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Texas college pay plan soon to run dry

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Steve Chiotakis: The rising cost of tuition at state universities is a problem for many families across the nation. Texas thought it had the right approach to keeping tuition affordable. But as Texas Public Radio’s David Martin Davies reports, the program is under stress from the very problem it was meant to solve.

David Martin Davies: Those are the tower bells of the University of Texas in Austin. And these days, the bells toll for the Texas Tomorrow Fund.

It’s a prepaid college plan that locked in tuition rates. Texas closed it to newcomers in 2003, and since then tuition at Texas public universities spiked 86 percent. Now, the fund is expected to run out of money in about five years.

Kathi Thomas: I went through the roof. My husband and I were so angry about it.

Kathi Thomas signed up for the Texas Tomorrow Fund. She’s worried the fund won’t be solvent when her daughter needs it.

To save money on the fund, Texas tried to change the cash-out rule. Instead of being paid out based on today’s tuition, the fund will reimburse only the amount paid into the fund, minus fees. The so-called investment would get no earnings.

Thomas: I wrote a lot of letter, a lot letters to the editor, I guess it went to my state rep and state senator.

The outcry from Thomas and other angry contract holders forced that rule change to be rescinded. Meanwhile, Texas needs a solution for the fund. It’s going to require $2 billion to make good on its promise.

Texas Comptroller spokesperson RJ DeSilva:

RJ DeSilva: The state will be paying money into the plan because it’s guaranteed, and the families that use it will be getting their tuition and required fees paid for.

State lawmakers will have to defuse this ticking budget time bomb in 2011, when they come back to Austin — in earshot of those tolling UT bells.

I’m Austin I’m David Martin Davies for Marketplace.

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