As a result of budgetary constraints, the Ohio Tuition Trust Authority, a prepaid tuition program, announced earlier this month that it would not accept payments toward the state's prepaid tuition program next year.
Tuition increases, coupled with lower than expected investment returns were cited in a press release as mitigating factors in the decision.
In August, the Authority attempted to address these issues by increasing contribution costs, but it was nonetheless forced to freeze new enrollment Oct. 8 in order to reevaluate state tuition costs.
"Ohio's situation is not unique," said Diana Cantor, executive director of the Virginia College Savings Plan, which oversees the Commonwealth's three qualified tuition programs, including a prepaid offering.
"In many states, tuition is rising at a rate that is greater than it has been in recent years," she said.
By suspending its prepaid tuition program, Ohio joins a growing number of states that have been forced to reevaluate their programs, Cantor added.
"States have closed enrollment because they don't know how to price these plans," she said. "This is the result of an uncertain tuition market."
Earlier this year, Texas indefinitely suspended enrollment into its Guaranteed Tuition Fund following state deregulation of tuition at public colleges.
Although states do not directly contribute to prepaid tuition programs, they guarantee that returns will keep up with tuition increases.
Wyoming, which became the first state to offer a prepaid tuition plan in 1987, stopped accepting payments eight years later in 1995.
Ohio was the third state in the nation to establish a college savings plan, in 1988, following the successful creation of a similar program in Florida the year before.
Although a similar budgetary condition exists in the Commonwealth, Virginia's Prepaid Education Program is structured in such a way that does not necessitate suspension of enrollment, Cantor said.
Virginia currently offers plan that allows individuals to purchase tuition in one-year increments during a three-month enrollment period, whereas Ohio operates a system, typically open year-round, in which investors can purchase units that represent 1 percent of the weighted average tuition of the state's 13 four-year public universities.
"Ohio has a savings plan that also gives the same tax benefits," Cantor said. "I happen to think our model is better for families."
If problems do arise in Virginia's prepaid program, Cantor said enrollment next year could be delayed until the fall, after the legislature is expected to announce funding cuts to public universities.
Economics Prof. William Johnson said that unlike insurance companies which offer benefits to many independent policy-holders, prepaid tuition plans are affected largely by two related factors.
"There's risk because the future course of tuition and return on investment are uncertain," he said. "They're not very well diversified."
Johnson said that despite initial hiccups, prepaid tuition programs should be evaluated as a long-term investment.
"Consumers are risk averse," he said. "This is a way of insuring yourself against the risk of rising college tuition."
Read More
Travel 101: How out-of-state students travel to and from Charlottesville
By Bertie Azqueta | 2 hours agoThese students have had to find efficient and affordable ways to travel across several states just to get back home or back to school.
Who is Interim President Paul G. Mahoney?
By Brandon Kile | YesterdayThe former Law dean joined the University Law School faculty in 1990 and served as academic associate dean of the School of Law from 1999 to 2004.
Why a judge ruled against allowing Youngkin appointees to serve
By Nina Broderick | 2 days agoThe denied appointees are now not recognized as official members and they can not vote or attend meetings.
