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View Full Version : Prepaying tuition for you kids....WOW


kvrdave
06-24-06, 01:29 PM
http://www.get.wa.gov/

In Washington State they have a deal where you can prepay for your child's education. You get a little discount even. A full year's tuition at the University of Washington is about $10,000. You can buy the tuition (which is equal to 100 GET points) for about $7,000. The cost of the points goes up with tuition.

You may end up going to another state school that has less tuition costs. If you went to Central Washington, you would spend about 80 points, and the rest could be used for books, etc. If you decided to go to Gonzaga or other private school, you still get the monetary equivilent of the points, but they have to be used on tuition somewhere. And you can buy up to 500 points per kid, so if your kid is dumb, he can take an extra year, or even spend it on graduate school. If they don't ever go, they can get the money refunded as well, so there really isn't any risk, unless you believe that tuition will not continue to rise.

Anyway, this looks like one hell of a deal. With my 3 little boys, I could prepay 5 years of tuition for each and it would cost $105,000. That is a buttload of money, but I don't have to buy it all now. And tuition costs I am looking at are 12-18 years in the future. 5 years at the U for each boy (don't worry, I wouldln't seriously consider sending them to UW :D ) today would cost about $50,000 ($150,000 total), and tuition looks like it will double in 10 years (if it stays on pace) and nearly triple at 17 years.

I forget the numbers, but it seemed like it worked out to about a 10% return with those assumptions. And the real advantage is having the weight of the thing off your sholders and knowing that college is paid for.

Anyone do this? Other states have something similar? Anything you can think of that I may be missing?

Lateralus
06-24-06, 01:39 PM
Yeah Pennsylvania has something similar. They have 3 levels, state school level, semi-state school level (Pittsburgh + Penn State) and private school level. The only drawback is that the school that your child has to attend must be in Pennsylvania. Suppose you put $30,000 down when your child is born and then college costs go up 12% next year, then you get 12% on your money. And you keep on doing that until your kid is ready for school. So your $30,000 will buy you 2 years of schooling now, and it will by you 2 years of schooling 18 years from now... which is a pretty good idea if you can afford it.

I see a couple problems, what happens if your kids don't go to college or they get scholarships?

Green Smurf
06-24-06, 01:41 PM
Sounds like a fantastic idea! I don't believe we have that in Wisconsin, but still a good idea.

kvrdave
06-24-06, 01:45 PM
I see a couple problems, what happens if your kids don't go to college or they get scholarships?

It can be cashed out 2 years after they graduate from highschool at the value of whenever they take the money back out, so you don't really lose. If you get scholarships, the points can be saved for more schooling or can be used for books and living expenses, but you can only use a total of 100 per year.

shoppingbear
06-24-06, 01:48 PM
5 years at the U for each boy (don't worry, I wouldln't seriously consider sending them to UW :D )....
:mad: HEY! :mad:

-ohbfrank- You should be so blessed, to have one of your boys trade up to a real university... :D


Anyone do this? Other states have something similar? Anything you can think of that I may be missing?
A close friend and her hubby are doing this for their kids, they researched it and I remember them saying most states have this now. The nice thing is, if this is the same program they're doing, you can have family buy the points as gifts, also, so if someone (grandparents, godparents, etc) wants to contribute to the boys' education, they can.

.

mosquitobite
06-24-06, 01:52 PM
Dave Ramsey doesn't recommend these set ups. He said the same thing about prepaying for your funeral.

Just save the money instead. Unless inflation out costs the money you could make elsewhere, you're losing money.
:shrug:

If you have $50,000 to set aside now, why are you not buying a house or investing it in the stock market instead?

Duran
06-24-06, 02:11 PM
If you have $50,000 to set aside now, why are you not buying a house or investing it in the stock market instead?

I think he should buy another horse.

kvrdave
06-24-06, 02:15 PM
Dave Ramsey doesn't recommend these set ups. He said the same thing about prepaying for your funeral.
I find Dave Ramsey to suck ass, but that's me. -wink-

Just save the money instead. Unless inflation out costs the money you could make elsewhere, you're losing money.
:shrug:
If you could have done this and prepaid for gas or health insurance, you would have done an amazing thing for yourself. College tuition goes up faster than inflation.....much.

