On sale today, costs of tuition plans have risen dramatically
Written by Chris Umpierre
Kim Purdy is thankful she already bought Florida Prepaid College Plans for her three young children.
The Cape Coral mother isn’t sure she could afford it now.
The cost of prepaying for college will spike by as much as $4,000 when the Florida Prepaid College Plans go on sale today. The price tag for the four-year university plan is $49,293 for a newborn, or $298 a month. That’s an 8.6 percent jump from last year’s price of $45,367.
“That’s ridiculous; that’s crazy,” said Purdy, who is making monthly payments of $150 for a $31,410 four-year university plan she bought for her youngest son, 4-year-old Nicki, in 2007. “If you do the plan now and you have two kids, you’re looking at paying $600 a month for 18 years. That’s a lot.”
Florida Prepaid College Plan prices have more than tripled in the past five years because of legislation that allowed universities to make big increases in tuition. In 2009, the state authorized universities to increase tuition by 15 percent a year until Florida’s average tuition meets the national average.
Florida is ranked 48th in the nation with an average tuition of $4,886. Nationwide, in-state tuition and fees at four-year public universities average $7,600, up 7.9 percent over last year, according to The College Board.
“The national average for tuition is continuing to rise as a lot of states are increasing tuition. Florida has a moving target,” Florida Prepaid spokeswoman Susan James said. “So it appears (prepaid plans) are on a path of continued increases.”
This year, Florida’s 11 universities disclosed to the governing board for the State University System that without significant improvement in the economy, 15 percent tuition hikes will continue to be necessary every year. Each university, except the North Florida, projected 15 percent increases the next four years.
Florida Prepaid College Plan’s price increases are also meant to keep up with the anticipated future increases in tuition and fees, James said.
By 2024, a four-year education at FGCU, for instance, will cost $204,929, according to a calculation from top lender Sallie Mae. FGCU’s annual tuition for a full-time, in-state undergraduate this year is $5,533, a 15 percent jump from 2010.
Florida Prepaid isn’t the only option for parents to save for their children’s education. Kathleen Campbell, a Fort Myers financial adviser, prefers individual 529 investment plans over prepaid.
Both plans involve tax-free investing in a mixture of stocks and more conservative options such as bonds, but prepaid comes backed by the faith and credit of the state.
Campbell argues 529s are more flexible than prepaid plans.
“If you’re in the Florida Prepaid plan, certainly that money can be used for an out-of-state college, but if you use it for out of state, it comes with a different interest crediting feature,” Campbell said. “So what ends up happening is parents say to their kids, ‘You’re going to a Florida college.’”
Fort Myers mother Jenny Isenhower, who purchased prepaid plans for her 6-year-old daughter Isabel and 8-year-old daughter Carlee when they were newborns, likes the extra security and predictability that prepaid provides. Individual 529 investment plans are susceptible to the whims of the stock market.
Prepaid plans in other states have encountered financial difficulties, but Florida’s plan — the largest in the country — has run a surplus. Florida prepaid’s conservative investing strategy has helped its plan, James said.
“I would tell people to get prepaid and lock in today’s prices,” Isenhower said. “It’s a very good plan because you don’t know what’s going to happen in eight or 10 years. Tuition could be even double than it is right now.”
Other students might be priced out of colleges altogether.
“Unless the kids can get scholarships in academics or sports, these price (increase) are cutting out the opportunity for a lot of kids to go to college,” Purdy said. “The middle class doesn’t qualify for some of the (federal and state) college grants because you make just enough not to qualify.”
- Florida Prepaid College Plans Annual Open Enrollment Begins Oct. 17 (prweb.com)
- Paying for College: Prepaid Tuition and College Savings Plans (education.com)
- College Savings Month (fabulousandmoneysavvy.com)
- 15 Facts All Parents Should Know About 529 Plans (onlinecollege.org)
- Should I Use My 401(k) Money To Pay My Child’s College Tuition? (askthemoneycoach.com)
- Florida’s Governor Declares War on Useless Degrees [College] (gawker.com)