Prepaid tuition proposed Glendening plan offers protection from taxes, rising college costs

'A thrift-based program'

Out-of-state students would receive subsidy equivalent to Md. cost

December 24, 1996|By David Folkenflik | David Folkenflik,SUN STAFF

Gov. Parris N. Glendening proposed a state-run investment program yesterday to allow parents to put aside money, protected from taxes, to pay for their children's college education and spare them from sharp tuition increases later on.

Simply put, a family could pay for tuition at a Maryland public campus at current rates for a child's future education. State investors would generate income from the families' payments to make up any difference.

"This is a thrift-based program," said Edwin S. Crawford, the University of Maryland System regent who headed a task force. "It is designed to get rid of dependency on debt when your child goes to college."

At Maryland's public campuses, tuition increased an average of 8.3 percent a year from fall 1986 to fall 1996 -- a jump that far outpaced inflation. The prepaid program would offer a spectrum of choices intended to allow families to protect themselves against such rapid rises.

Students heading to a private school or out of state for college would receive a subsidy toward their final cost that is equivalent to the cost of a state school tuition. The plan would offer payment plans -- monthly, quarterly and lump sum -- to cover Maryland residents who have not yet completed the ninth grade when they are enrolled.

If passed during the session starting next month, the program would begin in January 1998. Parents of a baby born then could make monthly payments of $133, and, in return, the fund would pay the equivalent of tuition and mandatory fees at a public, four-year Maryland campus when the child enters college. Current tuition and mandatory fees roughly average $3,200 a year at University of Maryland System schools.

"Assuming it works as intended, it would have a great deal of benefit for people," said H. Mebane Turner, president at the University of Baltimore. "It gives the parents some opportunity to set aside funds."

Various prepaid tuition programs already exist in Florida, Massachusetts, Michigan, Ohio and Pennsylvania. Several weeks ago, after federal legislation during the summer eased the tax burden on parents participating in such plans, Virginia announced a similar plan. Yesterday, Glendening adopted the Crawford task force recommendations for legislation he will submit during the imminent winter session.

"This is a way for people to save who know they will have to pay for college," said state Sen. Barbara A. Hoffman, a Baltimore Democrat who controls the Senate Budget and Taxation Committee. "Maybe [investing with] Legg Mason would be just as good -- but these people might not know Legg Mason. They're not all into the brokerage scene."

The program appears unlikely to draw marked opposition -- administration officials say it would require only a modest amount of state "seed" money and would pay for itself in years to come. In Florida, one in nine students is enrolled in the plan, and the state has generated a $205 million surplus on a pool of $1.5 billion.

But similar programs have run into financial trouble. The private firm overseeing the Pennsylvania initiative ran out of money, and the Michigan program was suspended and then re-opened with significantly reduced benefit for parents when it cost more than officials had expected. The Maryland proposal includes a clause reserving the right to alter the cost of the programs to parents if the fund proves financially shaky.

Glendening backed the idea of a prepaid scholarship plan in a September talk to faculty members at the University of Maryland Baltimore, but he did not indicate details of the plan until yesterday.

The tuition savings program is the latest in a raft of proposals from the Glendening administration affecting higher education -- particularly its cost. A former professor at the University of Maryland College Park who often talks of his experience as a scholarship student in Florida, Glendening has stressed the importance of Maryland's students and college campuses to its economic future.

During his first two years in office, the governor successfully pushed the General Assembly to increase spending on community colleges and the state's public campuses, even as he cut back many other state programs.

This fall, Glendening developed a scholarship plan for middle-class students modeled on a Georgia program to pay the college tuition of students with B averages from families earning less than $60,000 a year. The scholarship, publicly reported on the same November day as a Glendening plan to cut state personal income tax rates, generated strong opposition from the governor's political foes in the General Assembly who portray him as an undisciplined spender of state money.

In addition, Glendening aides say the governor is weighing proposals to freeze tuition rates or at least limit their increase at the state's University of Maryland System campuses.

The Glendening plan builds on a task force created after similar legislation was proposed last winter by state Sen. Edward J. Kasemeyer, a Democrat who represents Baltimore and Howard counties, and Del. Mathew J. Mossburg, a Montgomery County Republican. The panel included several state officials, the president of St. John's College in Annapolis and the president of the Journal Newspapers in the Maryland suburbs of Washington.

Pub Date: 12/24/96

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