Academic

University Caves To Prepaid 529 Pressure: Troy Freezes Tuition

By Dan Filler

Last week, discussing the looming crisis for state sponsored 529 plans that offer prepaid tuition, I predicted that state universities would start to feel pressure to hold down tuitions.  After all, if these quasi-state 529's need to find ways to cut costs - so they can give investors what they sort-of promised - one way to do this is to prevent tuition rate hikes.  It's not every day you get to do this, but: I TOLD YOU SO!

It's happened: the Birmingham News is reporting that Troy University - an Alabama state school - will waive tuition increases for state prepaid 529 participants (in what is known as the Alabama PACT plan) for the next three years. 

PACT officials requested the waiver of all state schools, said Gregory Fitch, director of the Alabama Commission on Higher Education and a member of the PACT board. Troy was the first university to waive tuition increases, he said.

But let's be clear here: Troy University is financed by the Alabama state legislature.  This is the same legislature that is not legally on the hook to cover 529 participants tuition if the plan flops.  So one way in which the legislature can "secretly" bail out the plan is to hold down tuition at these state universities.  Of course, somebody has to bear that cost: either Troy will scrimp or the legislature will write a bigger subsidy check. 

It's starting in Alabama, but watch this one unfolding in coming months across the country.

Full post as published by The Faculty Lounge on March 12, 2009 (boomark / email).