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More bad news for Ala. tuition plan; parents irate

Associated Press

MONTGOMERY, Ala. (AP) — The board that oversees Alabama's prepaid college tuition program got more bad news about the plan's financial outlook Wednesday, and the board's chairman got an earful of outrage from frustrated parents who can't plan for their children's education.

Actuary Dan Sherman said the board's liabilities will exceed its assets by $605 million if it keeps paying full tuition, and it should run out of money in fall 2015. He said if it keeps paying full tuition for more than 10,000 students currently enrolled in college, the board will need to close the program down in about a year if it wants to have enough left to refund the money participants paid to join.

The board is paying full tuition while the Alabama Supreme Court considers the constitutionality of a law that would allow it to pay reduced tuition at 2010 levels and remain operating.

After a board meeting Wednesday, the board's chairman, State Treasurer Young Boozer, met with parents to hear their concerns.

Liz Jones of Andalusia pulled no punches.

"When you get to the Pearly Gates, you are going to answer for this. It is just not right," she said.

Jones said she paid into Alabama's Prepaid Affordable College Tuition plan because it was backed by the state and promised four years of full tuition at a state university for her daughter. Now her daughter is a sophomore at the University of Alabama. If the Supreme Court upholds the reduced rates, Jones said she doesn't know where she will come up with $650 each semester each semester to fill the gap.

Kathy King of Marbury said her family skipped vacations and drove secondhand cars to make sure her two sons had paid up contracts with the tuition plan. She has one son at Auburn University Montgomery and another who's a senior in high school.

King said making up the gap for her oldest son will be hard enough, but she doesn't know what she will do for her youngest because the gap will grow every year due to rising tuition.

"I can't let him go to college and come out with $30,000 to $40,000 in loans. He will never pay it off," she said.

Other parents complained that the state treasurer has started a scholarship program with fees generated by Alabama's other college tuition plan, the CollegeCounts 529 plan, and questioned why that money couldn't be used to shore up PACT. Boozer said they are two separate programs.

The Legislature created PACT to allow families to pay a fixed amount when a child was young and upon graduation from high school receive four years of full tuition at a state university. The program invested the payments and used the income to pay tuition without any problems for nearly two decades. But it ran into financial problems when stock values plunged in 2008 and tuition increased faster than expected.

The program's leaders worked out a settlement with most of the participants to pay tuition at fall 2010 rates, with parents making up the difference. Some parents sued to keep full tuition. They won an Alabama Supreme Court ruling in March saying state law didn't allow reduced tuition payments. At the urging of the PACT board, the Legislature amended state law in April to allow reduced payments. Then the Supreme Court decided to take another look at the case, including determining the constitutionality of the new law. Attorneys filed the final briefs two weeks ago and are awaiting a ruling.

The tuition program has 34,489 participants, and 10,811 were enrolled for the fall semester.

If the program can start paying tuition at 2010 rates by June, it should have enough money to keep operating for all the students, the actuary said.

Boozer said a quick ruling from the Supreme Court allowing reduced tuition payments "is the best possible outcome."

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