Florida Prepaid College Tuition

[FIT_Goat]

My sister and I had a big argument about this recently.

She is paying $575 a month for 55 months to lock in college tuition for her daughter (who is currently 1 year old).  If they do this, then my niece gets 4 years of tuition at today's costs.

I was trying to argue with my sister that she would probably be better off investing the money for the 17-18 years, and then having it available to spend on college.  My reasoning is that 575/mo @ 7% for 55 months, and then sitting for the rest of the time is nearly $90k.  She's paying 31.6k in today's money, betting that tuition and expenses will be greater than $90k by the time her daughter goes to college.  She will be able to get a refund, at the going rates, for the money when my niece is college age, if she doesn't go or doesn't need the money.

So, what do y'all think?  If this a fair deal?  College tuition seems to be rising at around 4-5% per year, so it's probably pretty close.  It's probably not a horrible mistake.  It isn't tax advantaged (neither is a 529), so I don't know that there's really any deciding factor there either.

[tomorrowsomewherenew]

Is this just for tuition or for tuition and room and board? I mean, UCF is only about $6,000 a year right now, unless I'm grossly mistaken.

[FIT_Goat]

There are several plans, I am not sure which one my sister is getting.  But, I suspect it is tuition and room and board, but I am not 100% sure.  It seems to be too much for just tuition, but not enough for tuition with room and board.  My sister has become pretty defensive about it, so there's little hope of getting elaboration at the very moment.

[lifeisshort123]

What do people currently think about Florida PrePaid vs. investing in a 529?

We are leaning towards doing the Florida PrePaid 4 year university plan.  Are we ridiculous for thinking about doing that instead of just investing the money in the 529?

[GilesMM]

What if her child doesn't make it to college or doesn't like Florida?

[Runrooster]

 It isn't tax advantaged (neither is a 529), so I don't know that there's really any deciding factor there either.

Are you sure?  Most states offer two tax advantages: limited annual amount on state taxes and tax free growth on the initial investment . Florida has no state taxes so you don’t get the first, but it sounds like you don’t pay federal tax on tuition when you take it out do you?

We’re in a different state but yes we took that bet. Would have been worth more in state but the child is using it towards out of state private school.  In retrospect I would vote for a straight 529.

[AnotherEngineer]

Prepaid and even a 529 seem risky based on future tuition costs, kids interests and aptitudes, scholarships and grants, taxes, FAFSA, etc. That is a lot of money to tie up in a limited purpose account with potentially limited benefit.

We have no dedicated college savings for our three kids as we expect some combination of community college, local public university, scholarships/grants, online, trade school, loans, FASFA-hacking, and the whole higher ed system imploding under its own weight.

I like GoCurryCracker's take on 529s and how RootofGood are handling their current kids in college. https://www.gocurrycracker.com/why-gccjr-has-no-529/