The cost of prepaying for college will soar by as much as $4,000 when the Florida Prepaid College Plans go on sale Monday.
The price tag this year for the four-year university plan, traditionally the most popular, is $49,293 for a newborn, or $298 a month. That’s up from from $45,367 last year. It has more than tripled in the past five years because of legislation passed in recent years that allowed universities to make big increases in tuition.
Prepaid offers three other plans that are much cheaper, including ones that cover two or four years at state colleges, formerly known as community colleges. It also sells a “2 plus 2” plan, covering two years at a state college and two years at a state university.
“We recognize that families are having difficulty in managing their finances, so we offer four plans, with the lowest (the two-year state college plan) being $50 a month,” Prepaid spokeswoman Susan James said.
The current plans cover tuition and most required fees at state colleges and universities.
Q: What plans are available and how much do they cost?
A: Prepaid offers four tuition plans and a dormitory plan. There are also supplemental fee plans for those who bought plans before October 2010. The costs vary depending on the age of the child and whether you pay a lump sum, monthly over a five -year period or monthly until the child goes to college. The lump sum plan costs for a newborn child are as follows: Four-year university, $49,293; four-year state college, $17,331; two-year state college, $8,064; two years state college plus two years university, $32,990. Dormitory plans start at $6,682.
Q: Why is the price so expensive? Isn’t the idea of prepaid plans to lock in the current college prices?
A: Prepaid prices used to be similar to whatever tuition at Florida universities was at the time. But that was when the state limited increases to about 5 percent or 6 percent a year, which were funded by the interest earned on the plans. In 2009, the state authorized increases of 15 percent a year, requiring higher Prepaid prices to ensure the program is sustainable.
Q: Is Florida Prepaid still a good deal or should I consider other ways to save for college?
A: Financial experts say Florida Prepaid is a safe investment with guaranteed results. A traditional 529 college savings plan may yield better results, but that depends on market forces. Many families supplement a prepaid plan with another savings plan.
Q: What if I can’t afford the university plan?
A: Prepaid officials suggest looking at the state college or “2 plus 2” plan. The full value of the plan can be used to offset tuition and fees if the student decides to go to a university for four years. Officials are also adding calculators to the website to help buyers figure out ways to fit a prepaid plan into their budgets.
Q: What fees are covered?
A: The university plan this year covers tuition, financial aid, building, tuition differential, capital improvement trust fund, athletic, health and activity and service fees. Other fees such as transportation, technology and lab fees are not covered. Anyone who bought a tuition plan before October 2010 would not be covered for health, athletic or activity and service fees unless they bought a local fee plan.
Q: What is the “tuition differential” fee, and am I covered if I bought a plan in the past?
A: The state authorized a few universities in 2007, and all in 2009, to charge “tuition differential,” which is an amount above any tuition increases set by the state. Any prepaid plans bought since October 2010 cover this expense. Anyone who bought before February 2007 is grandfathered in, and doesn’t have to pay it. Anyone who bought between February 2007 and January 2010 is not covered, unless they bought a bought a supplemental tuition differential plan.
Q: I heard that Prepaid sales dropped last year. Is the program in danger of folding? Is my investment protected?
Sales of pepaid plans plummeted last year due to hefty prices. About 20,352 tuition plans were sold, down 47 percent from the previous year. But the sales of supplemental fee plans increased last year.
Officials say the current pricing structure allows the program to be sustainable long-term. The program is guaranteed by the state of Florida, so if it folds, the state is contractually required to honor existing contracts or issue refunds with interest.
Q: Can I use the plan for an out-of-state or private college?
A: Yes, you can apply the full value of the plan to offset tuition and fees at a private or out-of-state school.
Q: What happens if my child doesn’t go to college?
A: The recipient has 10 years after high school graduation to use the plan. It can also be a transferred to another family member, or you can get a refund without interest.
Q: How do I sign up or get more information?
A: Go to myfloridaprepaid.com or call 800-552-4723.
Copyright © 2011, South Florida Sun-Sentinel
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