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With Increases in Tuition Outpacing Inflation, Parents Should Consider Prepaid Plans

Oct. 18—Mention that you need to start saving for your child’s college tuition and you will hear the same advice from many financial planners: Pay for it in advance.

“Step one is, if you can lock in your costs at today’s prices, do it,” said Cathy Pareto, a certified financial planner in Coral Gables.

That’s because the costs of college are rising at a staggering pace — and far faster than the rate of inflation, Pareto said.

Just this year, the state raised tuition at all public universities by 8 percent and every university then raised tuition another 7 percent — a one-year increase of 15 percent.

While Florida universities are still among the cheapest in the country, tuition at Florida State University, for example, has increased 400 percent over the last 18 years — from about $4,000 back then to about $16,000 this year.

You can enroll in the Florida Prepaid College Plan all year long, but starting Monday, through Jan. 31, parents who sign up will lock in 2009-2010 tuition rates. The first payment is due in April. If you sign up after Jan. 31, you will be prepaying at the 2010-2011 rate.

At private universities, the price of tuition is growing at an average of 6 percent per year. There is a prepaid program for some of these schools too, the Independent 529 Plan, which was created by a group of more than 270 schools across the country. Both plans work in a similar way and the private plan can also save thousands in the long run. But the upfront costs are steeper than Florida’s, reflecting the pricier tuition at participating schools.

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