Just in time for the Feb. 1 open enrollment date, the Florida Prepaid College Board lowered prices by $1.3 billion. New enrollees can take advantage of cheaper prices while current participants will see lower monthly payments or a refund. Annually the board, in conjunction with investment professionals, reviews projected tuition costs to make sure the program remains sound. Higher investment returns, coupled with lower than expected tuition costs, allowed the board to make this decision. After these changes, Florida Prepaid tuition costs will be the lowest in five years. The adjustments affect plans purchased in 2008 or later. About half of the owners will get a rebate; the rest will have lower monthly prices and plans could be paid in full earlier than expected. For detailed information concerning the revised pricing, visit www.myfloridaprepaid.com/lowprices/.
The Florida Prepaid Tuition plan allows families to purchase tuition at current prices, essentially locking in future college costs. Families can enroll in the Florida Prepaid plan anytime, but the new prices take effect during the Feb. 1-April 30 open enrollment period. While lump-sum payments are an option, most opt for monthly payments. The Prepaid plan offers five different options depending on the school along with the opportunity to add dormitory housing coverage. Tuition stays locked in for 10 years after the beneficiary’s projected high school graduation date. If the recipient chooses not to attend college, the owner can transfer the plan, tax-free, to another family member. The plan’s website, www.myfloridaprepaid.com, has a nifty calculator to show current prices and may provide an incentive to start early. For example, rates are over 30% higher for a second grader versus an infant. Even if you relocate, the beneficiary still qualifies for in-state tuition.
For years, open enrollment began in October and ended in February. The overlap with the holidays proved to be a disincentive for enrollment. Beginning last year, the open enrollment changed to February, but the website’s notoriously bad reputation remains. Good luck trying to reach someone in person; the changes have swamped the system. It is a royal pain when a mechanical voice answers informing you to expect a delay, but it beats a busy signal.
Perhaps more importantly is many people may look at the refund as found money and that would be a huge blunder. Distributions from 529 plans are tax-free as long as they are used for "Qualified Higher Education Expenses" as specified by IRS regulations. Using the refund for anything other than "Qualified Higher Education Expenses" will generate a federal tax liability along with an additional 10 percent penalty. Unless you like giving your money away, use the refund to add a dormitory expense option to your prepaid plan or transfer it directly to another 529 investment plan. A 529 investment plan can cover housing or be used to purchase electronics like laptops or other devices.
Next step, pay teachers a decent wage.
You can’t always get what you want, but Buz Livingston, CFP, can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by 2050 West County Highway 30A, M1 Suite 230.