Texas Tomorrow College Fund on Hold Again

11-17-05 - The Texas prepaid college tuition program will be closed to new enrollees this year while program managers try to figure out how to fix the fund's problems.

This is the third year in a row that the $1.5 billion Texas Tomorrow Fund has closed to new enrollees over tuition uncertainty.

Among its difficulties are gaps in how much expensive schools, including the state's flagship campuses, and lower-priced colleges charge and increase tuition. Tuition deregulation now allows college boards to set their rates, so some charge more than double that of other schools.

"The average increase this year moderated to 7.4 percent, but some schools were still over 20 percent," said program manager Andy Ruth.

Current participants who register at colleges that charge higher tuition will benefit, since the fund pays the weighted tuition average for all senior colleges and universities. However, that leaves schools with less funding to cover educating students participating in the program, so those colleges must cover that on their own.

Those already enrolled, about 158,000 accounts, are protected and will get to use the fund to pay for tuition in the future, plan managers said. During the last open enrollment in 2003, 25,000 families signed up.

"I am confident we will be able to meet all our obligations," Ruth said.

It's unclear when the prepaid tuition program will reopen to take new participants.

The board is "uneasy that it cannot see the big picture yet, that it cannot determine what the long-term trends will be," Ruth said.

Other states have also faced similar problems with their prepaid tuition programs, said Joseph Hurley, chief executive officer of Savingforcollege.com. Both Colorado and New Mexico have done away with their programs.

"It's really a shame these programs are being cut back at a time when so many families are finding them a more attractive way to save for college," Hurley said.