Sunday, November 13, 2011

3 Alternatives to Rising Prepaid College Plans

Florida State University in TallahasseeImage via WikipediaThe costs of a college education continues to rise every year. Many parents fear that college tuition will someday be unaffordable. In Florida, we have two options that the state provides to pay for future college costs. We have a prepaid college plan and a 529 plan.

Over the last few year the costs of the prepaid plan have skyrocketed. Now to enroll in the plan it will cost you $49,293 for four years tuition at a Florida public university. That comes to $298 per month until October before the child graduates from high school.

Florida Prepaid administrators blame it on a law that allows public universities to make hefty increases in tuition and other fees. The universities blame it on the economy.

To put it in perspective, I purchased this plan for my 11 year old when she was born and it only costs me $61.00 per month. So you can see why the current fees are so crazy.

What to do?

There are always alternatives. The safety of the prepaid plan versus the market risk of the 529 are features that must weighed by the parents. The time span for accomplishing the goal is a big benefit. But a few ideas below will get you started.

1. Take half of the $300 and invest it in a tax-free 529 College Savings Plan. The $150 put away ever month, should after 17, grow to $54,00 at an interest rate of 6%. But their is always stock market risk to consider.

2. A cheaper Prepaid Plan for enrolling in a 2 year community college plan would only cost you $48.00 per month. This would get your child halfway there on a college education. You could either borrow the rest or work during the the first to years of college and save the money for the last 2 years of tuition.

3. You could do a combination of both plans . Saving in a 509 college plan and paying for one of the cheaper prepaid programs.

The time will be here before you know it. Saving for college comes down to putting away a little money each month. It's the consistency of saving regularly and the accumulation over time that will result in the goal.

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