Virginia offers a prepaid tuition program to residents looking to save for future college educational costs, called Virginia529 prePAID. The plan allows you to prepay future tuition and mandatory fees for Virginia colleges or universities. However, there are several catches that you must be aware of that make this college savings option somewhat tricky to plan around.
You can only open accounts during a limited enrollment period each year. Either the account owner or beneficiary must be a Virginia resident when opening the account. This is not a big hurdle, but it is something that you should know.
You purchase the credits in semester increments, and this is where things really start to get confusing.
- First, you can only buy the credits from the child’s birth through the time they complete the ninth grade. After the beneficiary has completed the ninth grade, you can no longer purchase any more prepaid tuition credits for them.
- Next, when purchasing semester credits, you can purchase either Tier1 or Tier2 credits. Tier1 credits cover one semester of tuition at a Virginia public four-year college, where Tier2 credits cover one semester of tuition at a Virginia two-year or community college. Applying a Tier1 credit to a Tier2 school will cover more than a semester of tuition, while applying a Tier2 credit to a Tier1 school will cover less than a semester of tuition.
- Furthermore, if you apply either Tier1 or Tier2 credits to an out-of-state college or a private college (even a Virginia private college), the credits do not necessarily transfer one-for-one and your pre-paid tuition might be worth less than what you thought it would be.
Those things, in our opinion, make planning around the Virginia pre-paid tuition plan very difficult. Before the ninth grade, college planning is a distant goal. Narrowing down college choices is something that probably very few people sit around and do with their 4th grader. Knowing where that child will eventually decide to go to school, or even whether your family will still live in-state when that 4th grader eventually heads off to college, is a wild guess for most. Even if your child loves one particular school, knowing whether they will eventually be able to make it into that school is a whole other issue.
The benefit to the plan, and its allure, is that you can lock in the future tuition and fee payments now so that you will not have to worry about whether tuition prices continue their rapid increase. However, you should at least be aware of some of the potential pitfalls involved with the plan before jumping in. For more information, visit the Virginia prePAID plan website, or feel free to contact us.