HD53 - Establishing A Pre-paid Tuition Trust Program Within the Commonwealth's System of Higher Education
There was considerable discussion about the cost of higher education during the 1992 session of the General Assembly. A portion of the discussion focused on ways the Commonwealth could assist students and parents pay for college through increased savings or other prepayment programs. This has become a serious concern for parents as tuition rates have grown at double-digit rates in the last three years and averaged more than nine percent increases over the last 12 years. Parents and students are fearful of their ability to pay for college. This is a timely topic and an appropriate state policy question.
Several bills were introduced, but not approved, in the 1992 session of the General Assembly to establish a Virginia Prepaid Tuition Fund and implement a prepaid tuition program. In addition to bills to create such a program, Delegates Cantor and Mims sponsored House Joint Resolution Number 200 and Senator Stosch sponsored Senate Joint Resolution Number 48. The two study resolutions were combined in the final actions approving House Joint Resolution Number 200.
The study resolution requests the State Council of Higher Education, in cooperation with the Department of the Treasury, to "study the efficacy and appropriateness of establishing a prepaid tuition trust program within the Commonwealth's system of higher education." The Council is asked to submit its findings and recommendations to the Governor and the 1993 Session of the General Assembly.
The General Assembly's concerns and interests were highlighted in the language of the resolution. A complete copy of the resolution, as approved, is provided in Appendix A.
1. The pursuit of higher education may provide not only the skills and knowledge necessary to compete in an ever-changing global economy, but may also enrich the perspectives and overall quality of life of countless citizens of the Commonwealth.
2. While enrollments at Virginia's institutions of higher education are expected to increase in the future, the costs of post-secondary education are also likely to increase, potentially endangering the opportunity for many prospective students to pursue the goal of higher education.
3. Recognizing the critical value of higher education to individuals as well as the general public, a number of states have established programs to encourage citizens to pursue higher education through the advance payment of tuition at a fixed, guaranteed level.
4. These prepaid tuition programs are designed to foster timely financial planning and to broaden the accessibility of higher education.
5. A prepaid tuition trust fund based upon the contributions of program participants might offer additional incentives to pursue higher education.
The General Assembly asked that the Council's study include, at least, an examination of prepaid tuition programs in other states; the potential social, financial, and educational implications of such a program; and the recommended procedures and policies for the implementation of prepayment programs. This draft report responds to these concerns and issues.
Many of the concerns and issues studied in this report were considered by the Council of Higher Education in its 1987 study of student financial aid. The Virginia College Savers Program was created in the 1988 session of the General Assembly. Virginia has been a leader in implementing programs to assist students and parents in coping with the costs of attending Virginia's colleges and universities. The Governor and the General Assembly have appropriated additional student aid funds to partially offset recent tuition increases.
A Pre-Paid Tuition Program appears to be a logical and desirable addition to the innovative policies and programs that make Virginia's colleges and universities among the best in the nation. While there are questions about the financial feasibility of such a program and how to avoid complications with the federal income tax code, the advantages of expanding the state's package of financial assistance programs to middle- and upper-income families are attractive and there appears to be significant interest among the citizens in such a program. These questions need to be resolved before any final action should be taken.