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Prepaid Tuition A Future Flunk-Out?

This confluence of events has caused a number of programs across the country to stop selling contracts. Ohio and Texas are among a half-dozen states that have closed their programs to new applicants.

"It's because of a lot of factors. Miami was one of the latest ones," said Jacqueline T. Williams, executive director of the Ohio Tuition Trust Authority. She added that tuition is soaring at other public colleges in Ohio, climbing 50 percent at the state's four-year universities since 2001.

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Williams and other program heads hasten to assure families who have bought contracts that those agreements will be fulfilled.

In Virginia, the University of Virginia, William & Mary and Virginia Tech are all seeking "charter" status, which would decouple them from the state. What impact this would have on tuition isn't known yet, but program head Diana F. Cantor said her office has been busy assuring contract holders that they will still be covered if the three universities are given charter status.

In fact, "anyone who is in a plan today, or who signs up by January 31, will have the full benefit" of the program as it exists today. "If they go to a state school, charter or not, the program will cover all tuition and fees."

Prepaid plans typically have annual enrollment periods when they accept new participants. Virginia's is on now and runs until Jan. 31. Maryland's opens tomorrow and runs until March 18. The District does not have a prepaid plan.

But Cantor said she is concerned about whether the program will be able to open to new participants after this year's enrollment period ends. The program now has a deficit of roughly $128 million, and though that is down sharply from a year ago, state lawmakers may decide the fiscal strain is too great.

She said she thinks prepaid programs remain feasible, though tiered pricing, which a few states have adopted, may become more common. In those programs, contracts are priced differently for different schools within the state.

That structure would make prepaid plans less appealing, however. Already many families are reluctant to commit themselves to state systems, for fear their children might opt for private or out-of-state schools. Programs do pay something if that happens, but the value of the guarantee is lost.

The programs that have remained open have also had to impose sharp price increases on families that buy contracts, which typically can be purchased for a lump sum or in installments. Joan Marshall, executive director of Maryland's program, noted that prices are up 10.3 percent for the coming enrollment, but that is an improvement on the past two years, when it hiked prices 25 percent each year,


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