If you have $50,000 to set aside now, why are you not buying a house or investing it in the stock market instead?

Because I have too many houses. :(

Bandoman
06-24-06, 03:11 PM
My kids are going to be male prostitutes. The only school you need for that is the school of hard knocks. And, perhaps, the school tha tells you where to get your antibiotics.

ShallowHal
06-24-06, 03:41 PM
Because I have too many houses. :(

I'll take one off your hands, got any sweet deals? :banana:

das Monkey
06-24-06, 04:04 PM
This is a great idea. This way your children can be anything they want to be!*

das

* Offer not valid in other 49 states or the world at large

Jason
06-24-06, 04:18 PM
In all seriousness, what if they end up not being college material? Can you sell your points or get a refund?

Brain Stew
06-24-06, 04:41 PM
My dad bought TAP (Tuition Account Program) credits for me to go to a state school here in PA and they have worked out well. I am the only one of my friends who has no college debt.

NotThatGuy
06-24-06, 04:41 PM
They really seem like a nice investment.

-p

kvrdave
06-24-06, 05:30 PM
In all seriousness, what if they end up not being college material? Can you sell your points or get a refund?


I see a couple problems, what happens if your kids don't go to college or they get scholarships?

It can be cashed out 2 years after they graduate from highschool at the value of whenever they take the money back out, so you don't really lose. If you get scholarships, the points can be saved for more schooling or can be used for books and living expenses, but you can only use a total of 100 per year.

Yep

Breakfast with Girls
06-24-06, 05:51 PM
And you can buy up to 500 points per kid, so if your kid is dumb, he can take an extra year, or even spend it on graduate school.Hey! :mad: :(

A coworker of mine is doing this exact thing for his son. Currently he has 1 year paid for, I believe.

Personally, I don't agree with parents paying for college tuition. Kids should have to work one and sometimes two jobs and still graduate under a mountain of debt like I had to. :grunt:

Edit: Morbid thought: what if someone pays for four or five years of college education for their kid and then he dies in a car wreck or something?

illini420
06-24-06, 07:10 PM
Kids should have to work one and sometimes two jobs and still graduate under a mountain of debt like I had to. :grunt:




Agreed, my parents had the money, but didn't pay for any of my school. I put myself through 8 years of college and grad school and now have nearly $200k in loan debt, but I also have a good job now too. And my parents are living it up in Maui now, probably because they didn't pay for college for me or my sis.

One big positive was that paying for it myself really gave me a bigger incentive to try hard instead of screwing around.

But if you're going to put your kids through school, that choice is yours alone. I still disagree with prepaying though. Seems to take a lot of choice out of your child's hands on what they want to do, where they want to go or whether they want to go. Seems like the same could be accomplished by saving the money in a good diversified account of stocks and bonds, then you could use the money for whatever you want, whenever you want.

kenbuzz
06-24-06, 08:24 PM
$105K to fully pay for THREE tuition bills... a bargain! Our one 5 y/o is gonna end up costing $80-100K, depending on the breaks and whether 4 years will be enough to get him through.

DVD Josh
06-24-06, 09:49 PM
In my mind a 529 is a much better use of that money. 18 years of compounding interest will save you a ton more than $3K a year.

kvrdave
06-24-06, 11:21 PM
Hey! :mad: :(

A coworker of mine is doing this exact thing for his son. Currently he has 1 year paid for, I believe.

Personally, I don't agree with parents paying for college tuition. Kids should have to work one and sometimes two jobs and still graduate under a mountain of debt like I had to. :grunt:

Edit: Morbid thought: what if someone pays for four or five years of college education for their kid and then he dies in a car wreck or something?

If the kid dies, you can transfer it to another kid, or cash it out.

My dad felt the same way you do, but then he went to West Point. My mom went back to work to make sure they paid for us to go to college. The rules were pretty simple. They didn't pay for average grades and they only paid 4 years. Years later I would find my sister's transcripts and how long she went to school and find out that the deal with her was, "Please, for the love of all that is holy, just graduate."

