D will be starting as a freshman this fall. I have seen some schools (e.g., USC) that allow students to lock in current pricing by pre-paying for future semesters at today’s rate. Does anyone know if UM has anything like that?
You can purchase a MET contract. http://www.michigan.gov/setwithmet but you will have to pay it entirely in advance. Current 8 semester contract costs $68,512
Several thoughts: 1) UM is raising a lot of money for scholarships, the picture might be somewhat different in a year or so…before you’ve paid all 4 years; 2) when you enter into a contract like this you take credit risk relative to the entity promising to pay…will they deliver on the contract or default; for that reason, you need to know whose credit risk you are absorbing…if it is some C-rated monoline (exageration for the sake of emphasis as this conditioning is unlikely), you might want to think twice.
Thanks @TooOld! I will take a look. @blue85 do you mean paying in advance through a third party rather than directly to UM or the state?
I should have mentioned we are OOS. Looks like MET is for kids living in Mi. Nothing from UM directly?
I think you can buy fewer than 8 semesters as well.
Thanks @Vladenschlutte.
“@blue85 do you mean paying in advance through a third party rather than directly to UM or the state?”
Well, if you are not holding your cash, you are depending on a third party (i.e., not you and not your targeted institution). If a bank, that may be FDIC insured. If you give the money to an insurance company, another third party, you depend upon their performance. UM is probably a safe bet in that it is probably not going bankrupt anytime soon, much less over the next 5 years or so. Likewise, the state may not go bankrupt in that time span. Problem is, I don’t know what MET is. I skimmed the website, but can’t tell where the cash is held, how it is reinvested, how/when they get reinsurance from a 4th party, when they issue financial statements…
Before you hand over your cash to some such entity, you better do your homework and determine whether the entity which is locking in your cost can be trusted to perform.
Check if the money can be refunded or transferred. Note that UMich meets the need for in state students. I has thought about this plan but hesitated as I am not sure how much we actually need to pay for tuition at the end after FA.
Thanks @blue85. That makes sense especially if it is a third party. I agree with you @billcsho. It needs to be refundable and/or transferrable if not used, including receiving FA. Unfortunately, we are full-pay OOS and don’t see that changing over my D’s time at UM. I am trying to protect against large OOS tuition increases.
Sidkane: 1) I’m not saying don’t do it, just do your homework on where they put the money and what their current credit rating is; 2) credit ratings can “jump to default” overnight, but if the entity has a great rating (AA or better or the equivalent in public finance space) it could be worth doing.
In other words, I’m extremely conservative, but don’t let me infect your process with ghost stories…this contract could be well worth purchasing and you should consider researching/pursuing…I was just trying to throw in a cautionary note, not advice to NOT do it.
Which ever way you go, good luck to you and your child.
^^Understood and thank you!
The plan being discussed here is the State of Michigan’s 529 Plan, which has actuarial reports and financial reports available. These include a substantial amount of financial data and information:
http://www.michigan.gov/setwithmet/0,4666,7-237-44071—,00.html
By the way, from an actuarial standpoint, the 3 college savings plans offered by the State are each over funded (which basically means that they each have more in assets than the present value of their future obligations).
Sorry, if you can’t because you’re an OOS I don’t think you can buy fewer. But I guess for anyone reading who’s instate.
It appears that the plan was in deficit a year ago, and in surplus today. Somewhat confusing because they are using the same date for the Surplus/Deficit date and the so called projected value date. For the first 9/30/2014, they show a Surplus. For the second 9/30/2014 they show a projected deficit. For the delta, they show positive Asset Experience as well as new money flowing in. It isn’t clear to me. The first date appears to relate to a balance sheet and the second date appears to relate to a flow of funds to reconcile the two states (2013 and 2014) of the balance sheet. So there is an actual deficit in 2013 and a projected surplus in 2014. The catchup is due, in part, to new money and asset growth experience and what appears to be an assumption that tuition and fees will decline. To understand this you have to understand why words “projected” and “Value at” are used for the same cutoff date. You would also have to understand whether or not the Asset experience and tuition/fee decline are actual or projected. To me, the wording and the presentation are somewhat opaque. I would want to see: prior year sheet for 2013; the actual asset experience; the actual changes in tuition/fees; and what the projections (inclusive of asset growth projection curve and how it is PVed and its source; liability projection growth and how it is PVed and its source) are.
Actuarial Present Value of Future Tuition Payments, Fees
and Expenses $884,727,143
Market Value of Assets (Including the Present Value of
Installment Contract Receivables) $912,671,063
Surplus/(Deficit) as of September 30, 2014 $27,943,920
Gain/Loss Summary
Surplus/(Deficit)
(1.) Value at September 30, 2013 $ (43,993,605)
(2.) Interest on (1.) at Assumed Rate from Previous Valuation $ (2,639,617)
(3.) New Enrollment Group $ 11,880,107
(4.) Projected Value at September 30, 2014 [(1.) + (2.) + (3.)] $ (34,753,115)
(5.) Change Due to:
a. Asset Experience $ 41,101,059
b. Tuition/Fee Inflation 29,485,230
c. Assumption Changes (5,271,684)
d. Other Experience (2,617,570)
(6.) Total [(5.)a. + (5.)b. + (5.)c. + (5.)d.] $ 62,697,035
(7.) Actual Value at September 30, 2014 [(4.) + (6.)] $ 27,943,920