MD Prepaid

[Anonymous]

All of these discussions about colleges have gotten me thinking.....

2 kids--one is 4 and one is 7. Both have a 529. 7 yr old has about $90K and 4 yr old has about $50K.

I'm wondering if the MD Prepaid makes sense. I'm just not willing to pay $60K/yr (today's dollars)for college. I'm willing to pay in-state tuition. I could take the 529 money and buy 2 plans. Each kid would cost around $43K if I did it today. I would leave the extra money in the 529 for incidentals.

I wish the instate MD options were better. It seems that the choices are UMD and THE OTHERS. But Towson is coming up and I think UMBC is fairly decent now. Salisbury and Frostburg are viable options if my kids cannot get into UMD or UMBC.

What are the downsides to the prepaid plans? I know that if for some reason they decide not to go to a MD school, I get the Weighted Average of Tuition that can be applied to an OOS. It's currently around $9K.

I also see that I am a day late---enrollment closed yesterday. So---thoughts for next enrollment period????

[Anonymous]

We did it for our kid because we like knowing it's paid for. If we had two kids I'd probably buy it for one and not the other (although you might need to check the rules on switching it from one year to another).

[Anonymous]

You do realize that UMD and UMBC are not included in the prepaid?

[Anonymous]

Anonymous wrote:You do realize that UMD and UMBC are not included in the prepaid?

Could you tell me where this is stated? This is what I see

Use it to pay the full in-state or in-county tuition and mandatory fees at any Maryland Public college or up to the Weighted Average Tuition toward nearly any private or out-of-state college.

http://www.collegesavingsmd.org/plan-comparison-chart.aspx?page=plan-comparison

[Anonymous]

Anonymous wrote:You do realize that UMD and UMBC are not included in the prepaid?

You are incorrect. Here is a partial list - (I used to have another brochure that had all the institutions including community colleges listed).

St. Mary’s College of Maryland
University of Maryland, Baltimore County
University of Maryland, College Park

Towson University
University of Baltimore
Frostburg State University
Salisbury University
Morgan State University
University of Maryland Eastern Shore
Bowie State University
Coppin State University


Of course, Private institutions like John Hopkins are not covered.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You do realize that UMD and UMBC are not included in the prepaid?

Could you tell me where this is stated? This is what I see

Use it to pay the full in-state or in-county tuition and mandatory fees at any Maryland Public college or up to the Weighted Average Tuition toward nearly any private or out-of-state college.

http://www.collegesavingsmd.org/plan-comparison-chart.aspx?page=plan-comparison

Please do not believe this misinformation.

Links to 4 Year MD Public Colleges and 2 year MD Community Colleges is given in this web page.
http://www.collegesavingsmd.org/useful-links.aspx

[Anonymous]

One issue is which plan offers the higher return on your monthly investment. The 509 will pay you market rates on stock investments, minus a cut for the investment manager, and in MD these are target funds so the mix of stocks shifts towards bonds (safer but usually a lower return) as your kid nears college age. The pre-paid plan has an implicit rate of return that gets you from your monthly investment to the UMD tuition. Generally, state pre-paid plans use conservative assumptions about rates of return (i.e., they assume a low rate of return on your monthly contributions) and what tuition will look like when your kid is old enough to go to college (i.e., they may assume a higher tuition rate in 2026 when your kid is 18 and headed to UMD).

So, in theory, you could make the same monthly payment to the 509 plan as you would to the pre-paid plan, and have more money (some left over for grad school?) when he's 18. Or, the market could tank (although the 509 plan phases into safer bonds as he gets older) and you could be left with less than the pre-paid plan.

Another way to put this is, with the 509 you tend to take on the potential risk and reward, while with the prepaid plan you mostly eliminate risk in exchange for knowing that you'll be all set when he's 18. In the past, the 509 was seen as a better deal because stock returns were assumed to be higher than the conservative (low) return built into the pre-paid plan. However, who the heck knows what stock markets will do in the future, I sure wouldn't want to advise you on this. Also, there's a value to knowing that you're all set, too.

Another potential downside is what you do if your kid decides he doesn't want UMD (his chosen major is better elsewhere, for example).

[Anonymous]

I thought the prepaid and 529 was also considered differently for financial aid? Correct me if I am wrong.