What Are The Benefits To Pre-Paid College Programs?

What are the benefits to pre-paid college programs? Pre-paid programs are historically less risk, but there is a premium to pay above the college cost. They are typically at least historically have been...

They are typically at least historically have been lower risk. With the Coverdale Education Savings Account or the 529, you decide the sort of degree of risk you want to take. In a prepaid program, you know exactly like you are getting in return again if the child ultimately goes to schools or to colleges. The flip side of it is that in many states now the prepaid programs have a premium on them to keep the programs what the account was called actually solvent, but that means in simple terms. For example, in the state of Pennsylvania, they have good and fairly large prepaid program. Five years ago, you brought semester hour Pen State at the same cost as the semester hour of Pen State that year. Today if you buy a semester hour Pen State in that prepaid program you pay a premium. I do not recall precisely what it is, but it might be in the 10 or 15% above the cost of the semester hour. You pay a premium. I do not recall precisely what it is, but it might be in the 10 or 15% above because of a semester hour, which again locks in the cost all the at higher and if it four or five year old or something and one could say that is a pretty modest premium, but it does not offer you the, you know, what you are getting from a return standpoint, but there is often times a cost. In addition, prepaid programs sometimes have annual fees or more restrictions on where the funds can be used, either dramatically from state to state. If somebody state offers a prepaid program, you should look at it, but it is going to take a little bit of analysis to understand and the things to look at are what is the cost versus what student would pay today. And #2 in part at least, as importantly as the first question is: what are the restrictions, if any on the schools they could be used at. If it is a great program, but it only applies to end-state school and your child chooses to go to school in another state. Often times, the return you get would not even be the return you get on the end-state program. So, those are the two issues to look at.

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