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College Education Savings / Texas Tomorrow Fund

6,552 Views | 17 Replies | Last: 7 yr ago by PedroJack07
Rascal
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AG
https://www.texastuitionpromisefund.com/

Wondering if anyone has invested money into this program. I'll admit, I haven't fully done my homework on it, but I do have a 7 month old kid that I'd like to start planning for.

Thanks for any insight (pros/cons) anyone can share.
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V8Aggie
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Best decision my dad ever made. Paid for A&M!
94chem
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Can money from a 529 plan be used to pay for this?
CoachFisher
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AG
From my understanding this is no longer a guaranteed (emphasis on the word guaranteed) program like the original Texas Tomorrow/Texas Guaranteed Tuition Plan that we (my parents) could buy 10 years ago.

That plan ended up costing the state a lot of money considering that education inflation was around 7%.

I would do some research on the plausible risks. I cannot attest to the validity of the claims in the article below but it could possibly help you to make a more informed decision.
http://www.bankrate.com/finance/college-finance/college-529-prepaid-tuition-plans-at-risk-1.aspx

From the website
"Is the Texas Tuition Promise Fund guaranteed by the state of Texas?
While the Texas Tuition Promise Fund is not constitutionally guaranteed, Texas law requires all Texas two-year and four-year public colleges and universities to accept Texas Tuition Promise Fund Tuition Units as payment for the applicable portion of tuition and required fees....

...The Contracts are not deposits or other obligations of any depository institution. Neither a Contract nor any return paid with a refund is insured or guaranteed by the FDIC, the state of Texas, the Texas Prepaid Higher Education Tuition Board, any other state or federal governmental agency or Northstar Financial Services Group, LLC or its affiliates. The Contracts have not been registered with the U.S. Securities and Exchange Commission or with any state.

Purchasers should carefully consider the risks, administrative fees, service and other charges and expenses associated with the Contracts, including plan termination and decreased transfer or refund value."
26.2
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TTPF just allows you to pay for future college expenses at today's prices. There's nothing to go belly up. The risk in handing your money over is that tuition and fees don't rise as much as other investments. Say, if Bernie makes college free for everyone.
94chem
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Working off the old adage that you shouldn't invest in something that you don't understand, I'll have to take a pass on this. I clicked on the OP link, and got lost in thousands of numbers, unit purchases, etc. It just looked hopelessly complicated.
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BPCAg05
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AG
Can you explain this more? I have a 529 set up for my 2 year old but if I could pre-pay at today's rates then I would do it. I guessing I don't understand if the universities are honoring the agreed upon unit rates or if it's Northstar paying out at current tuition rates but invested your money to hopefully make a return higher than the cost of tuition inflation? I would hate to drop $54,000 and stop contributing to the 529 and then Northstar go under and I am SOL
CoachFisher
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The Texas Tuition Promise Fund is in fact a form of a 529 plan with a different set of benefits than your average plan.

I think that the biggest risk is the chance that your child ends up going to a TCU or a USC. The units in the TTPF are most valuable at the tier of public school you choose in Texas.

Imagine you purchased top tier credits in hopes that your child went to TAMU. Circumstances changed and little Johnny didn't get into tamu and instead his best option for school was SMU.

The money you receive back from the plan is possibly not equal to what the rates of tamu tuition would be in the year Johnny starts school. They would be equal to some arbitrary value that NorthStar decides that is equal to/greater/less than your original investment.

Personally it seems to me that a traditional 529 provides much more transparency and flexibility when compared to the TTPF plan.

I would imagine that NorthStar/employees makes a considerable amount of commission on these products. The fact that they are not registered securities exempts them from disclosing this compensation to you.

From NorthStar website
"NorthStar Financial Services Group, LLC ("NorthStar") exists to innovate and develop products and services, strengthen our partners, and provide tools and resources to empower investment advisors."

The fact that they are trying to "develop products" makes me believe that they are more inclined to benefit themselves than their customers.
Rascal
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AG
Thanks for the feedback so far. Assuming that your child ends up not going to a Texas public university, does the parent or "investor" simply get a cash refund on whatever the market value is at the time OR does the child "end user/recipient" receive the money back in his name?

So if a 3rd party (Grandparent or Uncle) set up this fund for my kid, do the potential refund monies go to my kid or the original investor?
26.2
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https://www.texastuitionpromisefund.com/content/tips-tools/faqs

Calculation is explained here.
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HollywoodBQ
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I bought this for my daughter in 1996. Will collect her final benefit in Spring 2017.

Best $$$$$ I ever spent.

The only thing you have to watch is the number of term fee payments. So, tuition + fees = x number of hours and y number of terms. Summer school counts as one term for fees. If you only go to one summer school term, it counts for 1/2 of the 8 term fee payments included in the package.
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VanZandt92
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We're using a combination of 529s and a Private School 529. Its still a gamble. It is looking more and more like my kids won't go to A&M for a number of reasons (we're in North Carolina and A&M is trending steeply downward in reputation). Plus my employer offers generous benefits for college, though that could always change.

Comeby!
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AG
I'm using this an a 529 for my 2 kids. I also believe in jakes thought process, covering texas public school costs. Outside of that, you're on your own.
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PedroJack07
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For those looking at the "refund value". For those purpses the plan takes actual returns and subtracts 2% with a cap at 5%... I think.

Quote:

Adjusted annual net earnings on contributions are computed at an earnings rate set by the Board that is up to 2% less than the Plan's actual investment return for each of the years the Contract is in effect, provided that in no event shall the annual net earnings on the contributions ever exceed 5% annually.

At any rate, we just had baby #4, the oldest is about to be 7. We have 529s for the older three already. We're also putting away money in a non-529 acct. I'll probably do a 2 or 3 years worth of the Texas Tuituion Promise Fund and take my chances that 1 of the 4 spends some time at a public university in state.
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