The Future Of Prepaid Plans Such As The Florida 529
The number of prepaid tuition plans in the country are declining as the cost of higher education continues to rise. Most states used to have some form of financial program that let moms and dads pay a fixed amount for the college costs. Now less than 20 states still offer one. So what does the future look like for prepaid plans such as the Florida 529 and why does it matter? The idea behind a 529 plan is that a parent can go ahead and pay for the cost of college before the child graduates high school. They pay the money to the state, which goes into a state pool. Then the state covers the tuition costs when it comes time to enroll them. The good part about this is that if you pay $30,000 for a prepaid plan and then the cost of education soars to $50,000 between now and time for your child to enroll, you will not be responsible for the difference in tuition. The problem for the state is that they are the ones left with the responsibility of paying the difference when the cost increases. This can wreak havoc on state funds. In Pennsylvania, things got to the point that the treasurer was accused of essentially fudging the numbers to shed PA finances in the best possible light. Because of the increased burden on states, some have suspended their prepaid program. Texas, Colorado, Ohio, Kentucky, and West Virginia are examples. Others, such as Maryland, have turned to raising their prices. The big concern with higher prices is that the prepaid plan will become too costly for lower income families. Other options being used by states include changing the enrollment process and issuing credit to investors. In the state of Florida, nearly one million people have signed up for their prepaid program. Parents can pay monthly installments from a child’s birth to graduation and save tons of money. The money can come out of their checking account, or 401k plan. However, these savings also come at the expense of state funds. But unless measures can be taken to correct the error, Florida will soon join the ranks of other states who have been forced to close their doors. The prepaid program is a real aid to those who can’t seem to find a way to cover the costs of sending a child to college any other way. If a solution is not found, the prepaid program could soon be a thing of the past.
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