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Texas rolls out new prepaid college tuition plan

Texas families will be able to prepay college tuition and fees, locking them in at around today's costs, under a new program the state rolled out Wednesday morning.

Under the program, parents and students can prepay for a few semester hours, or the six-year frat plan. They can lock in at the most expensive state school for around today's costs, or they can pay less, aim for a cheaper school, and make up the difference if UT or Texas A&M is the ultimate choice. They can even prepay for the costs of two-year school.

"It is critical for the state to offer encouragement to help put higher education within reach for all families," Susan Combs, the Texas comptroller, said in a release.

Under the plan, for example, parents of a 7-year-old who enter the program could lock in one year of their child’s tuition and fees at a four-year state school by paying $81.53 per month for 10 years, the Texas Comptroller said in announcing the new Texas Tuition Promise Fund.

Families can also use the money for out-of-state and private schools, with the students and their families “making up for the difference in cost,” the Comptroller’s office said.

The current enrollment period runs through Feb. 29. There are three ways families can pay into the program by buying “units”:

  • LOCK IN TODAY'S COSTS: 100 Type I units, which cost $98.50 per unit, will cover one year’s tuition and fees for 30 credit hours at "the most expensive" public Texas four-year school. So, four year's worth of tuition and fees would cost $39,400 under the program, at 400 units for $98.50 each. A semester's fulltime, flat, resident tuition rate is more than $4,000 at the University of Texas today.
  • PAY LESS NOW, ASSUME SOME RISK OF INFLATION: 100 Type II units, which cost $67.65 per unit, will cover the "weighted average cost" at the time of enrollment of one year’s tuition and fees at any public Texas four-year school. If actual tuition and fees at time of enrollment are greater than this average cost, the family pays the difference or redeems additional units to cover it. This may be the best choice for families considering inexpensive state schools.
  • TWO-YEAR SCHOOL: 100 Type III units, which cost $16.99 per unit, will cover the weighted average cost at time of enrollment of one year’s tuition and fees at any public Texas two-year school. As with the Type II units, if the estimated actual cost at time of enrollment is above the weighted average cost, the family has to make up the difference.
  • Prepaid tuition accounts must be paid in full and open for at least three years before tuition benefits can be paid, "a feature that encourages parents to begin saving early," the comptroller said.

    Families can buy any numbers of units they wish, up to six years worth of undergraduate college. They can pay in a lump sum, or make installments.

    The program covers only tuition and fees, not room, board, books, and other expenses. It does not cover graduate school.

    It's possible for students to have unused units if they attend lower-cost schools. In that case, the state would refund the value of those units or transfer them to a 529 college savings plan, the Comptroller said.

    The state Legislature created the Texas Tuition Promise Fund by approving House Bill 3900, authoried by Rep. Geanie Morrison, R-Victoria, and sponsored by Sen. Florence Shapiro, R-Plano.

    WHAT DO YOU THINK? Click here to leave a comment on our Extra Credit blog.

    On the Net:

  • To read the Comptroller's news release on the new college tuition program, click here.
  • www.TexasTuitionPromiseFund.com
  • www.EveryChanceEveryTexan.org
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