I still want to pay for theirs. I didn't use to when they were just "in theory" but once they were born, I wanted to. :shrug:

kvrdave
06-24-06, 11:27 PM
In my mind a 529 is a much better use of that money. 18 years of compounding interest will save you a ton more than $3K a year.


You are saving $3k in the first year. Every year tuition goes up, you are saving that much more.

I talked to an accountant about it, and he said it was effectively like paying forty cents on the dollar for tuition.

PopcornTreeCt
06-24-06, 11:30 PM
Yeah my parents did it for me and my brothers when we were growing up here in Florida. It has worked out pretty damn awesome for us.

xmiyux
06-24-06, 11:33 PM
I'm torn on the issue of paying for my daughter's schooling. My debt for school (my parents didn't help out at all) is obnoxious and at times overwhelming. However i worked at school and worked to get a career. They paid for all the schooling for a brother of mine and he dropped out and didn't try at all in school because he had nothing vested in it. Because of this i haven't decided what is the good decision for me.

Lord Rick
06-25-06, 08:09 AM
Dave -

Am I understanding this correctly - if when your kid turns goes to college, and he goes out of state, so you don't use the points, that you can cash out at the value of tuition AT THAT TIME? That would give you a guaranteed 10% return for all those years, right?

If so, this seems like a no-brainer.

Here in SC, the deal used to be that you cashed out at the value of your contributions, which means you got no return on your money, and with inflation you lost money. I haven't looked into what the plan is these days, mainly because I can't afford to buy in right now.

Lord Rick
06-25-06, 08:11 AM
I'm torn on the issue of paying for my daughter's schooling. My debt for school (my parents didn't help out at all) is obnoxious and at times overwhelming. However i worked at school and worked to get a career. They paid for all the schooling for a brother of mine and he dropped out and didn't try at all in school because he had nothing vested in it. Because of this i haven't decided what is the good decision for me.

I'm going to do what my old boss did.

He paid for half of his kid's college. He had the kid take out loans for the other half. If the kid got good grades, my boss would pay off the loans. If the kid partied, he'd be on the hook for all that money. This made the kid have some skin in the game, and worked out great.

cruzness
06-25-06, 08:46 AM
I'm currently in a prepaid college plan for my daughter. I pay roughly $5500 over 5 years and it locks in the cost of 4 years of tuition and 2 years of dorm fees at any state college/university. ( UF, FSU, UNF, UCF, USF, etc...). It does not cover the cost of lab fees (which nowadays every class charges soem kind of lab fee) nor books. Should my daughter decide to go to a non state school or out of state the cash value can be applied to her tuition and if she decides to not go to college we get our money back. My wife and I decided on this plan because we figured that we would encourage our daughter to go to college to maximize the benefits of this plan and we'd offer to cover the costs of any additional loans as long as she was doing well in school. (if not then its kinda like Lord Rick's boss - the kids on the hook for the money) With my next child we will probably go with a 529 - I am not sure if the state of Florida was still offering the prepaid plans for new plans - I had heard they were having some budget problems.

1998Nole
06-25-06, 01:50 PM
I'm currently in a prepaid college plan for my daughter. I pay roughly $5500 over 5 years and it locks in the cost of 4 years of tuition and 2 years of dorm fees at any state college/university. ( UF, FSU, UNF, UCF, USF, etc...). It does not cover the cost of lab fees (which nowadays every class charges soem kind of lab fee) nor books. Should my daughter decide to go to a non state school or out of state the cash value can be applied to her tuition and if she decides to not go to college we get our money back. My wife and I decided on this plan because we figured that we would encourage our daughter to go to college to maximize the benefits of this plan and we'd offer to cover the costs of any additional loans as long as she was doing well in school. (if not then its kinda like Lord Rick's boss - the kids on the hook for the money) With my next child we will probably go with a 529 - I am not sure if the state of Florida was still offering the prepaid plans for new plans - I had heard they were having some budget problems.
It is still around but it is just more expensive. I started the prepaid plan for my son when he was less than 1 and I am paying $226 for 55 months(4years+1year dorm), looking at the site today it is like $290 for the same thing. I had it when I went to college and I still had to have student loans but I also decded to be a bum and not work for 4 years.

