Posted on 03/16/2010 9:38:12 PM PDT by UAConservative
MONTGOMERY (AP) — Alabama's prepaid college tuition plan appears unable to pay tuition beyond the fall semester of 2011 and still have enough money to provide refunds to the 44,000 participants, administrators said.
For leaders of the Save Alabama PACT parents group, that creates the need for the Legislature to find a solution in the current legislative session.
Patti Lambert of Decatur, the group's co-founder, said she would prefer a solution in the Statehouse rather than the courthouse, but members may have no choice but to join a handful of parents who have already sued the state to demand the program keep its promise of full tuition.
"I suspect we will be forced to. We are certainly not going to wait until we have no room to maneuver," Lambert said in an interview Tuesday.
Alabama's Prepaid Affordable College Tuition plan used to offer parents or grandparents the opportunity to pay a fixed amount when a child was young and then get four years of tuition at a state university when the child finished high school. To pay the tuition, the board overseeing the program invested the money, mostly in stocks.
That worked well until the stock market plunged in late 2008, and the program was left with too few assets to meet future obligations. The board stopped taking enrollments last year and predicted it would run out of money around 2014 without any help from the Legislature.
(Excerpt) Read more at tuscaloosanews.com ...
Do a 529 “cash” plan with a mutual fund company.
NEVER do a prepaid tuition plan, ever!
Take the pensions of the admins of the the PUBLIC STATE universities. Or, just shut them the hell down!!
Privatize them.
No more Federal or State aid to these Universities.
No matter how much money the government pours in to these “schools” tuition keeps climbing at double digit rates regardless of how low inflation is.
Let the free market and competition control tuition.
Unfortunately, most of the parents that invested in the PACT, whose kids will start in the next four years, are about to learn that lesson the hard way.
Problem with a 529 is that you get a 2% return with a 8% tuition growth rate. If you had put away enough money in the moderately conservative plan to pay four years of tuition in 2000, it would only be able to pay about 2.5 years today.
The folks who purchased the Alabama plan when it still said “guaranteed” will win in court.
The plan was horribly mismanaged (they paid big bucks for that management).
Something to think about is that, if professional money managers can’t keep up with tuition increases, what are regular folks supposed to do? Between the incredibly powerful financial aid officers with a social agenda and the lack of concern for middle class students ability to pay unless you are able to hit a freethrow or catch a pass, your opportunities to go to college are closing.
Think pretty soon these institutions who strongly desire to equalize society will get to control student loans, one of the last ways available for middle class families to send their children to college.
Huh?
Sorry, but you do not know what you are talking about.
Mutual funds can invest in anything.
Bonds
Stocks
Even some in Real Estate or Commodities.
A brokerage 529 can invest in anything yes, but the fees will eat you alive. I am citing the performance of our state 529 (which is actually pretty good). Their returns in their various funds dating back to around 2001/2003 (different inception dates) range from -3% to 4.5%. If you are a good market timer, then maybe you could have done better. Most folks can’t do any better than active money managers (most of whom underperform the 500 index). Maybe I should go with the managed option for my state, but I just don’t think I can do much better than the funds which I have selected. It is easy to look back and say you should have been in here and out there, but it is a whole lot harder looking forward. Also the one move per year restriction still applies as best as I can tell even for brokerage/advisor 529s. The state plan already gives me about 7.5% of investment off my state taxes for the deduction, so I don’t think going outside my state plan would make any sense.
To give you an idea of how bad it is the guaranteed tuition inflation adjusted CD from the Idaho 529 is tuition increase minus 3%. Assuming a 5% tution growth rate, then in 18 years the money you have saved will only pay for 60% of tuition that could had been purchased when the money was first saved.
So do you think stocks are going to continue to rise. I don’t, and I am light in equities right now for that reason, but I don’t know what will happen. Do you?
I can not recommend companies, regulations forbid it in this forum. You can probably search as well as any.
I will say that several 529 companies allow more transfers than you seem to have to comply with. Problem is: who is approved, in YOUR State?
Thanks for the advice. You obviously know more about this than I do. My main experience is with my state’s fund.
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