Before Ashley had even garbled her first word or taken her first step, her mother began saving for her college education. When Ashley was only six months old, her mother opened a Florida Prepaid college tuition plan.
“For a single mother, this was an affordable means of guaranteeing my children’s education,” said Yvette Rivera, Ashley’s mother. Today Ashley is a sophomore in college and feels lucky to have the safety net.
“I am able to concentrate on school and not worry about taking out loans just to cover the cost of books,” she said. She has reason to feel grateful. The cost of college tuition continues to skyrocket, and the amount of outstanding student loan debt is soaring along with it. So parents are beginning to prepare early, and 529 plans are an excellent saving tool because investments into them grow tax-free and as long as the proceeds are used to pay for education related expenses, the withdrawals are tax-free as well.
And now, beginning with this year’s open enrollment period, the price of a four-year Florida Prepaid college tuition plan is going down to $35,000 from $54,000 after a new law passed the state legislature in March. Now, families will pay $250 per month instead of $350. And some families may even receive refunds. The Florida Prepaid Plan is very popular. Thousands of families buy into the program every year; but, it is not the only option. There are two types of 529 plans: prepaid or savings plans. ·
Prepaid Plans – like the Florida Prepaid plan that Rivera selected — let you pre-pay all or part of the costs of an in-state public college education. They may also be converted for use at private and out-of-state colleges. ·
Savings Plans work much like a 401K or IRA. They invest your contributions in mutual funds or similar investments. The plan will offer you several investment options and the account will go up or down in value based on the performance of the particular option you select.
Savings plans will earn more money, but also carry more risks.
“I opened Florida Prepaid accounts for both of my children because it was safe and froze the cost of tuition. Financial aid is no longer the safety net it used to be.”