Venusian
06-25-06, 02:27 PM
Just move the GA. As long as you maintain a 3.0 GPA, any state school is free.

NotThatGuy
06-25-06, 02:36 PM
Just move the GA. As long as you maintain a 3.0 GPA, any state school is free.

Seriously?!!

Damn....I grew up in NJ, and we never had anything like that.

-p

Breakfast with Girls
06-25-06, 05:42 PM
My dad felt the same way you do, but then he went to West Point. My mom went back to work to make sure they paid for us to go to college. The rules were pretty simple. They didn't pay for average grades and they only paid 4 years. Years later I would find my sister's transcripts and how long she went to school and find out that the deal with her was, "Please, for the love of all that is holy, just graduate."

I still want to pay for theirs. I didn't use to when they were just "in theory" but once they were born, I wanted to. :shrug:I was partially joking. ;)

I think paying half is reasonable. When/if I have kids, I will tell them that I will pay for half of their school, up to five years. They pay for the other half.

I think knowing you will graduate with some debt is a good motivator to a) select a non-dippy major that will actually be marketable once you graduate, and b) work hard in school so you will get a good job after college, knowing you have to pay off that debt.

Bushdog
06-25-06, 05:47 PM
Can't tell you how many spoiled kids I've seen who have had their school paid for them. It is something I'm wary of.

al_bundy
06-25-06, 05:54 PM
i'll probably just set up a 529 plan and tell my kid if the grades aren't good then I'm using the money for a vacation and leave them with the loans.

I think 529 plans are better because if it grows enough it might last for grad school where with pre-paid tuition the school takes your money and invests and keeps anything that is left over. I also don't trust the state governments in that if they are financially strapped sometime in the future they may decide to raid that pot of money.

Draven
06-25-06, 05:59 PM
I paid for schooling myself, while my parents helped out where they could. I have a fair amount of debt but it wasn't too bad. And to be honest, student loans and my part-time job didn't really "feel" like I was paying for it myself. That only hit me when the bills started rolling in.

My wife had her schooling completely paid for by her family, and got a job only because she was bored. Of course, she worked her butt off, got good grades and paid for her Masters herself right out of school.

So I've seen it work both ways.

For my own kids, if I can afford to send them I'm going to try. I know my parents would have if they could have. I'm intrigued by this type of program, as we are already trying to save money for the kids for college. I'm definitely going to insist they go for scholarships, and we won't be taking care of everything 100%.

illini420
06-25-06, 05:59 PM
I think knowing you will graduate with some debt is a good motivator to a) select a non-dippy major that will actually be marketable once you graduate, and b) work hard in school so you will get a good job after college, knowing you have to pay off that debt.

Agreed 100%. Several of my grad school classmates had parents funding their tuition and expenses. Many of them just went back to live at home after graduation as they very slowly look for a job. Some have been "looking" for over a year as they freeload at home. Those of us that were paying ourselves had to take things more seriously and did the work necessary to ensure we had a job upon graduation.

I think if a parent really feels compelled to pay for any of the reasons mentioned, they should consider either paying half up front and making the student carry the rest of the debt (then if they really wanted to pay it all, just pay the debt after graduation as a graduation gift).

kvrdave
06-25-06, 10:52 PM
Dave -

Am I understanding this correctly - if when your kid turns goes to college, and he goes out of state, so you don't use the points, that you can cash out at the value of tuition AT THAT TIME? That would give you a guaranteed 10% return for all those years, right?

If so, this seems like a no-brainer.


That is correct.

I do need to read up on the refund if they don't go to school to make sure, but I know that if they go out of state or to a private school, they get full value.

BDB
06-25-06, 11:12 PM
from what I've been told by my CPA, you are better off to just toss that extra cash into your mortgage, and then when you need it take out a HELOC to pay for college, that way you can write it off.

