Enrollment doubles, to 10,000, in state's prepaid tuition plan

Milestone is reached after state agrees to guarantee payouts

April 20, 2001|By Michael Hill | Michael Hill,SUN STAFF

The Maryland Prepaid College Trust has finished its best enrollment period ever, doubling the number of people signing up for the tuition savings plan to more than 10,000.

That meets the projection that Edwin S. Crawford, chairman of the trust's board, made when the program started in 1998 and means it can start paying back the $350,000 borrowed from the state to help support the trust.

"I feel like there's a monkey off my back," said Crawford, who predicted three years ago that the program would quickly meet the 10,000 goal that would make it self-supporting and then watched it struggle to sign up clients during its first two years.

Crawford and Joan Marshall, the trust's executive director, credited a bill passed last year by the General Assembly that gave state backing to the trust payouts as the key to the growth in enrollment.

"This clearly added a new level of security, which we knew was exactly what families were asking for," said Marshall.

The shaky stock market during the October-to-March enrollment period also might have made a trust contract look like a better investment. The program allows parents - or grandparents, employers or anyone else - to pay for children's future college tuition essentially at today's prices. Contracts range from a lump sum to years of monthly payments.

The eventual payout is equal to the average price for tuition and fees paid at that future date by an undergraduate at Maryland's public colleges and universities, which is about $5,000 a year today. That money can be used at any college, public or private, in Maryland or out of state.

With state tuition increases limited to 4 percent a year, even figuring in a 10 percent rise in fees and tax advantages, trust officials could predict a return on the investment of 10 percent to 12 percent.

That was not so appealing when the stock market was rising at 20 percent a year - one reason that the trust suffered in its initial years - but looked better when a slide started last fall.

"People bought 1,000 shares of Cisco - I don't meant to pick on that company, but that was one of the hot stocks - and thought they had four years of college paid for," said Crawford. "Then suddenly that was only worth one year of college."

Marshall said an improvement in the trust's Web site - including allowing online sign-ups - also helped enrollment.

Crawford and Marshall said the key was getting the state to guarantee the payouts. The initial literature came with bold warnings stating that the program did not have state backing. The new literature included a state-guaranteed stamp.

In all, the trust, which enrolled a little more than 5,000 participants in its first two years, tallied 5,346 applications during the latest 4 1/2 -month enrollment period. It has about $40 million in the bank, but the new enrollments - which will start making payments in June - mean there is more than $200 million committed.

Reaching the 10,000 mark in enrollment means that the trust is self-supporting and is able to pay staff and promotion costs from its investments. During the past two sessions of the General Assembly, the trust has been forced to go back to the legislators, first for grants and then for loans, to keep going.

Marshall said that when the new enrollees begin making payments, the trust will start repaying the funds it borrowed.

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