State asks parents to save college fund
Penn State students enter a rally for Barack Obama in March 2008.
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Tess Vigeland: Several years ago colleges and universities across the country started offering parents an option. Lock in tuition at today's prices for kids who may not even be out of diapers yet. Yes, it removed that whole matter of choice down the line.
But for lots of parents it was an attractive option. If you wondered what was in it for the schools, some of them are getting their answer. In Pennsylvania, the program's fund has a $223 million deficit. As Marketplace's Jeremy Hobson reports, the state is looking to parents to make that up.
JEREMY HOBSON: Pennsylvania is planning to raise the price of pre-paid tuition. That means instead of paying today's tuition rates, parents will pay today's tuition rates plus up to 8 percent.
ROBERT MCCORD: We decided to mend it, not end it, and we've cut the problem roughly in half already.
That's Pennsylvania's State Treasurer Robert McCord. He says the program lost a lot of money when the stock market tanked. But he still thinks it's sustainable in the long run.
MCCORD: We got caught in a pincer movement between hyper-inflation in a lot of college tuitions, and then in addition to that, of course, we had the steepest downturn in 80 years.
Michael Olivas isn't surprised by Pennsylvania's woes. He's a law professor at the University of Houston, who's followed college savings plans for decades. He says it's no wonder no state has started up a new pre-paid college savings program in years.
MICHAEL OLIVAS: What looked like a brilliant idea at the time broke down in large part because they were so successful. Almost like Cash for Clunkers, the program was so successful that even wealthy people who didn't really need these programs locked in the tuition.
And left states holding the bag. So what's a family to do? Olivas says stick with the old-fashioned college savings plan. Basically a 401(k) for college.
He says it's at least as good as saving tuition money in your mattress.
In New York, I'm Jeremy Hobson for Marketplace.