States’ Pre-Paid Tuition Plans At Risk

Among the other states with fewer assets than anticipated liabilities are Tennessee, South Carolina, West Virginia and Washington. Seven of the 18 — Florida, Maryland, Massachusetts, Mississippi, Texas, Virginia and Washington — back their plans if money runs short, according to college savings organizations and state officials.

West Virginia’s plan stopped letting people enroll their children more than four years ago. Its investments have lost $23 million since July 1, or nearly 27 percent of their value, said Greg Stone, spokesman for the state treasurer’s office.

“We do have quite some time to make this up. We can only anticipate that things will get better. They can’t get much worse,” Stone said.

Programs have also stopped allowing new families in South Carolina, Ohio, Kentucky and Colorado. Texas stopped taking new students in its first prepaid college plan in 2003 due to a sudden rise in tuition, but later started a new one.

Directors of prepaid plans, which are offered by more than a dozen states, say they’re seeing renewed interest as families anticipate sharp tuition increases. Washington state, which offers only a prepaid plan, has seen a 50 percent increase in rollovers from state residents who had 529 savings accounts based in other states. Pennsylvania has seen a 43 percent increase in new account enrollment and a 19 percent jump in contributions from May through September over year-earlier levels in its prepaid plan. Other states, such as Virginia and Maryland, are seeing a pickup in calls from consumers interested in enrolling in their prepaid plans or rolling over their investments from their 529 savings plans.