529 Plan vs. Florida Prepaid Plan: What Florida Families Should Know
Originally published on December 11, 2016
Very few people will dispute the benefits of a college education. But rising tuition costs often seem formidable no matter how early you start. According to recent data, in-state tuition and fees at Florida’s public universities are significantly lower than many private and out-of-state alternatives, yet costs still continue to increase each year. This makes it critical for Florida families to evaluate options like the Florida 529 Plan vs. the Florida Prepaid Plan when saving for college.
What Is the Florida 529 Plan?
The Florida 529 Savings Plan (sometimes called the Florida College Investment Plan) is a tax-advantaged savings account designed to help families save for higher education.
- Investment growth: Your contributions are invested in portfolios that grow over time. There are age-based portfolios (which become more conservative as the student nears college) and static fund options.
- Tax status: Earnings grow federal tax-deferred and qualifying withdrawals for education expenses are tax-free. Florida has no state income tax, but federal tax advantages still apply.
- Contribution limits: Florida caps total contributions per beneficiary at around $418,000.
- Who can use it and for what: It can be used at any eligible educational institution for qualified expenses like tuition, fees, books, supplies and some room and board costs.
What Is the Florida Prepaid Plan?
The Florida Prepaid College Plan lets families prepay for tuition and specified mandatory fees at current rates, locking in prices so they won’t increase in the future. Plans must generally be used within 10 years of the projected college entry year.
- How it works: You can choose from several plan types (1-year university, 2-year college, 2+2 plans, 4-year university, plus optional dormitory plans) and payment options (lump sum or installments).
- What’s covered: Tuition and mandatory fees at Florida public colleges/universities are fully covered as per your plan contract. Housing can be covered through add-on plans.
- Limitations: If your child attends a private or out-of-state school, the plan usually pays the equivalent of Florida public tuition. You cover the rest.
Key Differences Between the Two Plans
| Feature | Florida 529 Savings Plan | Florida Prepaid Plan |
|---|---|---|
| Flexibility | Use at most U.S. colleges; broad range of expenses | Best used at Florida public schools; limited private/out-of-state value |
| Market Risk | Subject to market performance | No market risk; tuition cost is locked in |
| Payment Options | Flexible contributions | Pre-set payment schedule |
| Tax Benefits | Federal tax-free growth and withdrawals | No income tax benefit in Florida, but guaranteed coverage |
| Residency Requirement | Open to residents and nonresidents | Florida residency required for most plans |
Which One is Right for You?
Choosing between a Florida 529 plan vs. the Florida Prepaid Plan depends on your family’s priorities:
- Choose Prepaid for guaranteed tuition coverage at Florida public schools and protection from rising costs.
- Choose 529 if you want flexibility to attend out-of-state or private colleges and cover a wider variety of educational expenses.
- Consider your risk tolerance, savings habits and whether you expect to contribute regularly or up front.
Updated Considerations for Florida Families
- Florida offers no state income tax, so there is no deduction for 529 contributions.
- 529 contributions are limited to approximately $418,000 per beneficiary.
- Florida Prepaid Plans are guaranteed by the State of Florida and not affected by stock market fluctuations.
Final Thoughts
No single college savings strategy fits every family. By evaluating the pros and cons of each plan and considering your financial situation and your child’s educational goals, you can make the most informed decision. For detailed, current information, visit the Florida Prepaid College Board and consult a financial advisor.
Contact a James Moore professional to discuss how either plan fits into your broader financial plan.
All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.
