Maryland Prepaid Tuition Deficit Tops $80 Million

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State’s Fund Dropped Sharply In 2008

You’ve been socking away college tuition money for your child for fifteen years, understanding that the funds you’ve been setting aside will be enough to cover all four years of your child’s higher education. Thanks to a prepaid college tuition program that you’ve been a part of since her birth, she’ll piggy bankbe able to afford tuition at the University of Maryland, joining scores of her fellow classmates in rooting for the Terps.

Disquieting news from Maryland is showing some problems with that state’s prepaid college tuition program, to the tune of a $80 million shortfall in funding. Investment losses in 2008 caused the Maryland Prepaid College Trust to drop in value, raising concern among some parents that the money won’t be there when they need it.

Big Deficit Isn’t Having An Impact

Plan officials were quick to point out that the plan’s deficit doesn’t mean that any students will be affected, especially right now perhaps never. About 28,000 people are part of the plan with 6,000 eligible to take benefits. The other half of the benefits go to students attending Maryland’s state colleges and universities with the remaining funding covering tuition at private schools and out-of-state institutions.

According to an article which appeared in the Baltimore Sun (Prepaid tuition plan deficit hits $80 million; March 12, 2009) plan assets at year’s end totaled $429 million, down from $541 million six months earlier. At that earlier date the plan had a surplus of just under $60 million with losses coming when the stock market collapsed last fall. Every state’s college savings plans have taken a huge hit according to the Baltimore Sun.

The Comfort of a Legislative Guarantee

Maryland residents should understand that the state’s plan does have a legislative guarantee. What this means is that if for some reason the plan is unable to meet its obligations, the governor must include any shortfall in the state’s budget, although the legislature still has to approve it. To date, no plan has failed and no student has been unable to attend college due to plan related problems.

So relax. If your state’s prepaid tuition plan is experiencing a shortfall, more than likely there are processes in place to keep everyone covered in the event of a financial catastrophe. With hundreds of families joining these types of plans during the open enrollment periods, contributions will continue to cover educational costs for thousands of students for many years to come.

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Categories: Campus News, Finance