Market Endangers State-Run Prepaid Tuition Plans

By: Associated Press
By: Associated Press

MONTGOMERY, Ala. (AP) -- State-run trust funds for pre-paid college tuition are running short of cash because of the rising cost of college and the declining stock market.

The programs became popular as a way for parents to pay a fixed amount of tuition at a lower price than if they had waited until the child actually enrolled. States expected earnings from the investments would exceed the cost of tuition.

But in the last five years, tuition increases have doubled the rise in the rate of inflation. More recently the market has tanked.

The worst case is in Alabama, where the souring economy has sliced off nearly half the fund's assets. Also in trouble are programs in Tennessee, South Carolina, West Virginia and Washington.

Only seven of the 18 states with such programs back them up if money runs short.

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