Some Snazzy Schools Offering Prepaid Tuition Deals

Paying for College
61

<p>My, hasn’t this thread strayed. :slight_smile:
It does not make sense to calculate tax savings based on the marginal tax bracket (MTB) one’s gross income is in, since all other items still get their deductions. Figure out your MTB of your taxable income once all deductions have been taken account of <em>except</em> the applicable mortgage interest paydown. Unless that is in the 33+% MTB, it is hard to see how a nominal 4% HELOC rate become well under 3% effective.</p>

<p>btw, congrats on deducting state income tax on your HELOC. Too bad my state does not allow this.</p>

62

<p>Ohh, I see. Applicable 25% fed tax bracket, and a couple of percent savings from the state. That would bring the HELOC down to 2.9% or so.</p>

63

<p>This seems perfect for me. I just want to make sure I understand it. </p>

<ol>
<li>D is heading to a member school for the fall</li>
<li>I can put in the exact amount of the school’s 2009-2010 tuition + fees minus 0.5% discount</li>
<li>In the summer of 2013, I can send the certificate to the school for the senior year tuition. </li>
<li>Even if the member school withdraws, I can still use the certificate for 2013-2014</li>
<li>If D withdraws or transfers to a non-member school, I can request a refund and I can lose no more than 2% per anum and gain no more than 2% per anum. </li>
</ol>

<p>Am I missing something? I buy a certificate by June 30, do I get the 2009-2010 tuition or the 2010-2011 tuition?</p>

<p>All of their disclosures have the 2008-2009 numbers.</p>

64

<p>Real life example here…daughter accepted ED at her university in 2006 for start of fall 2007, private 529 investment of $14055 invested in Dec. 2006, redeemed in Dec. 2009 for 1 semester tuition, payment direct to university was itemized at $14055 paid, gain (tax-free) of $5200, to cover tuition and mandatory fees of $19255 for jr year, spring term 2010.</p>

65

<p>That’s the way I understand it, ClassicRocker. My D’s school, Univ. of Dayton, is offering a 1% discount. I wouldn’t sign up for this plan unless I knew my child was attending one of the member schools.</p>

<p>And, lb5, thanks for your real life example!</p>

66

<p>

I figured it out, it comes out to a little under 2.8%.</p>

<p>

The plan in changing on July 1 (they are eliminating the discount it looks like), and from the document I read it looks like they have imposed a one week black-out period before the change. So I think you have only until June 23 or so if you want to get the discount.</p>

67

<p>ClassicRocker - My understanding is that the 1/2% discount is per year.</p>

<p>Since you are buying in 2009-2010 to redeem in 2013-2014, you would get a 2% discount (1/2% times four years) and you would be buying the 2009-2010 tuition.</p>

68

<p>^^
Most colleges want you to pay upfront, or at best ~ concurrently. So in CRD’s case he has in the range of 36 to 42 months that his money will sit before used. Is the discount given upfront, concurrently, or at the end of the year ? The answer will vary his total discount from 1.5 - 2.0%. (0.5<em>3, or 0.5</em>4). Other than that CRD, I understand this plan the same way you do. If you pay by 6/23, '09 rates apply. Also note that the discount is going away after 6/23.</p>

<p>I plan to pay no later than 6/17, in case I have to fix something or an unexpected delay occurs.</p>

69

<p>

Works out to 11.06% annualized return, tax free. During the stock explosion and recession no less.</p>

<p>Awesome</p>

70

<p>btw, these interest numbers are easily obtained using finance calculators. I use an OS X program called financesosx.</p>

71

<p>Looks like you would only get a very minimal discount the first year (the year ending June 30, 2010):</p>

<ul>
<li>Certificate discounts are prorated throughout the initial year. To obtain the full discount, purchases must be received by July 1 (program year runs from July 1 to June 30). </li>
</ul>

<p>[Prepaid</a> College: Prepay College Tuition](<a href=“http://www.independent529plan.org/howitworks_redeem.html]Prepaid”>http://www.independent529plan.org/howitworks_redeem.html)</p>

72

<p>Real life part 2…the following summer (June, 2007) we invested $32000 for senior year (2010-2011). We have just received the bill for the upcoming fall semester for senior year. We are anticipating this will pay the billed tuition and fees of over $20000 per semester.</p>

<p>The cut-off is in June for the prior year’s tuition rates. We found that it has taken 1 week- 10 days to have both deposits and withdrawals processed. </p>

<p>We did realize that if the money had not been in this 529 program, it likely would have been in the stock market as it fell in 2008, so that was an added bonus for us.</p>

