Okay, so I've been doing some research this afternoon (while Walker and Leann were napping) on saving for college. I now know somewhat more about 529 plans and options, but I'm far from having it completely figured out.
I've been reading about the Texas Tuition Promise Fund, but I haven't decided if it's worthwhile. It's similar to the old Texas Tomorrow Fund, which is now billions of dollars in the hole. However, it's different in that you buy units at the current year's prices (as opposed to locking in tuition rates on the day you sign up). 100 units equals the cost of one year at a state school and covers tuition and fees, but not books, room and board, etc. Each year, you can buy credits at that current year's prices and then apply them toward the tuition bill when the kid is in college.
So it's obviously a better deal than paying tuition in 2027. (2027? Wow, that sounds so futuristic. Maybe we'll all have our jetpacks by then.)
Or is it? I guess if tuition increases at a rate that outpaces what I can expect from the stock market (which has obviously been the case over the past decade), then yes it's probably a better deal. But will that happen? Will the cost of education at a public school continue to skyrocket like it has since deregulation? On the other hand, the stock market has historically made huge comebacks in the years following a recession, so maybe it makes more sense to put our money in a stock-based mutual fund.
When Leann woke up from her nap, she and I discussed some of this. She points out that because colleges are essentially taking on the risk here (they're guaranteeing that they will honor the units, no matter which year they were purchased), they may be less likely to accept an applicant who is enrolled in the program if they start losing money on the deal. Would it reduce Walker's chances of getting into one of the participating schools if he's enrolled?
My current thinking is that we enroll in the TTPF and set up a separate investment to cover room, board, books, etc. But today I'm suffering from information overload paralysis, so we're going to wait a week or two before we make any moves.
Have any of you other new parents done some analysis on any of this? I would love to hear what your strategies are, either in the comments or via email.
We promise to get back to more photos or videos of Walker in the next post.
Yeah, right now our college savings for our children consists of telling Isaiah, "You'd better do well in school and get some scholarships, 'cause Mommy and Daddy are still paying off debt and don't have any money for you right now". We try to threaten him with phrases like "You'll have to work at McDonald's the rest of your life", but unfortuntely that sounds like heaven to a 5-year old. So, I guess I'm not any help, but the TTPF sounds interesting. We'll check it out.
ReplyDeleteGlad to hear you guys are doing well...can't wait to meet Walker!
You need to talk to Grady. He is the college savings guru. He researched for two years before settling on whatever it is we contribute to every month now.
ReplyDeleteFor some this program is a good deal - however, as a financial advisor I have found that if you are disciplined at saving money you can do better with a 529 or other college savings plan. It allows you to be more flexible with the colleges that your children can attend and in many cases you can get a lot more for your money. Essentially, the state is taking your money now and putting it into an investment to cover their costs later. This can be done just as easily on an individual basis and you can move money around as you see fit in different funds - You have the control - not the state of TX. I know that the market is not great right now but there are still places that can earn at least 5% until it levels out and you can earn much, much more.
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