A beautiful gift from my parents today

[Beer-man]

My parents told us today that they will be purchasing a 2yr prepaid college plan for each of our 3 kids. They are still sub 10yrs old but it was such exciting news. We haven’t had any windfalls and some setbacks along our FI journey in the past few years so this is such a surprise and blessing.
We do have 529’s but they are minimally funded and we really had no formal plan for how to fund college.

 

[aaronc879]

How do you prepay for 2 years of college for 10 year olds? I don't get it.

 

[Beer-man]

The state offers a plan for covering in state tuition for children. It’s pro-rated based on age. U can pay a monthly amount till they are 18 or upfront.

 

[Jerry1]

Yes, we have the same thing in Michigan. It’s called MET or Michigan Education Trust. It provides a lot of flexibility in prepaying education. For example, I can buy a prepaid plan for my 13 year old grandson for a lump sum for about $80K to have full tuition paid at an in State university. There are also monthly plans and two year plans versus four year plans . . .

 

[pb4uski]

The state offers a plan for covering in state tuition for children. It’s pro-rated based on age. U can pay a monthly amount till they are 18 or upfront.

What happens if the child's best choice is out of state? Of if the child choses not to attend college? Or joins the military?

 

[Beer-man]

What happens if the child's best choice is out of state? Of if the child choses not to attend college? Or joins the military?

All good questions but it is a gift at no cost to us and I don’t intend to question their reasons for choosing what they did. I’m grateful for their generosity and having the foresight to plan ahead.
These are reasons we chose to set up a 529 but haven’t had the ability to fund it as well as we intended.

 

[Midpack]

All good questions but it is a gift at no cost to us and I don’t intend to question their reasons for choosing what they did. I’m grateful for their generosity and having the foresight to plan ahead.
These are reasons we chose to set up a 529 but haven’t had the ability to fund it as well as we intended.

+1. It sounds like a wonderful gift.

 

[joeea]

My parents told us today that they will be purchasing a 2yr prepaid college plan for each of our 3 kids. They are still sub 10yrs old but it was such exciting news. We haven’t had any windfalls and some setbacks along our FI journey in the past few years so this is such a surprise and blessing.
We do have 529’s but they are minimally funded and we really had no formal plan for how to fund college.

That is indeed a beautiful gift. Your parents are very thoughtful people.

 

[Sarah S]

Very lovely gesture.

I looked at the website for what I believe to be op’s state and it seems all the issues raised are addressed in the plan so the money will not be lost
https://www.myfloridaprepaid.com/prepaid-plans/

 

[pb4uski]

Very lovely gesture.

I looked at the website for what I believe to be op’s state and it seems all the issues raised are addressed in the plan so the money will not be lost
https://www.myfloridaprepaid.com/prepaid-plans/

Yes, but if the student doesn't attend college and there is no qualified family member to transfer the benefit to, you get a refund but no interest. That would be us... DD had already completed college when DS decided not to attend college.

What if the Beneficiary does not go to college?
If the student does not use their Florida Prepaid Plan benefits, you may transfer the benefits to another qualified family member or you may request a refund. Your refund will be equal to the payments that you have made, less any previous refunds, and a fee of up to $50 per plan or 50% of the amount paid to the board, whichever is less, may be assessed upon termination of the plan.

 

[street]

That is great regardless of the terms what a wonderful gift.

 

[target2019]

My parents told us today that they will be purchasing a 2yr prepaid college plan for each of our 3 kids. They are still sub 10yrs old but it was such exciting news. We haven’t had any windfalls and some setbacks along our FI journey in the past few years so this is such a surprise and blessing.
We do have 529’s but they are minimally funded and we really had no formal plan for how to fund college.

Your parents are wonderful people. What a loving gesture!

 

[RetMD21]

Yes, we have the same thing in Michigan. It’s called MET or Michigan Education Trust. It provides a lot of flexibility in prepaying education. For example, I can buy a prepaid plan for my 13 year old grandson for a lump sum for about $80K to have full tuition paid at an in State university. There are also monthly plans and two year plans versus four year plans . . .

I picked the alternate MESP (Mich Educational Savings Program) 529 thinking that investments would outperform and that the youngsters might prefer out of state. They did stay in Michigan for college but I guess I could have offered them the alternative of paid instate tuition or partial payment of out of state + student loans.

 

[eytonxav]

Nothing better than the gift of an education!

 

[pb4uski]

That is great regardless of the terms what a wonderful gift.

Agree... just want to make sure OP understands possible outcomes.

 

[gwraigty]

Yes, but if the student doesn't attend college and there is no qualified family member to transfer the benefit to, you get a refund but no interest. That would be us... DD had already completed college when DS decided not to attend college.

+1

Although I agree it's a wonderful gesture, I think unrestricted gifts are much better.

 

[Ronstar]

Education is the gift that keeps on giving! Your parents are awesome!

 

[hausfrau]

That's awesome! What a great gift!

 

[REWahoo]

We gave each of our five grandchildren a two-year prepaid tuition plan on their first birthdays. One unintended benefit was that it motivated their parents to start saving to pay for the other two years.

 

[EastWest Gal]

My dad funded his grandkids’ post-high school education as well. Ours only partially. My sister’s kids, 100%. Great gift. Better than direct money. My dad did not live to see any of his grandkids graduate high school, however.

 

[Moemg]

Great gift !

 

[neihn]

Very nice gift!

 

[brett]

Your parents did a wonderful and a thoughtful act. This is a gift that will truly follow your grandchildren for the rest of their lives. Bravo!

We are doing an edu program for our grandchildren. We recently revised and updated both of our wills. An amount from the first cut of our respective estates is earmarked to our grandchildren for post secondary edu. As the edu fund grows we can adjust the number in the will accordingly.

We do not know what will happen in the future with their respective family finances. Edu costs are skyrocketing. The increase is far above the rate of inflation. We did not want our children to have debt coming out of post secondary, nor do we want out grandchildren to be burdened by this. Nor do we want their edu choices to be constrained or determined by financial constraints.

 

[youbet]

All good questions but it is a gift at no cost to us and I don’t intend to question their reasons for choosing what they did. I’m grateful for their generosity and having the foresight to plan ahead.
These are reasons we chose to set up a 529 but haven’t had the ability to fund it as well as we intended.

If your parents haven't competed the funding process, you might want to have a little discussion with them. Just ask to understand their thinking and strategy in choosing this route. Unless there are attractive options to attending one of the public universities in your state, these can be painfully restrictive plans.

I went with 529b's for my grandkids after some discussions with DS and DIL. I own the accounts and each of the three grandkids are beneficiaries. We funded, in aggregate, $20k/yr every year since they were little guys. $20k is the limit Illinois allows you to deduct from your state income tax (resulting in an immediate 5% gain at current rates).

I've been saving on my state income taxes and the earnings will be withdrawn tax-free when used to pay for qualified college expenses.

Probably the biggest hassle is deciding when to go conservative with the investment choices. Our grand daughter will be needing funding in about one year and is currently riding the equity wave with a high equity allocation (Vanguard TSM MF institutional shares) in her account. I need to start moving her to a much more conservative position.

Is it possible your parents chose the prepaid plan vs the traditional 529b plan to avoid the need to make these kind of investment decisions?

I agree with all who've commented on what a nice gesture this is on the part of your parents.

 

[bobandsherry]

I don't think anyone disagrees it's a great gift. I think people are just suggesting that parents understand the possible ramifications. It could be they spend a lot and no one gets a benefit. May be other options to explore to accomplish similar goal.