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New Law Significantly Lowers the Cost of Florida Prepaid College Plans

For Newborns, 4-Year Florida University Plan anticipated to drop nearly $20,000

shutterstock_120183217Tallahassee , FL – This week, Governor Rick Scott signed into law House Bill 851, making saving for a college education with a Florida Prepaid College Plan more affordable for Florida families.

“On behalf of the Florida Prepaid College Board, I’d like to thank Governor Scott and the Legislature for their work to keep the future cost of college lower,” Board Chairman Duane Ottenstroer. “Because of this law, the prices of university Prepaid Plans will be significantly reduced, helping more Florida families save for their children’s higher education.”

The law will bring the 4-Year Florida University Plan and 2 + 2 Florida Plan prices down to levels not seen in the past five years. The lump sum price of the 4-Year Florida University Plan for a newborn is anticipated to drop nearly $20,000 from its current price of $54,000 to $35,000 or le ss. Monthly payments for the same plan are expected to drop at least $100, from $350 to $250 or less.

“We are very excited for how this law will benefit our current and future customers. Going on 26 years of selling Prepaid Plans, we are the largest and longest running prepaid program in the nation,” said Board Executive Director Kevin Thompson. “With this legislation, we can look forward to continuing our successful legacy for many years to come.”

The great news is not just for future Prepaid Plans. It is anticipated that approximately 50,000 existing Prepaid Plans will see refunds and/or payment reductions because of the new law. Refunds and/or payment reductions are expected for 4-Year Florida University Plans and 2 + 2 Florida Plans purchased from Contract Year 2011 to 2014, as well as Tuition Differential Fee Plans purchased from Contract Year 2008 to 2014. The Board would like to assure all existing Account Owners that they will not have paid more for their Prepaid Plan than the reduced costs of future Prepaid Plans.

Eligible Account Owners can expect to receive notification from the Board in September regarding their specific refund and/or payment reduction information. It is anticipated that payment reductions will be applied to Prepaid Plan payments beginning September 20, 2014 and refund checks will be processed and mailed within 4-6 weeks of that date. No action from Account Owners is necessary at this time.

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About House Bill 851

House Bill 851 was passed during the 2014 Legislative Session and will become law on July 1, 2014. The law reduces future costs at State Universities in Florida, allowing the Florida Prepaid College Board to better predict State University tuition and fee costs covered by the Stanley G. Tate Florida Prepaid College Program. Specifically, the law reduces the maximum annual increase of the tuition differential fee to six percent for preeminent State Universities (Florida State University and University of Florida) and zero percent for all other State Universities. Currently, the aggregate sum of tuition and the tuition differential fee increase may increase by 15 percent at all State Universities. It is important to note, the legislation does not change the Prepaid Plan coverage. All Prepaid Plans continue to be guaranteed by the state of Florida and cover tuition and most fees at a Florida College or State University.

About the Tuition Differential Fee Effect on University Prepaid Plan Pricing

In 2007, the last year before the introduction of the tuition differential fee for State Universities, the parent of a newborn could guarantee the cost of college tuition and most fees at a State University in Florida with Florida Prepaid College Plans for less than $15,000. In 2008, the newborn plan cost, including Tuition Differential Fee, rose to just over $21,000. In 2010, after the cap on the tuition differential fee as percent of tuition was removed, the newborn plan cost almost doubled to just under $41,000. In 2014, after several years of double digit increases in the tuition differential fee, the newborn plan cost was nearly $54,000. For the 2015 Contract Year, beginning this fall, the new law will allow newborn plan costs to be an anticipated $35,000 or less. 

About Setting Prepaid Plan Prices and Open Enrollment

There are three basic components used to establish Prepaid Plan prices – current college costs, assumptions about future college costs and investment yields (as of July 31st). The current cost of college is known and, because of the new law, future college costs are lower and more predictable. An actuarial analysis of these three components is performed to set prices for the annual fall Open Enrollment. Prepaid Plans will be available for purchase at the start of the annual Open Enrollment period, which is scheduled to begin October 15, 2014.

About the Florida Prepaid College Board

The Florida Prepaid College Board manages the Stanley G. Tate Florida Prepaid College Program and the Florida 529 Savings Plan. Both are tax-favored 529 college savings plans authorized by Section 529 of the Internal Revenue Code. In 1987 the Florida Prepaid College Program was created by the Florida Legislature and the commitment and dedication of Mr. Stanley G. Tate to provide Florida families with an affordable means to save for their children’s future college education. The first Florida Prepaid College Plans were sold in 1988, and were augmented with the addition of the Florida 529 Savings Plan in 2002. Florida Prepaid is the largest, longest running and most successful prepaid plan in the nation with more than 1.6 million Florida Prepaid College Plans purchased and more than $6.7 billion invested in Prepaid Plans by Florida families. The 529 Savings Plan has more than 35,000 active accounts with a market value of more than $360 million.

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