By Kevin Thompson
Executive Director, Florida Prepaid College Board
October 20, 2014


Halloween is looming, and families across the country are investing in new costumes for their young superheroes, princesses and vampires. As scary as the tab for those Halloween costumes and trick-or-treat candy can be, it’s not nearly as jarring as the price tag might be on their college education.

The cost of a state four-year school rose to $18,391a year, on average, or 3.2 percent more than the year before, according to a recent College Board report. And one year at an average private college last year cost nearly $41,000 for tuition, fees, room and board—3.7 percent more than the prior year.

Fortunately, a little planning starting when those princesses and superheroes are young can ease a family’s fears over the cost of sending them to college, and 529 plans can help. There are two types of 529 plans, prepaid tuition plans and 529 savings plans, and saving with either can help make college more affordable than paying all at once.

Prepaid plans allow families to prepay the future cost of college through monthly or lump-sum payments, and they’re great for families seeking a manageable monthly payment that will ensure their child’s education is paid by the time they arrive on campus.

For example, the Florida Prepaid College Board offers five different prepaid plans to cover the costs at state colleges, four-year universities or a combination of both. However, each state does things a little differently, so make sure to check out your specific state’s plans to better understand your college savings options.

However, these prepaid plans don’t cover other college expenses such as books, fees, housing and supplies. That’s where a 529 Savings Plan can be a smart investment option. Earnings on a 529 Savings Plan are tax-free when used to cover higher education expenses, ensuring every penny you save goes toward sending your child to college.

Some families choose to use the 529 Savings Plan to cover tuition and all those other expenses, while others open a prepaid plan for tuition and fees but augment it with a 529 to cover the other costs of college.

The College Savings Plans Network recently reported that college savings and prepaid tuition plans have climbed steadily since the 2008 recession. That’s good news. But according to a 2012 survey from financial-services firm Edward Jones, sevenout of 10 Americans still do not know that a 529 plan is a college savings tool. That’s bad news, given how many studies show that saving for college is a predictor of college attendance and graduation.

So as far off as college might seem for your trick-or-treaters, start thinking now about how you can start saving to help turn their costumes into real-life careers.

About the Author:

Kevin Thompson is the Executive Director of the Florida Prepaid College Board, which offers both a tax-free prepaid college program and a 529 savings plan. The Stanley G. Tate Florida Prepaid College Program, created in 1987, is the largest, longest running and most successful prepaid program in the nation.