Which is Better: Florida Prepaid or the 529 Savings Plan?

My son was born in 2024, and like many new parents, I wanted to evaluate our options for college savings. The first question I asked myself was, should I use Florida Prepaid or the 529 Savings Plan?

I was the beneficiary of the Florida Prepaid Plan thanks to the diligence of my parents, and was able to obtain a bachelor’s degree at an in-state public school with no out-of-pocket expenses. Florida’s prepaid offerings have rightfully drawn much praise over the years for the tremendous value they provided families.

You may be wondering as I was, whether these plans still offer superior value, or if a traditional 529 account makes more sense.

This article will arm you with the analysis and perspective to tackle this important decision.

Florida Prepaid Plan

When you access myfloridaprepaid.com, you will enter your child’s birth date for current pricing. For this example, I have selected May 15, 2025.  

The website returned three different payment plan options:

• Monthly (211 payments)
• 5 Year (55 payments)
• Lump Sum (1 payment)

The results were tailored to five different college options (tuition only):

• 2-Year Florida College (60 college hours)
• 4-Year Florida College (120 college hours)
• 2 + 2 Florida Plan (60 college hours, 60 university hours)
• 1-Year Florida University (30 university hours)
• 4-Year Florida University (120 university hours)

For this analysis, I will focus on the three payment options for the 4-Year Florida University Plan.

Total Cost of Plan:

Monthly = $125.52 for 211 months = $26,484.72

5 Year = $466.62 for 55 months = $25,664.1

Lump Sum = $25,373.47

Right away, it’s clear that there are marginal savings for those who can prepay the entire balance upfront, while not being overly penalized if you opt for the Monthly or 5 Year options.

The expected payout of the plan is $63,500. For context as to how they arrived at this figure, they state the following:

“The estimate is based on current in-state tuition and fees, anticipated inflation and historical usage patterns. The actual benefit (costs paid in the future) may be higher or lower. However, the actual benefit will never be less than the price you pay for a plan – you cannot lose money.”  

Now, a $63,500 payout in 18-21 years on a $25,373.47 investment is an approximately 2.5x return with a CAGR (annual growth rate) of 5.22%.

Note: I used 18 years in the CAGR calculation for simplicity, despite the fact that the distributions would occur over 4 years.

That’s not bad, especially since it’s guaranteed. However, the payout figure – and therefore, the return figure — is reliant on an inflation estimate for education costs many years into the future. There are many unknowns, including what the legislature may do about swelling tuition costs.

If a guaranteed 5.22% annual return to secure a bachelor’s degree for your child sounds like a great deal, then you may not need to look any further. It is hard to put a price tag on the peace of mind of a hands-off investment to secure your child’s future.

However, if you think the inflation estimate is aggressive, that you can achieve a higher rate of return, or simply want more control over the investment, you may consider the 529 Savings Plan.

Florida 529 Savings Plan

With the 529 Savings Plan, you don’t need to contribute based on a fixed schedule (although you may want to).

There are three portfolio options for the Florida 529:

• Simple (a fully managed portfolio)
• Intermediate (professionally designed portfolios)
• Advanced (build your own)

None charge an advisor, sales or annual account fee, and you would only be subject to the fees that the funds within the account charge – the same as if you’d purchased a fund directly.

In the below example, I will examine what a build-your-own portfolio might look like with 100% of your contributed dollars invested in the U.S. Large Cap Equity Index Fund (VIIIX) – a low-cost Vanguard fund they offer, that tracks the S&P 500 index.

Based on the historical return of VIIIX – around 10% per year – the future value of $25,373.47 invested today and left untouched for 18 years would be over $141,000. This is more than double the estimated Prepaid Plan payout of $63,500.

A few caveats:

• Historical performance is no indication of future results. There is no way to know what the S&P 500 will return over the next 18 years.
• As the child approaches college, it is unlikely that you’ll leave 100% of the money in an equity fund, which is susceptible to volatility. Therefore, the return would be lower, with the final figure dependent upon how early and how much you move to more conservative investments.
• There is clearly more risk involved, considering you would be selecting the investments yourself, and you’d be subject to whatever the market returns.

Of course, you can always choose the Fully Managed Portfolio option (which they indicate to be their most popular) or choose from one of the Professionally Designed Portfolios.

Let’s take a look at the Enrollment Year Portfolio, which automatically adjusts investment allocation based on age.

Source: https://www.myfloridaprepaid.com/savings-plan/investment-options/

The graph above provides an excellent illustration of how the fund moves away from equities toward fixed income and money market funds as the child approaches college enrollment. Now, what about returns? As you’ll see below, the overall return for the Enrollment Year Portfolio drops, the closer the child is to college enrollment. This is to be expected, due to the aforementioned shift away from risk (less equity exposure).

It’s worth noting that the returns since inception (which they list as December 2002) may be a misleading metric for you as you perform your own review. Ultimately, you are seeking the 18-year return for an investment that you begin in 2025 and maintain until enrollment in 2043. With that in mind, you can use this table as a guide, but not as a definitive resource when weighing this option against the others.

Below are the historical returns for some of the other passive, Professionally Designed Portfolios. Because these are static investment options (the fund seeks to maintain a target allocation percentage), the return figures are a bit more informative on a stand-alone basis.

Source: https://www.itppv.com/documents/pdf/investment/investment-disclosure-statement.pdf

Final Thoughts

So, which one should you choose: Florida Prepaid or the 529 Savings? Only you can answer that. I would encourage you to seriously consider your own risk tolerance. If you’re interested in the 529 savings option due to control, but your risk tolerance is low, you should run your own calculation based on the expected return for your chosen portfolio composition and compare that against the guaranteed return of the Prepaid Plan. A heavy allocation to fixed income investments over equities may not produce the return you need, particularly in light of the risk you’re taking on.

For those comfortable with a heavy allocation to equities, especially early on, the 529 offers much higher potential.

Note: this article does not serve as an endorsement for any of the college savings options, or funds listed above. It is intended to provide you with information only, so that you can make the best decision for your family.