To Refund or Not To Refund?

the state has more than 100,000 active contracts for Texas Guaranteed Tuition Plan

Thursday, Sep 24, 2009  |  Updated 12:15 PM CDT
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To Refund or Not To Refund?

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Some legislators are urging Texas Comptroller Susan Combs to abandon a plan to cut refunds to those who invested in a state prepaid college tuition program.
 
But comptroller spokesman R.J. DeSilva said the board has no plans to change its May decision. With the rise in college tuition and other factors, the panel took the step to keep the fund solvent.

  "The reason behind the rule change has not changed," DeSilva told the Fort Worth Star-Telegram,
 
After Oct. 30, people who paid into the Texas Guaranteed Tuition Plan will receive only the money they put into the plan if they request a refund. They will not get any earnings, no matter how long their money had been invested. Fees will be deducted from their refund.
 
State Sen. Jane Nelson, R-Flower Mound, sent a letter Tuesday to Combs, who leads the board that oversees the tuition plan, telling Combs she strongly objects to the decision by the Texas Prepaid Higher Education Tuition Board. Last week, 43 Democratic state representatives signed a letter to Combs that calls on the board to "immediately reconsider its action."
 
"I think we're setting a bad precedent," said state Rep. Marc Veasey, D-Fort Worth, who signed the letter. "We need residents of the state to have full faith in what we're doing down in Austin, particularly in these tough economic times."
 
Veasey said Democrats plan to file legislation to prevent such rule changes in prepaid tuition plans, but the Legislature will not reconvene until 2011.
 
State residents could invest in the fund from 1996 to 2003. Through lump sums or installment plans, people were allowed to lock in tuition and required fees at about what they paid when enrolling in the program.
 
The state guaranteed full payment -- no matter how much tuition increased. Additional costs were to be covered by earnings the state got from investing the money.
 
In 2003, though, the Legislature deregulated tuition at public colleges and then-Comptroller Carole Keeton Strayhorn halted enrollments.
 
According to the Texas Higher Education Coordinating Board, tuition and fees rose well past the rate of inflation, increasing 53 percent between fall 2003 and fall 2007. That combined with the economic downturn led to a shortfall that will reach $1.7 billion to $2.1 billion by 2030, DeSilva said.
 
He said the prepaid tuition board voted to change the refund rule to save money.
 
DeSilva said the state has more than 100,000 active contracts.

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