Now I know dave already has a shitload of houses so it doesn't really work for him.

kvrdave
06-25-06, 11:17 PM
No, but there is the idea of paying off a bunch of rentals and using the rental income towards their college. I have it worked out to where the rentals are all completely paid off 3 months before my oldest starts going to college. Either way, I think I am safe, but it would have been nice to prepay for 5,000 gallons of gasoline a few years ago. :)

Paying it when it is due may just serve to piss me off. But if I pay for it now, it is done. :shrug:

RunBandoRun
06-26-06, 08:37 AM
My kids are going to be male prostitutes. The only school you need for that is the school of hard knocks. And, perhaps, the school tha tells you where to get your antibiotics.

Will their instructor be "Fred Garvin, Male Prostitute?" :D

http://i33.photobucket.com/albums/d57/Vibiana/FredGarvinMaleProstitute.jpg

Lord Rick
06-26-06, 09:41 AM
That is correct.

I do need to read up on the refund if they don't go to school to make sure, but I know that if they go out of state or to a private school, they get full value.

Well, geez, then can I participate, even though I'm out of state?

Because 10% per year tax-free for 15 years seems too good to pass up.

kvrdave
06-26-06, 11:10 AM
Nope. State residents only :D

kvrdave
02-26-07, 01:49 PM
Well, the cost of the points goes up next month, so I went ahead and started this thing.

I decided that I wouldn't tell the boys about it so that I can use the idea of paying part of their tuition as leverage. I am really looking at this as a way to make my life easier when they graduate rather than make their life easier. :lol:

RunBandoRun
02-26-07, 02:04 PM
My kids are going to be male prostitutes. The only school you need for that is the school of hard knocks. And, perhaps, the school tha tells you where to get your antibiotics.

Excuse me, sir, but I found this apple under your tree ... :D

4KRG
02-26-07, 02:24 PM
I am really looking at this as a way to make my life easier when they graduate rather than make their life easier. :lol:

That is how I look at it. I have already purchased a prepaid for my oldest daughter, and am still saving up to get one for the younger daughter (the price seems to jump about $1000 each year in grade, but the younger the kid the more it costs).

This only covers the tuition though, so I have another 529 savings account to cover the other expenses.

Sure I should make them pay for it all themselves, it will make them better people, but I don't want the money to be an excuse for them to never try to go.

I just remember how hard it was for me, and much harder I think it will be in the future for them, that I want to help them where I can without spoiling them. It is a hard line to walk.

You have to have some fun and goof off while in college, that is part of what the experience is all about :)

NotThatGuy
02-26-07, 02:29 PM
You are saving $3k in the first year. Every year tuition goes up, you are saving that much more.

I talked to an accountant about it, and he said it was effectively like paying forty cents on the dollar for tuition.
Yeah, i've heard similar things. I'll probably go down this route eventually....because I don't really see a downside. If my kids are smart, i'm taking this money and blowing it on something fun...so it is a win/win!

-p

NotThatGuy
02-26-07, 02:36 PM
I'm going to do what my old boss did.

He paid for half of his kid's college. He had the kid take out loans for the other half. If the kid got good grades, my boss would pay off the loans. If the kid partied, he'd be on the hook for all that money. This made the kid have some skin in the game, and worked out great.

I had a variation of this with my folks. They said they'd pay for half, and the rest was on me. I received a $40k scholarship which took care of a large chunk of my part, and then I paid down another $5-$6k during college....so in the end i just had $16k, which they offered to pay when I was accepted into grad school.

It made me appreciate the work, but also really helped me out because I'd be struggling if I had to pay down my undergrad loans AND my grad loans (100+k :( ). It does annoy me to see fellow grad students get everything paids for by their parents, a house, car, etc. Now if I could only hit the lottery.....

-p

cdollaz
02-26-07, 02:45 PM
We are doing a Coverdell for our son, but we will not be telling him about it in hopes that he has great grades and gets scholarships. I can also use it to pay his private school at any age, which is a bonus.