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Conference nyoss1::market_investing

Title:Market Investing
Moderator:2155::michaud
Created:Thu Jan 23 1992
Last Modified:Thu Jun 05 1997
Last Successful Update:Fri Jun 06 1997
Number of topics:1060
Total number of notes:10477

833.0. "Massachusetts UPlan for college tuition" by MILKWY::JSIEGEL () Thu Feb 23 1995 12:14

    I think this fits in this conference, as it is really an investment of
    sorts.  Moderator, please let me know if it should go somewhere else...
    
    Has anyone looked into the UPlan, which is the plan available in
    Massachusetts to "buy" percentages of college tuition now or over time
    to lock in today's tuition prices for the future?   Initially it looked
    like a great idea, since it guarantees what you will pay for your kid's
    tuition in the future, assuming they go to one of the schools in the
    plan (all in Mass).  You can take your money out if they don't go to
    college, or decide to go to a non-participating college.  Also, any
    interest is tax free, at least until you pull out $$ (I forget if it's
    tax free even then).
    
    But, the money is invested in State or Muni bonds, and is "guaranteed to 
    keep up with the rising cost of college costs."  So it seems that one
    could just as easily invest the $$ you would put into the plan
    elsewhere, as long as it returned as much as the bonds purchased in the
    plan?  And if the timeframe is long enough (i.e. > 10 yrs.), investing
    in stocks might be a better choice.  Am I missing something?
    
    /Jon
    
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833.1Uplan - depends on what tuition costs doBIGQ::SORRELLSHell has my E-Mail addressThu Feb 23 1995 16:1813
    The big variable is the rate of increase in tuition.  You can do an
    analysis of rate of return of stock investments vs rate of increase
    of tuition, and find out whether stocks or Uplan is better.
    
    I made some assumptions before I got the full info - in fact, I think
    the federal tax implications are still uncertain - and it showed that
    if tuition rises much more than 7% annually then Uplan is worth considering.
    I think that assumed historical stock rate of returns in the 8-12%
    range.
    
    I suppose you could also use Uplan as a hedge that 1) your stock
    investments in your kids' college fund rose less than expected or 2)
    college costs rose much more than expected.    
833.2MARVA2::BUCHMANUNIX refugee in a VMS worldTue Feb 28 1995 20:069
    As an example of what tuition prices can do, the tuition at Johns
    Hopkins University in 1978 was $4500. Over the course of the next ten
    years, it increased at an annual rate of thirteen percent and was over
    $10K. I lost track of it at that point. Then-president Steve Muller
    stated that the increases were in line with those at "Ivy-League schools
    and other universities of Hopkins' caliber."
    
    13% would be an awfully good return in anybody's book. I think the
    increases have moderated lately, though.
833.3Explanation of value, I hope...JOKUR::FALKOFThu Mar 02 1995 15:5417
    I checked out one more item in UPlan. If you buy a bond worth, say,
    $1000, and that bond today represents, say again, 10% of your ultimate
    school's tuition today, then that bond at maturity would be worth 10%
    of the school's tuition then. So, if tuition changes from $10k to $30k,
    your $1000 bond will be worth the equivalent of $3k then. You are
    still subject to the remaining 90% of the cost as of that future date. 
    
    Summary, the bond does not freeze the tuition rate, only the percentage
    amount of the value of your investment.
    
    If any new schools join the plan, they say, they will try to enforce an
    agreement that makes your investment's comparative percentage effective
    as of the date you enroll in the plan, not the school's participation
    date. So, if you want to attend Harvard (which does not now participate
    in the program), you take out a bond for $2000 (I think this is 10% of
    today's tuition), and in 18 years Harvard joins the program, then your
    $2000 will be worth 10% of whatever Harvard costs then.
833.4my commentsSLOAN::HOMFri Mar 03 1995 11:2421
With two childred approaching college age, I looked at the
plan  in detail.  

1.  The plan is marketed only by Shawmut Bank.  What's in it
    for Shawmut or they are doing it in the public interest?
2.  Some good schools are NOT in the list: MIT, Harvard, ...
3.  What if your children don't attend a MA school? You get
    back a rate equal to the CPI.
4.  There has been significant focus on college cost. My view
    is that future tuition increases will not be as high as
    it's been.
5.  Over the long term, the SP500 returns would have taken care
    of the increase in college cost.
6.  As noted previously, you are only covered for the %tuition
    you put in.

Given the restrictions and lack of flexibility, thanks but no
thanks,

Gim

833.5MSE1::PCOTEYou want some cheese with that whine?Fri Mar 10 1995 13:439
> 2.  Some good schools are NOT in the list: MIT, Harvard, ...

      Oh, did the plan mention something about guaranteed admittance
      or did I miss that point ?  :-)

      

      
833.6http://www.infi.net/collegemoneyWONDER::BENTOI've got TV but I want T-Rex...Wed Mar 15 1995 13:313
    Signet Bank has a WEB page about college loans...
    
    -TB