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00-13: The Best Prepaid Tuition Deal in the U.S.
Joe Hurley
Sunday, June 18th 2000

There can be some really terrific results from the purchase of a prepaid tuition contract if you are in a state that offers a prepaid tuition plan. A lot of it can depend on the particular public university that the student attends. Go to an expensive one, and you’ve got a deal. With the least expensive public college, you may be throwing money down the drain. In conducting our research for an article about prepaid tuition contracts in the last issue of our newsletter, The 529 Plan Report, we found some startling results including a few tremendous bargains.

The absolute best deal? Our vote goes to the Maryland Prepaid College Trust, IF your child will be attending St. Mary’s College of Maryland (and you are a Maryland resident). Here’s why: in the last enrollment period you could purchase a one-year university contract for a child in the tenth grade at a cost of $4,909. The contract will pay for the tuition and mandatory fees for one year at any Maryland four-year public institution. The tuition and fees at St. Mary’s for the 1999-2000 school year were $7,175, which means that you immediately get the benefit of a $2,266 discount off the regular tuition and fees! This represents a two-year return of 46% even before factoring in any increases in the tuition and fees over the next two years!

Of course, St. Mary’s College enrolled only 278 freshman last year, and so the chances that any particular contract beneficiary will be attending that college are pretty slim. The investment returns decrease significantly if the student attends the University of Maryland at College Park ($4,939 cost of tuition and fees) and are pretty dismal if the child attends Bowie State University ($3,664 cost of tuition and fees).

Any resident student heading off to the Virginia Military Institute can also get a great deal through the Virginia Prepaid Education Program. Although you cannot purchase a contract for a child past the ninth grade, the cost of a one-year university contract for a ninth grader in the last enrollment period was $4,037 while the tuition and fees at VMI this past year were $6,214 (according to the U.S. Department of Education). This is a $2,177 discount, or 54% over three years.

The point here is that there is more to think about with the prepaid tuition plans than you might realize, and so careful study is required to determine how attractive the investment in a contract really is. With so much attention being focused on the new 529 savings plans these days, it is important to realize that the prepaid tuition plans are here to stay and that they will remain a popular choice for many families.

» 05-4: The 529 marshals have arrived - 08/30/05
» Our 5.29th-year anniversary - 06/29/05
» 05-2: 529s and the new Bankruptcy Act - 04/28/05
» 05-1: Reform or Deform? - 02/27/05
» 04-6: Perspectives on the 529 debate - 12/28/04
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