Another Reason We Need To Reregulate College Tuition

It seems that, no matter what we do, Texas’ low-income and middle class families can’t catch a break when it comes to higher education:

Gov. Rick Perry has signed a new law that allows Texas families to prepay college tuition costs for the first time since 2003 — and with greater flexibility in purchases.

But if it catches on, the Texas Tomorrow Fund II, which will open in 2008, could wind up pushing prices higher for future low-income students, according to some experts.

Under the new program, families will be able to prepay undergraduate tuition and fees by purchasing tuition units. A full year’s tuition, or 30 hours of class, will require 100 units. Prices will vary based on whether the buyer chooses to purchase units for a community college, the average four-year university or the highest-priced four-year institution in Texas.

Each year, the Texas Prepaid Higher Education Tuition Board will set the new prices for tuition units according to what Texas colleges are charging that year.

Just as tuition deregulation screwed up the Texas Tomorrow Fund, it’s going to cause problems with the new plan as well:

That provision could pit universities against the state’s prepaid plan later, some experts say.

“When university officials set tuition, the last thing on their minds is the markets,” Baylor said. “They are looking at the costs to provide services. If I were hedging bets, I would bet that tuition increases will exceed investment increases.”

Baylor worries that colleges and universities would make up the losses by raising tuition on students whose families had not prepaid for classes. That would be mostly lower-income families.

State officials say not to worry, they could repay some of the losses under the new program. If necessary, the state could add a service charge on purchases, up to $25, and then use that fee to reimburse the universities.

Still, families should weigh their options before investing in the Texas Tomorrow Fund II, advisers say. Unlike other 529 and college savings plans, the money placed in the new fund could not be used for books, housing, food or transportation during college. So a large portion of college expenses will have to be funded otherwise.

Historically in Texas, tuitions and fees have made up about 25 percent of the annual costs of going to a public institution, according to George Torres, senior adviser for congressional and legislative relations to president of Texas Guaranteed Student Loan Corp.

Whether the new prepaid tuition plan succeeds also will depend on the level of marketing, Torres said. And state officials will have to find a way to convince low-income families — who often have minimal free income — to use the plan.

“Prepaid plans are targeted at middle- to upper-income families who have the money upfront to spend,” he said. “It doesn’t seem like the sets of programs we have in Texas are matched to what we are trying to do to close the (college) gap.”

Indeed, they are not.