73

<p>CRD, </p>

<p>If you are buying one semester with a 0.5% discount, pay 48.4% of '09 tuition + fees;
If you are buying two semesters, pay 98.25% of '09 tuition + fees.</p>

<p>The numbers are estimates based on presumed 6% apr college price increases. Deviations will not change the final results much, because they only affect the discount rate.</p>

74

<p>^^ Correction,
Purchase of one semester, pay 49.2% of '09 tuition + fees.</p>

75

<p>Can I move money from another 529 plan to this plan?</p>

76

<p>You can roll over funds from an existing 529 into the i529.</p>

<p>You can’t roll over funds directly from a UGMA/UTMA: you need to take a withdrawal from the UGMA first, then deposit it into the i529.</p>

77

<p>

</p>

<p>I’d like to understand how you calculated that.</p>

78

<p>A previous poster eyeballed the list of participating colleges, and suggested that the jewels (or at least not glass beads) in the pile are rare. I pulled the list into a database, and show below those colleges with 2010 tuitions of $30k or more, on the assumption that quality somewhat follows cost. Or put another way, tier 3 colleges are unlikely to charge over $30k tuition, and tier 1 colleges (or close to tier 1) are unlikely to charge less than $30k. 115 colleges made the list:</p>

<p>AGNES SCOTT COLLEGE $30,105.00
ALBION COLLEGE $30,006.00
ALLEGHENY COLLEGE $33,560.00
AMERICAN UNIVERSITY $34,973.00
AMHERST COLLEGE $38,928.00
ARCADIA UNIVERSITY $31,260.00
AUGUSTANA COLLEGE (IL) $31,326.00
BARD COLLEGE $39,880.00
BERKLEE COLLEGE OF MUSIC (2) $33,100.00
BOSTON UNIVERSITY $38,440.00
BRANDEIS UNIVERSITY $38,762.00
CARLETON COLLEGE $39,777.00
CARNEGIE MELLON UNIVERSITY $39,990.00
CASE WESTERN RESERVE UNIVERSITY $36,237.00
CATHOLIC UNIVERSITY OF AMERICA, THE $32,150.00
CENTRE COLLEGE OF KENTUCKY $31,200.00
CHAPMAN UNIVERSITY $36,764.00
CHICAGO, UNIVERSITY OF $39,381.00
CLAREMONT MCKENNA COLLEGE $38,510.00
CLARK UNIVERSITY $35,220.00
COLORADO COLLEGE, THE (3) $37,278.00
DENISON UNIVERSITY $36,560.00
DEPAUW UNIVERSITY $33,250.00
DICKINSON COLLEGE $40,114.00
DREW UNIVERSITY $37,892.00
DREXEL UNIVERSITY $38,760.00
DUKE UNIVERSITY $38,741.00
EARLHAM COLLEGE $35,164.00
ELMIRA COLLEGE $34,850.00
EMORY UNIVERSITY (13) $38,036.00
FAIRFIELD UNIVERSITY $37,490.00
FRANKLIN & MARSHALL COLLEGE $39,980.00
FURMAN UNIVERSITY $36,656.00
GEORGE WASHINGTON UNIVERSITY, THE $41,655.00
GETTYSBURG COLLEGE $38,860.00
GOUCHER COLLEGE $33,785.00
GRINNELL COLLEGE $36,476.00
GUSTAVUS ADOLPHUS COLLEGE $31,760.00
HAMPSHIRE COLLEGE $39,896.00
HARTWICK COLLEGE $31,930.00
HARVEY MUDD COLLEGE $38,467.00
HENDRIX COLLEGE $30,270.00
HOBART AND WILLIAM SMITH COLLEGES $40,221.00
ILLINOIS WESLEYAN UNIVERSITY $33,982.00
ITHACA COLLEGE $32,060.00
JOHNS HOPKINS UNIVERSITY (15) $39,650.00
JUNIATA COLLEGE $31,550.00
KALAMAZOO COLLEGE $32,643.00
KENYON COLLEGE $40,740.00
KNOX COLLEGE $31,911.00
LA SALLE UNIVERSITY $32,700.00
LAKE FOREST COLLEGE $34,206.00
LAWRENCE UNIVERSITY $34,596.00
LEWIS AND CLARK COLLEGE $35,233.00
LOYOLA COLLEGE IN MARYLAND $37,610.00
LUTHER COLLEGE $32,290.00
MACALESTER COLLEGE $38,174.00
MCDANIEL COLLEGE $32,000.00
MIAMI, UNIVERSITY OF $36,188.00
MIDDLEBURY COLLEGE (3) $40,330.00
MILLS COLLEGE $36,232.00
MIT $37,782.00
MORAVIAN COLLEGE $31,250.00
MOUNT HOLYOKE COLLEGE $39,126.00
MUHLENBERG COLLEGE $36,990.00
NOTRE DAME, UNIVERSITY OF $38,477.00
OBERLIN COLLEGE $40,004.00
OCCIDENTAL COLLEGE $38,935.00
OHIO WESLEYAN UNIVERSITY $35,040.00
PACE UNIVERSITY $33,114.00
PEPPERDINE UNIVERSITY $37,850.00
PITZER COLLEGE (7) $39,332.00
POMONA COLLEGE $37,017.00
PRINCETON UNIVERSITY $35,340.00
REDLANDS, UNIVERSITY OF (8) $33,894.00
REED COLLEGE $39,700.00
RENSSELAER POLYTECHNIC INSTITUTE $39,165.00
RHODES COLLEGE $33,710.00
RICE UNIVERSITY $32,057.00
RICHMOND, UNIVERSITY OF $40,010.00
ROCHESTER, UNIVERSITY OF $38,690.00
ROLLINS COLLEGE $36,220.00
ROSE-HULMAN INSTITUTE OF TECHNOLOGY $34,515.00
SAINT LOUIS UNIVERSITY $31,335.00
SAINT MICHAEL‚</p>

