OT- Saving for kids college
- Thread starter msuJD164
- Start date
Tuition rates have been climbing faster than the stock market for a long time now. You're best off trying to squeeze every point out of the SAT/ACT and get scholarship money. A few extra points could be worth thousands of dollars.
state, they probably have one as well. MPACT guarantees to pay your child's tuition and required fees - but not room, meals, or books. It has several options and terms that increase or lower the cost but the younger the child, the lower the cost. If the child goes to a private college or out of state school, they would get the average MS tuition. Mississippi also has a MACS plan that allows you to save for college costs and get tax advantages. You can sign up for MPACT in a couple of months.
Your kids are a long, long, way from this, but for others with older kids that are good academic students, be sure they take the PSAT as a junior in high school. Many schools will start prepping students in the 9th grade for the PSAT and some offer classes. With a high enough score on the PSAT, a kid can qualify as a National Merit Semi-finalist which currently means a scholarship for tuition and a room for 4 years (roughly $40,000 right now). With a high enough score on the SAT, filling out paperwork, and meeting deadlines, they can get Finalist status, which is even more money. As a Semi-finalist or Finalist, they will also have an excellent chance of getting other scholarships, which on top of MPACT means spending money that doesn't come from your checking account.
Your kids are a long, long, way from this, but for others with older kids that are good academic students, be sure they take the PSAT as a junior in high school. Many schools will start prepping students in the 9th grade for the PSAT and some offer classes. With a high enough score on the PSAT, a kid can qualify as a National Merit Semi-finalist which currently means a scholarship for tuition and a room for 4 years (roughly $40,000 right now). With a high enough score on the SAT, filling out paperwork, and meeting deadlines, they can get Finalist status, which is even more money. As a Semi-finalist or Finalist, they will also have an excellent chance of getting other scholarships, which on top of MPACT means spending money that doesn't come from your checking account.
The way college tuition has been outpacing inflation is not sustainable. In another 16 years, paying for college could look a lot different. Public universities may have drastically cut costs or there may be credible, cheap on-line programs that are options.
That said, if you can afford it, the prepaid tuition deal seems like a pretty reasonable hedge. The worst case scenario (assuming the program doesn't default; no clue what it would take for that to happen) is that you paid more than you had to but your kids have college paid for.
That said, if you can afford it, the prepaid tuition deal seems like a pretty reasonable hedge. The worst case scenario (assuming the program doesn't default; no clue what it would take for that to happen) is that you paid more than you had to but your kids have college paid for.
My wife's parents paid for our first child's already. We just started one last year for our now 2 year old. It's a really good deal, we will have it fully paid for in 4 years.
http://www.collegesavingsmississippi.com/
I am putting any extra savings in mutual funds and a stock account I have. If they need it, it will be there, if not it will go to our retirement.
http://www.collegesavingsmississippi.com/
I am putting any extra savings in mutual funds and a stock account I have. If they need it, it will be there, if not it will go to our retirement.
MPACT is suppose to be self sufficient, but with tuition increasing at a steady pace and investment returns swinging wildly, it is possible that the Legislature may at some future point have to help fund the program for it to meet its obligations. So far, that has not been necessary. If it were to become necessary and the Legislature not fund it, then the capitol would be surrounded by angry parents and politicians tend to avoid that if possible or at least chose very carefully who they make mad.
No telling what the future may hold, but I think a pre-paid tuition plan is a good bet.
No telling what the future may hold, but I think a pre-paid tuition plan is a good bet.
I'm about halfway through my 10 years. I pay about $185/month for 4 years of college credit.
I hate paying it, but I feel it is one of the better investments I've made.
I hate paying it, but I feel it is one of the better investments I've made.
MPACT is only a good option if you know with certainty that your child will attend an in-state school. If they decide to go out of state, MPACT only pays an amount up to the average tuition and mandatory fees set at all of the public universities or public community colleges in the State. Because you will only be paid at the average of all public institutions in the state, your return would not be good.
Alternatively, 529 plans offer the same tax advantages but also offer the potential for larger returns. College tuition inflation is averaging between 5.5% and 6% right now. History tells us you can earn at least marginally better returns in the stock market. I put most of my clients in the Ohio Blackrock Age Based 529 or the Virginia American Funds 529.
Alternatively, 529 plans offer the same tax advantages but also offer the potential for larger returns. College tuition inflation is averaging between 5.5% and 6% right now. History tells us you can earn at least marginally better returns in the stock market. I put most of my clients in the Ohio Blackrock Age Based 529 or the Virginia American Funds 529.
So far, so good. I think it's pretty much tied to the S&P 500.<div>
</div><div>BhamDawg ... Do you know what the resolution of the Alabama Prepaid College Tuition is/was? Last I heard contributors were pretty much left holding the bag regardless of guarantees.</div>
</div><div>BhamDawg ... Do you know what the resolution of the Alabama Prepaid College Tuition is/was? Last I heard contributors were pretty much left holding the bag regardless of guarantees.</div>
.... that your "return" is only good if you child goes in-state. The return is unaffected by the choice of in-state or out-of-state. There seems to be only two scenarios in which the return is bad: 1) the state goes broke or 2) your child does not go to college. In the latter, you get basically a short term CD's ROR. If the child dies or is permanently disabled then you get the standard return.
