My oldest child went off to college for the first time this past fall, and 18 years of parenting collided with the realities of growing up. Over those 18 years I thought A LOT about saving for college, and was fortunate to find myself in a position to do so.
Over the course of those 18 years we ran into a decision that a huge number of parents in Florida need to make. That decision is how exactly to save for a child’s education. More specifically, should we save for college using the Florida Prepaid College Plan or the Florida 529 Savings Plan.
Both of these state-sponsored programs help you save for college expenses. But it is important for you to understand how they do that in different ways.
The Florida Prepaid College Plan
What Is the Florida Prepaid College Plan?
The Florida Prepaid College Plan is a state-backed program that allows one to lock in today’s tuition rates for use in the future. Essentially you are prepaying for your child’s college at a guaranteed rate. The principal advantage of this is that you are protecting yourself from increases in tuition rates at Florida’s public colleges and universities.
It is important to not think of the Prepaid College Plan as “investing”, because it isn’t. Instead, it is a contract between you and the state of Florida, with the state obligated to provide tuition at a pre-determined future date. So you can think of it as saving for college when you know exactly what the future cost will be. It’s very easy to see how much this will cost, just put in your child’s birthdate here to see the options.
Key Features of the Florida Prepaid College Plan
- Guaranteed by the State – The state of Florida financially backs the Prepaid Plan.
- Set Payment Plans – You can choose from a variety of payment plans to save for college. These include up-front lump-sum payments or installments over time.
- Covers Tuition and Fees – The plan covers tuition and most fees at Florida’s public colleges and universities.
- Transferability – If your child decides to attend an out-of-state or private school, you don’t completely miss out. You can apply the Prepaid Plan to tuition at these institutions, albeit at a different rate.
- No Market Risk – Since you lock in today’s rates, there is no risk from stock market fluctuations.
- Guaranteed In-State Tuition – If you move out of state but your student attends a Florida public college or university, the Prepaid Plan continues as if you never left and covers the full costs of tuition and fees.
What Does the Florida Prepaid College Plan Cover?
The Florida Prepaid Plan offers several ways to save for college. It’s important to note that the below options do not cover housing though. You can purchase a “Dorm Plan” separately should you wish.
- 2-Year Florida College Plan – Covers tuition at a Florida public college.
- 4-Year Florida College Plan – Covers tuition for four years at a Florida public college.
- 1-Year University Plan – Allows families to buy one year of university at a time.
- 2+2 Florida Plan – Covers two years at a Florida college and two years at a Florida university.
- 4-Year Florida University Plan – Covers tuition and fees for four years at a Florida public university.
Pros and Cons of the Florida Prepaid College Plan
Pros:
- Predictable costs
- No investment risk
Cons:
- Limited to tuition and fees – while there are “Dorm Plans”, these make less financial sense.
- No opportunity to grow the value beyond the contracted amount. This caps your ability to save for any college expenses beyond tuition and fees.
- You must use it at an eligible school to get the full benefit. The rate it pays outside of Florida public schools isn’t very attractive. MANY parents are disappointed in the value of the Prepaid Plan when it isn’t used at Florida public school.
The Florida 529 Savings Plan
What Is the Florida 529 Savings Plan?
The Florida 529 Savings Plan is an investment account that allows families to save for college expenses. Unlike the Prepaid Plan, the 529 Savings Plan invests in a variety of funds to potentially grow savings over time. These funds invest in the stock and bond market, potentially growing dollars to a greater amount over time.
It is important to think of the 529 Savings Plan as “investing”, because it is. Unlike the Prepaid Plan, there is no contract between the buyer of the plan and state of Florida. You are responsible for saving the amounts you feel appropriate. A helpful calculator can you determine how much to save.
Key Features of the Florida 529 Savings Plan
- Investment Growth Potential – Contributions are invested and can grow over time based on market performance.
- Tax Advantages – Earnings grow tax-free (for federal taxes), and withdrawals are also federal tax-free when used for qualified education expenses.
- Flexibility – Covers a wide range of college expenses, including tuition, fees, books, supplies, room and board. Recent tax law changes even allow it to be used for select K-12 expenses.
- Can Be Used Nationwide – Can be applied to any eligible college expense across the U.S., not just in Florida.
What Does the Florida 529 Savings Plan Cover?