79

<p>“I’d like to understand how you calculated that.”</p>

<p>I plugged your numbers into an investment calculator:
apr: 6
periods: 3.25
annual deposit: 0.5
deposits per year:1
Future value: calcuated</p>

<p>The future value is the compounded discount rate. I used 3.25 periods to mirror your anticipated withdrawl of one semester in 3 years, and one semester in 3.5 years. This 3.25 average is inexact for reasons that would likely bore you to sleep, but pretty close. Since the future apr is a guess, there is no good reason to worry about the unweighted inaccuracy. </p>

<p>Clear as mud ?</p>

80

<p>For those who feel like the list is shouting at them, a quieter version:</p>

<p>Agnes Scott College
Albion College
Allegheny College
American University
Amherst College
Arcadia University
Augustana College (il)
Bard College
Berklee College Of Music (2)
Boston University
Brandeis University
Carleton College
Carnegie Mellon University
Case Western Reserve University
Catholic University Of America, The
Centre College Of Kentucky
Chapman University
Chicago, University Of
Claremont Mckenna College
Clark University
Colorado College, The (3)
Denison University
Depauw University
Dickinson College
Drew University
Drexel University
Duke University
Earlham College
Elmira College
Emory University (13)
Fairfield University
Franklin & Marshall College
Furman University
George Washington University, The
Gettysburg College
Goucher College
Grinnell College
Gustavus Adolphus College
Hampshire College
Hartwick College
Harvey Mudd College
Hendrix College
Hobart And William Smith Colleges
Illinois Wesleyan University
Ithaca College
Johns Hopkins University (15)
Juniata College
Kalamazoo College
Kenyon College
Knox College
La Salle University
Lake Forest College
Lawrence University
Lewis And Clark College
Loyola College In Maryland
Luther College
Macalester College
Mcdaniel College
Miami, University Of
Middlebury College (3)
Mills College
Mit
Moravian College
Mount Holyoke College
Muhlenberg College
Notre Dame, University Of
Oberlin College
Occidental College
Ohio Wesleyan University
Pace University
Pepperdine University
Pitzer College (7)
Pomona College
Princeton University
Redlands, University Of (8)
Reed College
Rensselaer Polytechnic Institute
Rhodes College
Rice University
Richmond, University Of
Rochester, University Of
Rollins College
Rose-hulman Institute Of Technology
Saint Louis University
Saint Michael’s College
San Diego, University Of
Skidmore College
Smith College
Southern Methodist University
Southwestern University
St. Mary’s College Of California
St. Olaf College
Stanford University
Stevens Institute Of Technology
Susquehanna University
Syracuse University
Trinity College
Tulane University
University Of The Pacific
University Of The South, The
Ursinus College
Vanderbilt University
Vassar College
Wagner College
Wake Forest University
Washington & Jefferson College
Washington University In St. Louis
Wellesley College
Wesleyan University
Westmont College
Wheaton College
Willamette University
Wittenberg University
Wofford College
Wooster, The College Of (3)</p>