Anonymous wrote:OP here. We don't trust anything 100%, which is why we have 2 children but would only consider 1 pre-paid plan.

IF Virginia does not default and one of our kids goes in-state for college (and I estimate there is at least 75% that will be the case in our situation) then I think the pre-paid plan is a better deal than a 529.

As I stated in the OP, we would still do 529 for remainder of our college savings, thereby hedging if something happened to the prepaid plan or our child was unable to use it.

We are not the type of people who will just let our child go "anywhere." We are highly successful products of both public K-12 AND public Virginia colleges, so our kids are going to need a DARN good reason to go private/out-of-state for college.

Right on! Same for us too

Current price is 7,675/semester, which means 61,400 for 4 years for only tuition and fees (now between 12-14k/year at UVA and WM). If you assume a 4% return (s&p has averaged 8% over the last 17 years), that would mean they think tuition will be 120k in 17 years.

I don't see that happening with wages not moving that much in the past few decade and seemingly unlikely to increase significantly any time soon. I think there would be too much of an outcry if tuition alone was 120k as public college would be ultimately unaffordable for most americans.

Plus - in the prepaid fine print if you cash out or go private/OOS you get the LESSER of the payments+return or the public tuition and fee. WM and UVA are great schools and many of the others are very good, but too much can happen in that time. It's a gamble either way, and they pay actuaries that are smarter than me to set the pricing....

OP here. We don't trust anything 100%, which is why we have 2 children but would only consider 1 pre-paid plan.

IF Virginia does not default and one of our kids goes in-state for college (and I estimate there is at least 75% that will be the case in our situation) then I think the pre-paid plan is a better deal than a 529.

As I stated in the OP, we would still do 529 for remainder of our college savings, thereby hedging if something happened to the prepaid plan or our child was unable to use it.

We are not the type of people who will just let our child go "anywhere." We are highly successful products of both public K-12 AND public Virginia colleges, so our kids are going to need a DARN good reason to go private/out-of-state for college.

We did it, but the price was $20k each when we did it. We get that money back, plus a bit of interest, if the kids do not go in state. Right now each are worth ~$27k. I think of as our "Bond" investment. We have other investments if they go out of state and a 529 for expected R&B and books.

Anonymous wrote:What if the cost of education goes down because it's a bubble, i dont trust prepaid

This is my concern also. I think we'll do some sort of savings program that can be used for any educational expenses (undergrad, grad/technical school) in any state.

Our financial advisor said that 529 was the better bet.

google what happened with the Illinois plans. i trust 529 investment more

Anonymous wrote:What makes me uneasy about the prepaid is the "payments plus reasonable/actual rate of return" if you go private or out of state. If you look through the literature the rate of return for the past several years is basically zero. For that reason I am putting our money into the 529 investment accounts. I may be missing something, but I feel the market should do better.

My plan is to do 8k/kid/year for 9-10 years, then let it grow. If they need more than that our mortgage will be paid off around that point.

Something that is not widely publicized is that you can deduct 4k/account for each fund you invest in for each kid and each parent is separate, so you can deduct far more than 4k/kid/year.

I bought the VA prepay tuition for both my son and daughter 12 years ago. The price was around $32K each. If I invested this amount in S&P 500 12 years ago, I don't think I can pay for the UVA tuition today. If you look at S&P500 from 2000 to 2008, stock market did not go any way. The reason was during the time. If none of them goes to VA state school, I can always get all my money back.

Anonymous wrote:DONT DO IT!!

You are screwed if your kid doesn't go to a VA school or decides to not attend college. Yes, that might actually happen as shocking as it might be in these parts.

I would invest your bonus money in a safe but liquid investment so that you can access it whenever you need it for whatever purpose.

Not true. My son is in college out of state. I think I paid $10.00 to have his prepaid account converted to a VA 529. Every semester, his college gets a check from VA (the amount is the average VA college tuition). Sure, best bang for your buck is if your kid stays in Va. But you still get your money + interest is he goes OOS. Not sure of the rules if he forgoes college altogether.

What makes me uneasy about the prepaid is the "payments plus reasonable/actual rate of return" if you go private or out of state. If you look through the literature the rate of return for the past several years is basically zero. For that reason I am putting our money into the 529 investment accounts. I may be missing something, but I feel the market should do better.

My plan is to do 8k/kid/year for 9-10 years, then let it grow. If they need more than that our mortgage will be paid off around that point.

Something that is not widely publicized is that you can deduct 4k/account for each fund you invest in for each kid and each parent is separate, so you can deduct far more than 4k/kid/year.

DONT DO IT!!

You are screwed if your kid doesn't go to a VA school or decides to not attend college. Yes, that might actually happen as shocking as it might be in these parts.

I would invest your bonus money in a safe but liquid investment so that you can access it whenever you need it for whatever purpose.

It would be great to hear from a someone who's made it all the way through and is actually using this, but I can say that we've been enrolled since our 5th graders were in preschool, and we still feel good about it.
Good tax break, good disciplined savings (automatically withdrawn from our checking each month) and since there are so many good quality VA public schools, I don't feel like I'm limiting my kids. Of course, if they get scholarships for OOS, we always still have the option to just use the money, just without the guaranteed tuition paid.

What if the cost of education goes down because it's a bubble, i dont trust prepaid

As long as the $$ can be applied to any school of your choice, I think it's an excellent idea. You pay now and don't worry about it later. And no need to constantly count your beans and estimate if you have enough to pay for tuition.

DH is about to get a huge bonus and we are discussing buying 1 prepaid tuition plan (we have 2 kids.) I ink the total cost is about $75k? If we did this we would likely do 529 for everything else. Since we are lifelong Virginians with no plans to leave, we feel confident at least 1 kid will go in-state. Thoughts?