An important college planning deadline is fast approaching. The opportunity to enroll your kids in a Florida Prepaid Plan ENDS February 28th. They have a range of plans and payment options that are worth your consideration. I sat down with College Planning Expert, Natalie Davis of Campus Tower Consulting to have a conversation about the pros and cons of the Florida Prepaid Plan. Natalie Davis (LinkedIn Profile) is the executive director of Campus Tower Consulting and possesses unique expertise working with college admissions and financial offices. She knows what they are thinking.
PF: What is the FL PP plan?
CT: Great question. The Florida Prepaid college plan is a way to lock in today’s tuition rates at public universities for your student years before he or she goes to college. It assumes that the price of tuition and fees for public colleges and universities will go up, which is a pretty safe bet in my book. Want to lock in the entire cost of a bachelor’s degree? You can do that. Want to lock in just one year? You can do that too.
PF: Is this the same thing as a 529 plan?
CT: No, a 529 saving plan is a different funding vehicle altogether. A 529 plan is like a 401k retirement plan. You can contribute after-tax dollars to a fund that is tied to the stock market for growth. The idea is that a dollar invested today will grow with compounding interest and will outpace the growth rate of tuition and fees.
529 plans are offered by every state, and each state’s plan performs a little differently in the marketplace. You aren’t limited to just your state’s plan, but sometimes there are tax incentives to use the 529 specific to your state.
The money in your 529 account is more flexible than Florida prepaid dollars in that the funds can go towards ANY educational expense like tuition and fees, books, room and board, computers and other supplies.
PF: What would the benefits be to enrolling before the deadline?
CT: The window to lock in the 2018 tuition rates closes on February 28. So if you are thinking about getting the prepaid plan, it would save you the cost between this year’s rates and next year’s rates. A more significant reason to commit now is each year your child gets closer to attending college, the less time you have to save, resulting in larger monthly payments in order for the funds to be there in time. The Florida Prepaid website has a fantastic calculator where you can investigate monthly or lump sum payments based on your child’s age.
PF: What do we need to understand about the trends in Florida’s tuition?
CT: According to data from the State University System of Florida, the average tuition rate for Florida’s Universities was stable from 2014 to 2016. However, this tuition freeze was short-lived as tuition was on the rise again – 7.7 percent – in 2017. But this one moderate increase in tuition doesn’t give the whole picture. From 2009 to 2012, the percentage growth in tuition at all Florida universities grew by double digits year over year, meaning there was a significant 10-15 percent increase in price each year during that time. When you “zoom-out” and look at the past 18 years, average tuition has increased over 152 percent.
The stability seen in tuition rates from 2014 to 2016 was the result of state legislation intended to limit tuition increases. However, we have seen from other states that implemented a “tuition freeze” – typically the moment the freeze expires, there is a large increase in tuition to make up for those years of flat tuition revenue that couldn’t keep pace with growing expenses.
PF: What are some of the drawbacks or trade-offs to doing a prepaid plan?
CT: The drawbacks come in flexibility. Florida Prepaid is intended for Florida’s public colleges. What if your student wants to attend a private college within the state? You can take the funds with you, but you loose the purchasing power of locked-in rates. Essentially, you could end up using all of the funds paid into the plan on one or two semesters at a private college (assuming you are paying the full sticker price at that private college, which not many people do, but I digress…)
The same is true if your child attends a university out-of-state. The benefit of locking in today’s rates is lost, and you are left with a funds becoming a glorified “savings account”.
PF: What is your advice for Pullaro Financial clients beyond the Florida Prepaid and 529 Savings Plans?
CT: The good thing is that you are already planning and thinking about how to pay for college, but college funding is only half the equation. I would say that preparing your student to become the best applicant possible – meaning: earning the best grades he or she is capable of, taking the most rigorous curriculum offered at their high school, and taking some kind of action –like volunteering- to discover what they might be interested in studying once in college.
PF: Campus Tower Consulting provides college counseling services – what does that mean exactly?
CT: Campus Tower Consulting provides the most strategic, professional and data-driven college planning and admissions counseling around. We help students and families manage every aspect of attending college starting with college selection, cost analysis, financial aid, essay coaching, application assistance, financial aid form prep and interview prep. We not only help you navigate the process of attending college, but we also manage the entire process so nothing slips through the cracks. Our website has more information (www.campustowerconsulting.com) and also explains a little about my background as a higher education research manager for the National Association of College and University Business Officers in Washington, DC.
The deadline is Feb 28th, and if you want to have a conversation about how college planning fits into your families bigger plan we’re here to chat. Find a convenient time for you by clicking on our online calendar. You can go to MyFloridaPrepaidPlan.com to sign up.
Cheers to your financial life,