Tuition plan posts deficit

Prepaid college trust still sound, Md. officials say

March 12, 2009|By Eileen Ambrose | Eileen Ambrose,

The projected deficit of Maryland's prepaid tuition plan rose to more than $80 million last year because of investment losses, but plan officials said yesterday that the Maryland Prepaid College Trust is sound.

"We have sufficient funds to pay future benefits for more than 17 years," says Joan Marshall, executive director of the College Savings Plans of Maryland.

During the last two quarters of 2008, the Maryland plan lost 9.3 percent and 15.9 percent, respectively, on its investments. Assets at year's end totaled $429 million, down from $541 million six months earlier.

As of Dec. 31, the Maryland plan had an actuarial deficit of $82.3 million - meaning based on the projected value of assets and liabilities, the plan is short that much in meeting future obligations. Six months earlier, the plan had an actuarial surplus of $58.9 million.

Prepaid plans allow families to pay for college in advance, locking in the price of college based on today's prices. Families' money is pooled and invested, and the tuition and fees are paid when the child enters college.

The Maryland plan has about 28,000 enrollees, with about 6,000 now eligible for benefits, Marshall said. Half of those taking benefits go to Maryland public colleges, while the rest go to private or out-of-state schools.

Prepaid plans nationally have suffered investment losses since the stock market started its slide. Alabama's plan is hardest hit, and state officials there have warned parents that the full cost of college can no longer be promised, according to the Associated Press.

Maryland's plan has a legislative guarantee. That means if the plan couldn't meet its obligations, the governor must include any shortfall in the budget, although the legislature has to approve it.

Parents should be aware of the plan's actuarial deficit but should also understand that "they are just projections based on assumptions of increasing tuition and investment performance," says Joseph Hurley, founder of

"No one has lost money in any of these plans," adds Jackie Williams, a spokeswoman for the College Savings Plans Network.

Open enrollment in the Maryland plan continues through April 6. As of Feb. 24, the plan had 773 new enrollees, up from 664 for the same period last year.

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