It comes down to whether you think college inflation will rise faster than the overall market over. Risk tolerance plays a big part of it too.
I know that the average increase for MS universities this past year was just under 10%. That's not a bad return these days.
The problem with out-of-state is that MS schools are so much cheaper than everywhere else and if you just rely on MPACT to fund college then you could have a large gap to fill if you childgoes to a privatecollege or a more expensive out-of-state public university. You probably need a mixture of MPACT and a 529 plan to really be covered.
It comes down to whether you think college inflation will rise faster than the overall market over. Risk tolerance plays a big part of it too.
I know that the average increase for MS universities this past year was just under 10%. That's not a bad return these days.
The problem with out-of-state is that MS schools are so much cheaper than everywhere else and if you just rely on MPACT to fund college then you could have a large gap to fill if you childgoes to a privatecollege or a more expensive out-of-state public university. You probably need a mixture of MPACT and a 529 plan to really be covered.
I believe that under the settlement that was reached the PACT program is continuing to make tuition payments; however, the settlement is being review by the Alabama Supreme Court.
Say they're backed by full faith and credit, but provide the flexibility to change parameters of programs and what costs they will cover based on financial performance, which basically turns them into something closer to an education savings account, where you're protected from all but the worst performance and don't get any upside.
I've never heard that Mississippi's program does anything like that and I think it's probably a good bet. If tuition at state schools continued to rise such that MPACT could not meet its obligations, I think they would force the schools to get costs down before they tried to cut what it paid. But some places have state pensions that are unfunded, prepaid tuition plans that are unfunded, huge bond obligations, and already have tax revenues high enough that they are chasing businesses out. I'd be very aware of how much the full faith and credit of the state is worth in those places and if I was giong to rely upon in, where in the political pecking order people with similar rights to mine would fall.
I've never heard that Mississippi's program does anything like that and I think it's probably a good bet. If tuition at state schools continued to rise such that MPACT could not meet its obligations, I think they would force the schools to get costs down before they tried to cut what it paid. But some places have state pensions that are unfunded, prepaid tuition plans that are unfunded, huge bond obligations, and already have tax revenues high enough that they are chasing businesses out. I'd be very aware of how much the full faith and credit of the state is worth in those places and if I was giong to rely upon in, where in the political pecking order people with similar rights to mine would fall.
Was going to say the same thing here. 529 plans are great and both them and MPACT should be considered. If your child happens to have a full ride then the 529 can be used for any education expense tax free. If there is no education expense it can be used on then take the 10% penalty and its still a great investment.
I started 529 plans for my children when they were three years old. I chose T. Rowe Price 529 plans and I have been very pleased. With T. Rowe Price you can select an investmentplan that coincides with the yearyour childwill start college and the investment strategy changes each year. The closer they get to college the more conservative the investments becometo prevent wild changes just before the start of college. For example, if you child is four now he/she likely will enter college in 2026; therefore you would select the 2026 investment option. As time passes if you want to be more aggressive then you can move part of the money in the 2030 plan. You can make automatic deposits of $50 or more from your checking account. You pick the month and day of the month you want the withdrawal from your account to take place
.
Thegreat advantage of all 529 plans is that the gains are never taxed--even when you use the money for college expenses. Therefore you don't have to worry aboutpaying taxes ondividends, interest or capital gains.
The T. Rowe Price funds are great because they are "no load funds." I never paidany fees for setting up or maintaining the accounts and all of their charges are internal and average less than 1% per year. I have been very pleased. Access the information at TRowePrice.com and select College Savings Plans. I like this family of 529 funds because your child can go to school in any state and you will have no problem. My twelve year old is trying to decide between Harvard and Mississippi State!!
I do not work for T. Rowe Price.
.
Thegreat advantage of all 529 plans is that the gains are never taxed--even when you use the money for college expenses. Therefore you don't have to worry aboutpaying taxes ondividends, interest or capital gains.
The T. Rowe Price funds are great because they are "no load funds." I never paidany fees for setting up or maintaining the accounts and all of their charges are internal and average less than 1% per year. I have been very pleased. Access the information at TRowePrice.com and select College Savings Plans. I like this family of 529 funds because your child can go to school in any state and you will have no problem. My twelve year old is trying to decide between Harvard and Mississippi State!!
I do not work for T. Rowe Price.
In all the investment debates in the last couple of days,THIS is by far the most importantfactor.Whether for college or for retirement, as long as you're consistently putting money intoa reasonable investment, you'llwind up in pretty good shape.Spanky said:
have a plan B, a 32 puts you in the 98 percentile. Obtainable, but not for everyone. We chose MPACT even though I was consistently told that the stock market would outperform tuition increases. As you see, timing is everything and I found comfort in knowing that tuition was settled. I feel if I had relied solely on investments, my now college freshman would be short of funds.