Monday, March 14, 2011

What if I put money in the Wisconsin prepaid tuition plan?

Prepaid tuition plans are defined benefit plans. Parents putting money into their state's prepaid tuition plan are trusting their state government to honor their obligation to provide tuition credits that will actually cover the cost of education when it comes time to send Junior off to college.

Hmm. What if you put money into the Wisconsin plan? They've already shown a willingness to change the terms of the deal long after the money has already been contributed and folks are now depending on the payout. At least they stopped taking new money back in 2002, back when Colorado became the first state to come clean and tell people who'd contributed to the plan, "Well, what we actually meant by 'future tuition credits' was . . . "

It's possible the exam could bring up the fact that a prepaid tuition plan is an obligation of a state government to pay out a promised benefit to people crazy enough to trust it with their money. If I lived in a state with a lousy bond rating from Moody's/S&P/Fitch, and that state had already shown a willingness to renege on benefits to its employees, I'm thinkin I'd want the 529 Savings Plan instead, in which I pick little mutual funds and control the outcome to some extent. Just things to consider before taking the exam--not that you can remember every little thing that I blog about. But, if you can remember some or most of it, I'm convinced you'll have an edge at the testing center.