Blog disclosure: This post is sponsored by the Florida Prepaid College Board. All thoughts are my own.
Over the last few months, you’ve heard me mention Florida Prepaid quite a few times. You’ve heard me mention how Florida Prepaid plans helped my parents put my brother and me through college. You’ve also heard me say that Florida Prepaid is a big reason why I graduated from college debt-free.
Recently, I also talked about another option for college savings called a 529 plan. The Florida 529 Savings Plan is slightly different than the Florida Prepaid plan, so I figured I would give you a quick rundown of each so you can make the decision that makes the most sense for you and your family.
The timing is right to figure out which is best for you, because Florida Prepaid is seeding new Florida 529 accounts with up to $50 between now and June 30, 2018.
Florida Prepaid Plan
The Florida Prepaid Plan is a prepaid college savings plan. With this option, you prepay the future cost of college tuition and other specified fees. The savings are tax-free when they are used for a qualified plan. Some of the pros and cons:
- Your savings are guaranteed by the State of Florida, so you can’t lose what you put in.
- Payments can be refunded or transferred to a beneficiary.
- Savings are tax-free.
- The value of your plan can be used in Florida, or at other postsecondary institutions around the country – public and private.
Other considerations and eligibility requirements
- The child or his/her parent must be a resident of the state of Florida for the past 12 months
- The plan does not cover room and board (but Florida Prepaid offers a separate dormitory plan)
- There’s an Open Enrollment period a few months each year
- You have payment options to choose from – lump sum, monthly over 5 years, and monthly through 12th grade
- The child must be a newborn to 11th grade
This is the option my parents used. When my account had money left over, they used the extra money to ensure my brother’s extra classes were paid for.
Florida 529 Savings Plan
The Florida 529 Savings Plan is a little different than the Florida Prepaid Plan.
It’s an investment plan, so it is not guaranteed by the State of Florida. As with any investment, you can either make money or lose money, depending on how your investment choices fare. That’s just the nature of investing.
Like the Prepaid Plan, the Florida 529 Savings Plan is tax-free so long as the savings are used for qualified educational expenses.
Some of the pros and cons:
- You don’t have to wait until college to use the funds. You can now use it for private school tuition in K-12.
- You can start with as little as $25 a month, and there are no monthly minimum contribution requirements.
- The funds can be used for expenses beyond tuition – books, housing, etc.
- You don’t have to wait for an Open Enrollment period. You can apply right now.
- There is no residency requirement.
The latter point is especially important because I have several friends whose parents did not save for their education because they were not residents and therefore did not qualify for the Prepaid Plan. In a state with a large immigrant population, it’s important that we know we have other options that can help us save for our child’s education.
The Bottom Line
Both plans are fantastic and considered top-rated in the nation. Which you choose depends on your particular situation and eligibility requirements.
If you feel like a 529 Plan is the best move for you, you can apply in as little as 10 minutes right now. If you apply before June 30th, Florida Prepaid will seed your new account with an extra $25. You can get another$25 when you set up automatic monthly savings of $25 or more.