- Tuition and fees at colleges, universities, trade schools, and graduate programs
- Room and board for students enrolled at least half-time
- Books, supplies, and other educational materials
- K-12 tuition (up to $10,000 per year)
Pros and Cons of the Florida 529 Savings Plan
Pros:
- Higher potential value of college savings through investment growth
- Flexibility to use the funds for a variety of K-12 expenses as well as college education
- Broader coverage of educational expenses than just tuition and fees, including dorms, food, and books
Cons:
- Higher potential value also means there will be more fluctuation in value and risk of loss
- No guarantee that the amount saved for college will meet future tuition costs (which the Prepaid Plan guarantees)
- Investing requires selection of investments and monitoring
Which Plan Is Right for You?
Now for the million dollar (well not exactly million dollar) question. Is the Florida Prepaid College Plan or the Florida 529 Savings Plan right for saving for your child’s college? This is a question I see debated over and over and over again, with strong opinions on both sides.
First, the BIG impactful decision is to save for your child’s college. And to start doing it as early as possible. Regardless of which plan you choose, choosing to save, and starting early has a profoundly positive impact on the total cost and outcome.
The small decision that follow is which is best for you and your child when saving for college?
How Much Money Does Each Plan Make?
From a pure math standpoint, if you had a child born February 1, 2025, and before the end of that month you decided to go with the Prepaid Plan and bought the 4 Year University Plan, it would cost you $25,373.47. You would pay that amount upfront, never pay in another penny nickel, and the tuition and fees for 4 years at a Florida public college or university will be paid for when your child goes off to school. You’ve saved for college, easy right?
A comparable option to save for college would be to instead invest in the 529 Savings Plan. There are a lot of investment options to choose from, from those that the state of Florida manage for you, to allocations you can choose, to you selecting the individual funds.
For purposes of this example, I’ll use the performance over the lifetime of the Savings Plan that are currently enrolled, which is 3.43%, when managed by the state of Florida using the “Enrollment Year Option” when selecting investments.
So that same $25,373.47 that was used to buy the Prepaid Plan could instead be invested in the 529 Savings Plan. That amount, invested for 18 years and earning 3.43% annually, would be worth anywhere from $46,560 to $48,157. This exact amount depends on when they went to college and when you paid for it.
Divide this by 4 years of college, and it’s approximately $12,000 per year that you would have to spend on eligible college expenses, be it tuition, room and board, or books.
I’ll note here that the “Enrollment Year Option” shown above is managed by the state. These options are typically managed conservatively to avoid unexpected surprises. If you choose to manage the plan yourself, you would possibly invest more aggressively. This may end up saving more money for college.
So Again, Which Plan is Right For You?
As you might be starting to learn, there is no “right” way to save for college. Instead you need to balance what’s right for you and your family and make some “best guesses” about what the future holds.
The Florida Prepaid Plan May Be Right For You If:
- You want no doubt that you will have saved enough for tuition and fees at public college or university in the state of Florida.
- You want predictable, set costs (and payments if you choose). Note that using a payment plan instead of a lump sum purchase up front does increase the overall cost.
- You have a high degree of confidence that your child will attend a public college or university in the state of Florida.
- Most importantly, if your child chooses not to attend a public college or university in the state of Florida, you understand that the Prepaid Plan will very likely not cover the full cost of tuition and fees, and you will need to have a plan to cover the (potentially significant) remainder.
You Might Prefer the Florida 529 Savings Plan If:
- You want the potential to save a greater amount for college and see a greater rate of return on your college savings.
- You want the flexibility to spend your college savings on items beyond just tuition and fees, which includes room and board or books.
- You are comfortable with some level of investment risk. This will vary based on how you invest.
- You would like the flexibility to direct your own investments.
Another Idea is to Choose Both!
It IS possible to use both. For example, you might purchase a Florida Prepaid Plan to cover tuition and fees while using a Florida 529 Savings Plan to cover additional expenses like housing and food, or to provide additional savings if your child chooses to attend a school other than a public college or university in Florida. This can be a great option that provides flexibility, but still runs the risk of being significantly short on college savings if your child does not attend a Florida public college or university.
Final Thoughts
Saving for college can feel overwhelming, but Florida’s Prepaid College Plan and 529 Savings Plan both provide excellent options for families looking to secure their child’s educational future. And CONGRATULATIONS! By reading this, you likely have a plan to start saving for your child’s college, which on it’s own is the most important thing you can do.
Now, think carefully about how you would like to save for college. Think about where your child might attend college. How much of their educational expense you want to cover. By doing so, you can make the best decision to support your child while keeping your finances in check.