My wife and I have been patting ourselves on the back for 14 years now since we were introduced to a prepaid college savings plan. That’s right, we have been saving for college for 14 years, and we are “Super Parents!” Smartphones and the 24/7 information super highway didn’t exist back then, so we relied on a pamphlet and missed some very important information that everyone interested in saving for a child’s higher education may want to know.
First on the list is the fact that enrollment in the prepaid college plan does not guarantee your child’s college admission. They still need to “qualify” for admission to the college or university of their choice.
The plan may be geared towards public, not private institutions. You may be limiting your child’s college options. Does your son have an artistic flair that will only be enhanced by attending a private university?
Your child is an individual and as an individual she may chose a different path in life rather than going to college. What happens to the money you saved? You only get back what you put in minus any expenses accrued but that money hasn’t even kept up with inflation. It is possible that you could have realized a stronger return by investing on your own and now you can use that money for other purposes.
Most prepaid college plans only pay for tuition. Think about the other expenses that accompany a college career. If your child leaves home for college you will be out-of-pocket for room and board. Even if they live at home you will still be paying for supplies, books, lab fees, computers, a car, insurance, sororities or fraternities and beer money.
Your daughter has been accepted to her Aunts alma mater. In another state! The college credits that you purchased can be applied toward a college in another state, but there’s no assurance it will cover the entire cost.
So are we “Super Parent’s”? Yes! We saved for our daughter’s education, but we have had to overcome some of the pitfalls that come with prepaid college tuition plans. It is important that you review the pros and cons of every college savings plan for your own unique situation to ensure that you will make the best possible choices for your family.