Parents hoping to dodge the effects of an alarming succession of tuition increases at Maryland's colleges and universities by buying a prepaid tuition plan got bad news this week.
Costs of prepaid tuition contracts jumped as much as 27 percent, the Maryland Prepaid College Trust announced. It was the second steep increase in as many years.
The plan allows people to lock in the cost of tuition and fees at a Maryland school by paying in advance, in a lump sum or in installments. The money also can be withdrawn for use at private colleges or schools outside the state.
The hefty cost increases have plan administrators concerned.
The question is whether sales of the tuition contracts will continue rising or level off because "the cost of higher education is becoming so prohibitively expensive," said Ed Crawford, chairman of the College Savings Plans of Maryland board, which oversees the plan.
The cost of four years at public university in Maryland is projected to cost $102,150 in 18 years.
Last year, enrollment exceeded expectations by a few hundred new accounts despite increases of as much as 30 percent contract prices. New accounts reached 4,300, bringing the total to about 18,800.
"We had more families look at the prepaid trust because of the concern over tuition rising," said Joan Marshall, executive director of the Maryland savings plans. "I certainly hope that trend will continue."
As happened last year, trust officials blamed this year's increase on hefty tuition increases. State school tuition rose by up to 20 percent this fall. They noted that once parents join the prepaid plan, tuition costs are locked in.
"If your child is younger and you expect tuition to increase rapidly, it could still make good sense," said Joseph Hurley, chief executive of Savingforcollege.com and an expert on prepaid plans.
"Generally, if your child is older, the increased prices will hit you harder. You don't have as much time for [future] high tuition to justify that investment," Hurley noted.
Maryland isn't alone in raising the price of tuition contracts.
"Programs are either shutting the door to new enrollments or are increasing their prices," said Hurley. "And price increases have been substantial in just about every case."
A contract's price is based on a combination of factors, most important the age of the child, anticipated tuition and investment returns.
