Prepaying tuition for you kids....WOW

[kvrdave]

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 ) 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]

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]

Sounds like a fantastic idea! I don't believe we have that in Wisconsin, but still a good idea.

[kvrdave]

Originally Posted by Lateralus

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]

Originally Posted by kvrdave

5 years at the U for each boy (don't worry, I wouldln't seriously consider sending them to UW )....

HEY!

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

Originally Posted by kvrdave

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]

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.


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]

Originally Posted by mosquitobite

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]

Originally Posted by mosquitobite

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.

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

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]

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]

Originally Posted by kvrdave

Because I have too many houses.

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

[das Monkey]

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]

In all seriousness, what if they end up not being college material? Can you sell your points or get a refund?

[Brain Stew]

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.

[pedagogue]

They really seem like a nice investment.

-p

[kvrdave]

Originally Posted by Jason

In all seriousness, what if they end up not being college material? Can you sell your points or get a refund?

Originally Posted by Lateralus

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

Originally Posted by kvrdave

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]

Originally Posted by kvrdave

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!

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.

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]

Originally Posted by Breakfast with Girls

Kids should have to work one and sometimes two jobs and still graduate under a mountain of debt like I had to.

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]

$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]

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]

Originally Posted by Breakfast with Girls

Hey!

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.

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.

[kvrdave]

Originally Posted by DVD Josh

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]

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]

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]

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]

Originally Posted by xmiyux

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.