Tomorrow's education, on sale at today's prices Tuition: The new prepaid college payment plan just approved by the Maryland legislature will help parents avoid tuition sticker shock years from now.

The Education Beat

April 16, 1997|By Mike Bowler | Mike Bowler,SUN STAFF

MARYLAND'S new prepaid college tuition program, approved TTC by the General Assembly in the last days of the 1997 session, is a very "'90s thing" in one sense and quite the opposite in another.

The program should appeal to the boomers who begin worrying about John and Jane's college careers while the babes are sucking on their first pacifiers. For, indeed, when the state begins selling tuition contracts early next year, parents will be able to invest in the higher education of their children from the day of their birth to the ninth grade. (So will grandparents, aunts and uncles; an investment in prepaid tuition makes a splendid gift.)

But the program isn't for serious stock market players who, until the recent Wall Street "correction" that wiped out all of the robust gains of 1997, had been earning double-digit dividends in the bull market.

Double-digit earnings aren't expected for the Maryland plan, which the legislation's sponsor, Democratic Sen. Edward J. Kasemeyer of Howard and Baltimore counties, called "a Chevrolet model."

It works this way: Marylanders can begin paying now the future tuition of their children at today's rates as charged by public universities and community colleges. The state invests the funds, assuming that the return over the years will at least keep up with increases in college tuition. In effect, it's a state-managed IRA for college.

Kasemeyer said the Maryland plan has three options, one for a two-year community college education, one for a combination of two-year and four-year education and one exclusively for a four-year university education.

Funds from the Higher Education Investment Program can be used at private colleges such as the Johns Hopkins University and at out-of-state schools, but only to the level of Maryland public four-year tuition. Participants can opt out and get a refund by paying a modest fee. Thirteen other states have such plans -- or soon will have.

What's to complain about? Nothing, really.

Although a couple of schemes have encountered financial problems -- Michigan's had to be suspended for a time and reduced in scope before it was put back in operation -- prepaying tuition is in the generally abandoned American tradition of saving. The state can run the plans for almost nothing, and the politicians can claim credit, quite accurately, for doing something for the "little people."

("Big people" can pay into the plan in a lump sum; "little people" can do it on the installment plan, which in Maryland will be about $130 a month for a newborn bound for -- egads! -- the University of Maryland Class of 2019.)

Kasemeyer said that Maryland's plan is "very much our own" but that it has features from plans in Virginia and Florida. Florida's plan was an instant success and is running a surplus. Virginia's, launched last winter, was pronounced a "rousing success" by the head of the commonwealth tuition trust fund after only a few months. More than 16,000 families signed up, committing $200 million, much of it in lump-sum contracts.

Will the prepaid tuition plan be a wise investment?

As always with investments, no one knows.

Certainly the recent track record of the state's public universities would encourage confidence in prepaying.

Maryland tuition increases have outpaced inflation for more than a decade, as operating costs have been shifted from taxpayers to tuition payers.

Kasemeyer said Maryland experts anticipate annual earnings in the 7 percent to 8 percent range, very modest if one looks at the pre-March performance of the stock market.

If inflation remains low and public colleges continue to pass their costs on to students and their parents, the new plan will pay off handsomely.

If not

Maryland has set up a hot line, 800-903-7875. You'll get very little information from it, but the plan's operators will take your name for mailings after they've crossed the T's.

It pays to get fired from Baltimore County jobs

A tale of two fired educators: Stuart Berger, former Baltimore County school superintendent, had 11 months left on his $121,000-a-year contract when the school board canned him in August 1995.

His settlement: $150,000 in a cash buyout, $110,000 for doing "consulting work" and $50,000 in benefits, including use of a car. Total: $310,000.

Daniel J. LaVista, fired as chancellor of the community colleges of Baltimore County on Jan. 13, had almost 31 months left on his $175,000-a-year contract. His settlement: $165,000.

Pub Date: 4/16/97

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