Canceled tuition contract refunds undergoing change

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    Texas Guaranteed Tuition Plan investors looking for big returns on their canceled contracts might want to take a closer look at their savings strategy soon, a university official said. Melet Leafgreen, assistant director of loan programs, said the plan’s governing body will limit the payment of refunds for canceled tuition contracts beginning in November.

    The state-sponsored program, which allowed investors to prepay for an education in the future at the average rate of college tuition at the time, was scrapped in 2003 but continues to honor its financial commitments. Plans were offered for both private and public colleges and were adjusted for increases in tuition, according to the fund’s Web site.

    For example, a contract originally purchased for $11,000 would now be worth nearly $29,500 in tuition and fees at an eligible institution, according to an article from The Dallas Morning News citing figures from the Texas Guaranteed Tuition Plan’s Web site.

    Following an Aug. 24 announcement in a letter from the overseers of the fund at the Texas Prepaid Higher Education Tuition Board, plan participants who cancel their contracts will no longer receive earnings on their original investment. The letter also states that purchasers have until 5 p.m. on Oct. 30 to cancel and still receive the earnings from their contract, minus any applicable fees.

    Leafgreen said potential earnings, like those reported in the example from The Dallas Morning News, were part of what assured contract holders that their decision was a financially sound one.

    “Some people have counted on … this supposition that what they put in would be worth more now,” Leafgreen said.

    R.J. DeSilva, spokesman for the Texas Comptroller of Public Accounts, said that before the refund policy change, contract holders who canceled their plans were awarded the amount their investment would have paid at an eligible college or junior college, minus any fees due.

    The change in policy comes after examination of past refund payments by the fund’s governing board since closing the program in 2003, DeSilva said. With tuition inflation rates climbing in recent years, the board found it appropriate to limit refunds of canceled contracts in an attempt to protect the financial resources of the plan, he said.

    DeSilva said participants who choose not to cancel their contracts before the October deadline will continue to reap the benefits the plan provides.

    “The guarantee of this plan is that you’re getting tuition and required fees taken care of,” DeSilva said.

    Wendy Crowley, director of student financial services, said about 300 students plan to use contracts from the program, formerly known as the Texas Tomorrow Fund, to pay for tuition and fees this school year.

    Leafgreen said that because the plan began in 1996, many parents saving for their child’s education have had money in the fund for more than a decade.

    “The time value of money is something that is supposed to really pay off,” Leafgreen said. “In this situation it seems like … they could’ve put the money elsewhere and done better.”

    Andrea Beshel, a sophomore nursing major and mother of a 15-month-old son, said she thinks planning ahead for college is crucial, but realizing the inherent risks in some savings options is also important.

    “I think a lot of people have taken a lot of losses (in the stock market),” Beshel said. “You really do take a chance when you try to go into an investment-type situation.”

    Leafgreen said the fund is guaranteed by the state of Texas, so contract holders in the program should not worry about losing value on their original investment. When a participant chooses to cancel their plan, they are guaranteed to receive no less than the amount they originally invested minus any fees due, she said.

    “The worst thing that could happen, which is actually what’s happening, is that you get back what you put in,” Leafgreen said.

    The change in the Texas Guaranteed Tuition Plan cancellation policy will take effect Nov. 1.