ANNAPOLIS – Parents would be able to begin paying for a child’s college education at a fixed rate years before the child went to college under legislation being considered by a House committee.
The bill, modeled after a program in Florida, would allow parents to prepay tuition to a Maryland state school or community college from a child’s birth until age 18. The payments could be made in monthly installments over as many as 18 years or in a single lump-sum payment.
Each year, tuition amounts for upcoming years would be projected, based upon economic factors. Parents would be locked in to projections made during the year they entered the program.
The payments would depend upon the child’s age at entry. Children could be entered as late as the eleventh grade.
For example, in 1995, Florida parents who entered a newborn in the prepaid college program would pay $47 per month until the child was 18. For the total $10,000 in payments, that child’s tuition would be covered for four years.
Supporters of the bill say making payments now reduces the risk of having to pay higher rates in the future.
“If you save a little bit of money when a child is born, you can cover the cost of college without breaking the bank,” William W. Montjoy, executive director of the Florida Prepaid College Program, told members of the House Appropriations Committee Wednesday.
Funds paid into the program would be invested in a trust set up by the state and designed to generate sufficient income to cover any difference between the prepaid amount and actual costs at the time of enrollment.
But if the investments did not perform, state funds would make up the difference.
This worries Patricia S. Florestano, secretary of the Maryland Higher Education Commission.
“It is impossible to estimate the fiscal impact on the state should the program experience heavy participation coupled with low rates of return on investment funds and large tuition increases,” Florestano wrote in a letter opposing the bill.
But Montjoy offered the example of Florida, which has not had to dip into state funds.
Since the program began there in 1987, it has managed $1.1 billion and generated a $200 million surplus through investments, Montjoy said. The Florida fund has sold 275,000 tuition contracts.
“The reason it works is we have the money before you go to school and have the opportunity to invest it,” Montjoy said.
Today 12.5 percent of Floridian children above the poverty line are in the prepaid tuition program, Montjoy said. The program is growing by 40,000 children a year, he said.
Del. Matthew Mossburg, R-Montgomery, a co-sponsor of the Maryland bill, cited multiple benefits:
– Parents would be encouraged to save early.
– They would take an interest in state schools before their children reach college.
– And children would have more confidence in their futures.
“Psychologically, the child becomes conditioned to going to college,” Mossburg said.
Montjoy agreed, saying the program moves dialogue from whether a family has the money for college to a discussion of where to go to college.
“The child can say, `Let’s talk about my choices,'” Montjoy said. “We’re changing the mindset.”
Under the Maryland bill, if a child did not go to college, money paid into the program would be completely refunded with 30 days’ notice, but no interest would be paid. Students who decided against enrolling in Maryland public universities or colleges could have the value of their contracts applied to the school of their choice. Ten states currently have prepaid college programs, and Virginia will begin a program this summer, Montjoy said. -30-