#45347 - 09/23/09 09:06 PM
Want to do Prepaid tuition plan that is guaranteed?
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soccer17
Registered: 09/23/09
Posts: 1
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i want to put a lump sum to cover 6 years of tuition at a public college. I live in PA but from what i can tell it is not guaranteed so in theory i could lose all my investment. Is there a way to get the peace of mind of prepaid tuition plan that is guaranteed in some way. No sense taking locking in tuition if I can't get peace of mind.
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#45358 - 09/24/09 09:30 PM
Re: Want to do Prepaid tuition plan that is guaranteed?
[Re: satanhimself]
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rsinj
Registered: 11/16/03
Posts: 1134
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HA!
Thanks, I needed a good laugh today.
Even with bankruptcy, I do not think that absolves obligations which fall under "the full faith and credit of the commonwealth", since it has taxation as a means of raising money - which is specifically what the phrase means. And, even then, due to the structure of the plan, it may not matter, since the schools have agreed to accept the bonds backing the plan.
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#45431 - 10/11/09 10:35 PM
Re: Want to do Prepaid tuition plan that is guaranteed?
[Re: rsinj]
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desi1
Registered: 08/23/09
Posts: 29
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soccer17,
I would stay away from PA TAP. That plan is subject to politicians' whims.
About 8-9 years ago, I was visiting this forum and some of the "regulars" with their best intentions seem to sing high praises of PA TAP.
Needless to say, I invested some (not all but still in 6 digits) to PA TAP program as in theory it investment philosophy matched closely to the real future needs.
Everything was fine until current PA Treasurer McCord decided to apply annual recurring fees to investments already made in past. The net result is that unless I send him hundreds of dollars every year for EACH of my kids, I will see my already purchased credit start disappearing.
Pease do look at what rsinj has suggested (it has its positives and limitations too). But otherwise until they develop a sound widely acceptable pre-paid plan, better to stick with traditional 529 plan.
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#45442 - 10/13/09 11:15 AM
Re: Want to do Prepaid tuition plan that is guaranteed?
[Re: desi1]
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Drew
Registered: 01/09/00
Posts: 2913
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The UMass program only applies to some 80 participating Mass colleges and NOT top ones like Harvard, MIT, Tufts ---if you don't go to one of the 80 participants your return falls to the CPI--now the CPI may be a good deal compared to many other deals and its a better exit deal that Pa GSP in a down market unless CPI takes a tumble.
If you are to attend a state owned college in PA or even U Penn the GSP may be still a good deal ---but I must say Treasurer McCord as contaminated the waters with a dose of politics and a new formula designed to visit costs on the larger savers. In the real world Vanguard gives larger customers lower fee structures--but not so with GSP--it once was an equitable flat rate in sense of processing costs--but state political battles with PSU over tuition fell over to GSP participants along with practical problems of how to address lackluster underlying plan performance.
_________________________
Drew
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#45445 - 10/13/09 07:05 PM
Re: Want to do Prepaid tuition plan that is guaranteed?
[Re: Drew]
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rsinj
Registered: 11/16/03
Posts: 1134
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Yes, the MA U.Plan does "only" apply to about 80 MA schools and not Harvard/MIT/etc. However:
1. There is no state residency requirement
2. It applies to both public and private schools
3. It has the full faith and credit backing of the commonwealth
4. There are no fees, premiums, etc.
5. Though the top, top schools like Harvard and MIT are not in the plan (I personally don't put Tufts in that category), you still have BU, BC, Amherst, Babson as well as all the schools in the UMass system.
The above are facts - they're not going to change. How many prepaid plans are remaining that allow residents of other states to participate, provide for both public and private schools, and have state backing/guarantee?
if you don't go to one of the 80 participants your return falls to the CPI--now the CPI may be a good deal compared to many other deals and its a better exit deal that Pa GSP in a down market unless CPI takes a tumble.
