JACKSON — The Mississippi board that oversees the plan that allows people to lock in pricing for future college tuition voted yesterday to reopen the program, but charge sharply higher prices.
State Treasurer Lynn Fitch closed Mississippi Prepaid Affordable College Tuition program in fall 2012, saying she was worried about a funding shortfall.
The program that reopens Oct. 1 will put its proceeds into a new pot of money, leaving the old fund with a gap that still must be made up through investment gains, state appropriations, or other methods. The program is backed by the state’s full faith and credit, which means obligations must be paid.
New contracts will cost 60 percent to 90 percent more than when last offered in 2011. Four years’ tuition at a public university will cost $41,584 beginning in October, compared to $23,839 in 2011.
Prices differ based on the current age of the projected student, how many years are purchased, and whether the contract covers community colleges or universities. The cheapest option, one year of community college for a newborn, will cost $3,381. The most expensive option, four years of university for an eighth grader, will cost $44,477.
A four-year university contract will guarantee up to 124 credit-hours of tuition over eight years. The old program guaranteed 128 hours.
Prices include a one-time 5 percent account maintenance fee. Under the old program, fees were assessed periodically.
Fitch acknowledged prices will be higher, but noted that even if the old plan had continued, prices would have increased yearly to reflect rising tuition.
“This is still a great savings tool for families,” Fitch said.
She said officials believe enough people will buy contracts, even at higher prices, to keep the program viable. Contracts will be sold through May, instead of the fall-only period previously used.
The board aims to charge enough to have 115 percent of assets required to pay tuition, keeping a cash cushion if investments swoon or tuition increases accelerate. The board could raise prices if the reserve shrinks, or lower them if it gets too high.
“This is a very prudent way to operate,” Fitch said after the meeting. “It says we’re going to make the program sustainable.”
Money from new contracts won’t be used to make up the previous program’s deficit, meaning the board is likely to ask lawmakers for state money to fill that hole.
The old plan had $316 million in assets at March 31, with about 20,000 contract holders. Last year, the plan was 80 percent funded, falling $82 million short of 100 percent.
Under the policy adopted yesterday, the board will ask the Legislature for 10 percent of the underfunded amount in any year when the old plan is less than 100 percent funded. Lawmakers have thus far ignored requests to make up the old plan’s gap.