By Steve Wilson | Mississippi Watchdog
The Mississippi Prepaid Affordable College Tuition Plan is open for business again, but questions remain about its financial stability.
The program was re-opened to new enrollments Monday after an unanimous vote by its board of directors. New enrollments were discontinued in 2012 so the plan’s finances could be audited, which showed its balance sheet in serious disarray.
State Treasurer Lynn Fitch said the plan is $82 million in the red and is in danger of running out of money in less than a decade. By law, the state — and its taxpayers — would be liable to cover the shortfall.
UNDER THE DOME: The Aubrey K. Lucas Administration Building at the University of Southern Mississippi in Hattiesburg.
Fitch said reopening enrollment would help get the program back on more solid financial ground. She said changes in the contract prices, which vary from plan to plan, for new enrollees will help relieve the program’s financial crunch as well. Plans under the old plan will not be changed.
“We looked at the numbers and we’re going to reprice these contracts to correct our needs,” Fitch said. “We’re hoping that, moving forward, we can have a program that’s going to be cost-neutral without any taxpayer contributions. New enrollees can help with our shortfall.”
Fitch blamed the 2008 financial crisis as one of the biggest hits to the fund. The fund has investments like municipal bonds, and the downturn put a definite squeeze on the rate of return, which was optimistically pegged at 7.4 percent when the plan began in 1997.
According to state law, the program can be discontinued by a board vote, but the state’s liability in such an instance would rise to $142 million. Before enrollment was closed in 2012, 248 new enrollees added $211,000 to the shortfall.
Another factor that has added to the fund’s continuing financial problems has been the rise in the cost of higher education in the Magnolia State. The Southeast Regional Education Board says the net price of college — the cost of attendance minus grants and scholarships — in Mississippi was $11,800 in 2011-12, seventh-highest among the 16 states representing the SREB. Eighty-seven percent of freshmen at Mississippi four-year universities had grants or loans, compared with the national average of 83 percent.
Last year, five of the state’s eight four-year universities — the University of Mississippi, Mississippi State, the University of Southern Mississippi, Alcorn State and Jackson State — raised tuition.
While the fund’s financial challenges are daunting, Joseph Hurley, founder of Savingforcollege.com, said prepaid college is still a good investment for parents looking to hedge their bets on higher-education costs.
“They can still be a good idea in states that will experience rapidly increasing tuition rate and where the state provides full faith and credit backing for the plan’s obligations,” Hurley said. “Parents must study the rules carefully to understand what they are paying and what they will be getting.”
Contact Steve Wilson at firstname.lastname@example.org