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Finally, go through the "what if" exercise. Ask yourself about every eventuality you can think of, such as:
- What if your child takes more credits, or fewer, than the standard load?
- What if your child attends college on a scholarship, or doesn't attend at all?
- What if your family moves out of state and your child is no longer eligible for in-state tuition rates?
- What if in-state tuition goes down, not up?
- What if you sign up for an installment payment plan but lose your job and cannot afford the installments?
Another big "what if" concerns the plan's ability to stay in business. How long can it afford to pay ever-increasing tuition rates if its returns on invested contributions don't keep pace? The "funding ratio" in several prepaid plans has dropped precipitously over the past year with the collapse of the stock market, and actuaries have determined that some plans will run out of money in the future if conditions don't change.
Some prepaid plans have a better "backstop" than others do. Some states attach their full faith and credit to their prepaid plans while others offer only a "legislative guarantee" that an appropriation will be considered. A few plans shift the risk of underperforming investments to educational institutions by asking (or requiring) that they accept less tuition for plan participants if the investments don't keep up. The prepaid plans in the most exposed position are those without any state backing or legislative guarantees, so that they must rely entirely on plan investments to pay out future obligations.
| Plan | Residency requirements? | Type | Out-of-network benefits | Backstop | Enrollment period |
|---|---|---|---|---|---|
| Plans accepting new enrollment: | |||||
| Prepaid Affordable College Tuition (PACT) Program | No | Contract | Average in-state tuition | Fund assets only | October thru December |
| University of Alaska College Savings Plan | No | Unit | Contributions plus/minus portfolio performance | Direct obligation of state | Year-round |
| Florida Prepaid College Plan | Yes | Contract | In-state tuition | Full faith and credit | October thru January |
| College Illinois! 529 Prepaid Tuition Program | Yes | Contract | Average in-state tuition | Legislative guarantee | October thru April |
| Independent 529 Plan | No | Voucher | Contributions plus/minus fund performance (2% annual collar) | Commitment by colleges | Year-round |
| College Savings Plans of Maryland - Prepaid College Trust | Yes | Contract | Average in-state tuition | Legislative guarantee | December thru March |
| Massachusetts U.Plan | No | Voucher | Contributions plus interest (at CPI) | Full faith and credit | May thru June |
| Michigan Michigan Education Trust | Yes | Contract | Average in-state tuition | Fund assets only | Year-round |
| Mississippi Prepaid Affordable College Tuition (MPACT) Program | Yes | Contract | Average in-state tuition | Full faith and credit | September thru December |
| Nevada Prepaid Tuition Program | Yes | Contract | Average in-state tuition | Fund assets only | January thru April |
| Pennsylvania 529 Guaranteed Savings Plan | Yes | Unit | Same as in-network | Fund assets only | Year-round |
| Tennessee's BEST Prepaid College Tuition Plan | Yes | Unit | Same as in-network | Fund assets only | Year-round |
| Texas Tuition Promise Fund | Yes | Unit | Contributions plus fund performance | Statutory requirement on in-state public | September thru February |
| Virginia Prepaid Education Program (VPEP) | Yes | Contract | Lesser of in-state tuition or contributions plus interest/fund performance | Legislative guarantee | December thru March |
| Washington Guaranteed Education Tuition (GET) | Yes | Unit | Same as in-network | Full faith and credit | September thru March |
| Plans closed to new enrollment: | |||||
| Colorado Prepaid Tuition Fund | Unit | Same as in-network | Fund assets only | ||
| Kentucky's Affordable Prepaid Tuition (KAPT) | Contract/unit | Contract payout value | State unclaimed property fund | ||
| Ohio CollegeAdvantage - Guaranteed Savings Fund | Unit | Same as in-network | Fund assets only | ||
| South Carolina Tuition Prepayment Program | Contract | Lesser of average in-state tuition or contributions plus fund performance | Legislative guarantee | ||
| Texas Guaranteed Tuition Plan | Contract | Average in-state tuition | Full faith and credit | ||
| West Virginia SMART529 Prepaid Tuition Plan | Contract | Average in-state tuition | State unclaimed property fund | ||
Posted March 20, 2009
Joe Hurley is the founder of SavingForCollege.com.
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