Investment & Financial Articles
Title: College Tuition Prepayment Plans Stumble
Author: Tony Novak
Article:
Perhaps the most heartbreaking casualties of recent stock market
performance are the 20 state-sponsored college tuition
pre-payment plans throughout the country. With college costs
continuing to grow at a pace of about 9% per year and investment
returns on plan assets being flat or negative, the sponsors of
the various prepaid tuition programs now project long-term cash
shortages.
Investors in the program thought that they had purchased "paid
up" tuition credits under the program, regardless of the future
rise in tuition costs. But now states anticipate notifying
investors hat the plan cannot meet its projections, and so the
investors must "pay up" by making additional investments or bail
out of the program. Colorado has already notified investors of
the default and other states anticipate similar actions in the
future. Other states are considering more creative options. Most
plans agree that the growth of plan assets will not keep pace
with college tuition inflation over the next decade.
Investors are irked because they thought that these plans
represented a guarantee backed up by the sponsoring state and
are shocked to learn that this is not the case.
Of course, a recovery of the financial markets will greatly help
ease the burden, but many investment advisers do not expect that
to happen in the near future.
About the author:
Tony Novak is an independent writer and financial adviser in
Narberth PA who provides OnlineAdviser services through
MedSave.com and FreedomBenefits.org
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