Md. college cost rise eases

Prepaid plans up 3%-5.4% after years of double-digit increases

November 12, 2005|By EILEEN AMBROSE | EILEEN AMBROSE,SUN REPORTER

The cost of enrolling in Maryland's prepaid college plan will be going up by the smallest amounts in years, largely because of tamer tuition inflation.

Open enrollment will begin Monday in the Maryland Prepaid College Trust, a program that allows families to prepay a semester or years of schooling and fees at the state's public schools. The money also can be applied to private and out-of-state schools.

Contract prices this enrollment season, which runs through March 24, are going up 3 percent to 5.4 percent, said Joan Marshall, executive director of the College Savings Plans of Maryland.

Prices are tied to the child's age, expected investment returns and tuition forecasts. A few years ago, when tuition soared in Maryland and a weak stock market hammered investment returns, prepaid contracts had back-to-back increases of as much as 30 percent and 27 percent. Last year's contracts rose about 10 percent.

Investment returns have improved, and tuition in Maryland this year is rising 6 percent, "more moderate than it has been for several years now," Marshall said.

The steepest increase is in the price of four years of college. The lump-sum price for four years at a university rises an estimated 5.4 percent, to $36,201, for an infant today who will attend school in 2023.

Community college contracts will have the smallest increase. The estimated lump-sum price of two years at a community college rises 3 percent to $7,354 for an infant today.

Payments don't have to be made in a lump sum and can be drawn out over years. Families can also purchase smaller amounts of tuition. Last year, the Maryland plan began selling tuition by the semester.

Last enrollment season, 2,500 people signed up. About 24,000 children are enrolled, and the plan's assets are up to about $390 million.

Maryland isn't the only state seeing a retreat from double-digit percentage increases. With tuition increases abating elsewhere and better market returns, other states with prepaid plans expect to raise contract prices 7 percent to 9 percent, said Diana Cantor, head of Virginia's plan and former chairwoman of College Savings Plans Network, an association of state plans.

Virginia's contracts are going up 8 percent, compared with increases last year of 30 percent to 60 percent, she said.

Smaller tuition increases and healthier investment returns also helped slash prepaid plans' projected deficits. "All the states I have seen have shown some decrease in their deficits over the last year," said Joseph Hurley, founder of Savingforcollege.com and an expert on college savings plans.

Last year, Maryland's plan was $75.1 million short of meeting future obligations based on projections of assets and liabilities. At the end of June this year, that deficit had shrunk to $26.5 million, Marshall said. Virginia's $260 million deficit of two years ago has fallen to $60 million, Cantor said.

eileen.ambrose@baltsun.com

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