1. You don't enter into a prepaid plan with the thinking of "if you don't go to one of the schools" - you go.
2. Regardless if CPI takes a tumble - you are guaranteed not to lose money. How many other prepaid plans are guaranteeing you that you will not get less money out than what you put in, better yet some guaranteed rate of return?
In general, no matter which prepaid plan you choose, by definition, you are entering into a contract - a contract with stipulations, terms and conditions. You are not going to get a deal that is 100% slanted in favor of the purchaser, that allows everything under the sun, gives you a risk-free exit strategy guaranteeing you above market rates of return. Maybe in your wildest dreams, but in the real world it is not going to happen.
What it boils down to is "what is most important to you in selecting a prepaid plan"?
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#45448 - 10/14/09 10:21 AM
Re: Want to do Prepaid tuition plan that is guaranteed?
[Re: rsinj]
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bwilk
Registered: 05/14/01
Posts: 3345
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I don't understand the use of quotation marks around "only". You seem to say that this isn't a big deal. It is huge. As you also said, you enter into a prepaid with the thinking of going to one of those schools. I have no family ties at all to the New England area or any Massachusetts school. Since I have no reason to believe there is even a small chance that my daughter will go to a school in the plan, then I have to look at the exit strategy. Risk free, tax free CPI returns aren't that attractive. At that point, just invest in a CD or some other risk free instrument like Tips. Same idea and return without the Massachusetts reqmts. Also, no guarantee that the exit strategy or other fund rules won't change.
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#45450 - 10/14/09 02:28 PM
Re: Want to do Prepaid tuition plan that is guaranteed?
[Re: bwilk]
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rsinj
Registered: 11/16/03
Posts: 1134
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The quotes around "only" is to indicate that a single state plan with 80 participating schools is a very large number in comparison to other states. What other state plans which limit you to schools in the state, allow for attending any of 80?
For you, it is a big/huge deal, as it is for me. But for me huge in the fact that it is tremendous. We have no specific ties to family or schools in MA either. However, I decided long ago, that just like you buy any product, whether a car, a house, or anything else, you compare the product with others, the price/deal you're offered, and then make a decision on what you want and what you can live with for the price. A college education is no different (though kids and some parents would like to think it is) - it is a product. You buy the product for some price, and for the most part, you are getting essentially the same product as you can get elsewhere. We can argue that point for eternity, but, we all have friends who've attended the top schools, and really didn't get anything out of it. On the other hand, we all know folks who did not attend the top tier school and did fine for themselves. End result mostly lies with what the individual does with the knowledge. Five or ten years out of school, who really looks or cares about where you went? It only matters for your first or possibly second job.
If you don't believe that there is much of a chance of your child going to a school in the plan, you don't have to look at the exit strategy at all - you don't sign up for the plan. Why would you sign up for a prepaid plan that doesn't meet your needs in the first place? So if the child decides to go to one in the plan then you make out ok? That's the backwards way of looking at it in my mind.
Risk free, tax free CPI aren't attractive if you are comparing raw dollars to potential raw dollars that you might get elsewhere...for additional risk. But, again, the objective is that you do fulfill the contract, you attend a participating school, and you make out very well because you paid maybe half price for the tuition benefit you're getting at the time of matriculation. Investing in a CD or other risk free instrument is not going to keep pace with tuition - is it? It isn't the same idea - because with your CDs or other instruments, you have no entry strategy - your money has not kept pace with tuition inflation. Sure, you don't have the MA requirements, or any requirements, and your dollars will not buy the tuition that they could years earlier.
As far as rules not changing - sure, there are no 100% guarantees. However, show me how many plans have specific mention of full faith and credit of the commonwealth (we're counting fingers on one hand), go advertise that fact, and then reneg. I believe MA had some token/flat fees early on which were eliminated. Could they be brought back? Probably.
But, let's get back to the original post for a moment - the poster is looking for a prepaid plan that is guaranteed. Looking at the playing field today, what's your answer? Again - we're counting on one hand. I've provided him/her with the answer.
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