Prepaid tuition sign-up postponed

Questions over how high costs could rise delay enrollment in state plan

October 15, 2002|By Eileen Ambrose | Eileen Ambrose,SUN STAFF

The Maryland Higher Education Investment Board postponed yesterday new enrollment in the state's prepaid tuition plan until it has a better idea of where college tuition costs are headed.

The enrollment period was expected to run from today through March 14. The goal is to begin enrollment Nov. 1, although that date might be pushed back if more time is needed to determine the direction on tuition increases, said board Chairman Edwin S. Crawford.

The board made its unanimous decision after an article in The Sun last week said the University System of Maryland, which oversees most public colleges in the state, had appointed a task force to review tuition policies and that tuition might increase 10 percent or more.

How high tuition is expected to rise is a critical factor for the prepaid college trust.

Participants in the plan buy contracts that allow them to pay tuition in advance based on a child's age, expected investment returns, current tuition and tuition forecasts.

For several years, tuition increases held steady at 4 percent a year, a factor in the price of contracts. But after the last enrollment period ended, the university system tacked on a supplemental tuition increase of 1.5 percent.

By then, about 4,000 contracts had been sold in expectation of a smaller jump in tuition, and the plan faced a shortfall of about $3.4 million, Crawford said.

That shortfall will be made up in the pricing of future contracts over the next five years.

In August, the Board of Regents approved another 4 percent tuition increase for the 2003-2004 school year for in-state undergraduates.

The regents left the door open for another supplemental increase.

To be safe, the prepaid plan based the contracts it was to sell this enrollment period on a 6 percent annual increase in tuition.

It would create another multimillion-dollar gap" if tuition rose much faster, Crawford said.

Regent David Nevins, who is on the tuition task force, said the group hasn't met and that "any guesses about where tuition will be going over the next year or two are nothing more than pure speculation."

"We'll be studying the matter over the coming months," Nevins said, adding that Maryland is like all other states facing budget constraints. "I wish I could give them better information."

Chris Hart, a spokesman for the university system, said that before the task force issues its final report, which could be many months away, the public and the board overseeing the prepaid plan will know more about what tuition will be next year.

The prepaid plan has more than 14,400 accounts and more than $100 million in assets.

The decision to delay enrollment does not affect the state's other savings college plan, the Maryland College Investment Plan, which permits people to sign up year-round.

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