financial planners will agree with yours. Save the way you think is best, but do read your fine print carefully.

[Anonymous]

OP, you need to do a mixture of the two. Just to diversify.
That said, my guess is that tuition costs will probably NOT rise as fast as they have in the past. As a matter of fact, they will probably be essentially flat for the next 10 years.

[Anonymous]

You should switch over from College America to VEST, then you won't have to pay all of the loads and other high expense ratios associated with American Funds.

[Anonymous]

Please make use of the following report if you are considering VA pre-paid plans. Particularly, look at p. 6-7 where it shows the increases in tuition/fees over the past 10 years. The average increase over that time span was approx. 10%.

Even if you assume a very low 5-6% average increase over the next 10 years, you would reap a savings of about 7000 dollars by doing the Va Prepaid plan today. The cost of the pre-paid plan today is $13,300. The average cost of tuition in-state is about $11,000 (today). If you apply the 6% increase to the $11,000 tuition for ten years, you end up with tuition above $20,000. So, you will have paid $13,300 for tuition that will cost you over $20,000 in ten years.

http://www.nrao.edu/admin/hr/docs/tuitfeesreport.pdf

That's why pre-paid makes A LOT of sense if you are willing to put your child in a Va. state school. You don't lose the money if they go out-of-state, but you aren't getting a lot of return on it either.