AS IT BECAME CLEAR a few years ago that the gap between rising tuition and shrinking financial aid was not going to close in the foreseeable future, the attention of many states and schools turned to ways they could help parents pay for college without actually subsidizing them. It's a delicate trick, especially given the large amounts of money involved and the speed with which tuition is expected to keep rising -- faster than inflation, faster than interest can accrue on most investments. That difficulty goes part of the way toward explaining why, in an election year when education is every candidate's hurrah, the seemingly bold and exciting suggestions of recent years -- "tuition futures" and state guarantees for parents of young children -- are little in evidence. With few exceptions, the plans actually moving through state legislatures are far more modest.
Two years ago, more than 30 state legislatures were working on versions of "tuition futures" -- plans that would allow parents of infants to pay their children's projected tuition at current rates as a hedge against inflation. The state or, in some cases, the specific school would then invest the money and hope to make up the difference in the intervening years. The same kind of hedge against inflation, on a much smaller scale, led such institutions as the University of Washington to let parents pay all four years of tuition upon their child's matriculation -- often with the help of a loan the college helped them obtain. The college would get the money to invest; the parents could hope that interest on their loan would come to less than tuition increases.
The savings aren't too inspiring here, and in general, as with regular investing, such plans don't save much money unless the risks to someone are concomitantly great. That high risk is why most states have balked on actually implementing their tuition futures plans. So far, only Wyoming, a state with no independent colleges and with public tuition under $500 per term, has actually put one into effect. Other states that passed plans, notably Michigan, are waiting for federal tax rulings on whether the investment gains would be tax-exempt. More troublesome are the questions of choice (if a student decided not to attend a participating college, how much money would be given back?) and of state risk (what if investments lost and the state found itself massively indebted?).
Attracting more attention these days are the far less ambitious arrangements by which the state matches a percentage of parents' savings, waives taxes on them or sells bonds. The Maryland General Assembly is now debating such a plan, but legislators say the amounts are so small in relation to tuition -- under $600 over 14 years -- that the only benefit would be the psychological jog to parents to save.
That's something, but it isn't really an answer for those who don't have the money for college to begin with. College costs are genuinely beyond reach -- not just badly planned for -- in more and more families. Fancy investment plans should not divert attention from the continuing need to assist such families directly.