The latest casualty may be Washington state, where legislators announced last week that the state's popular prepaid tuition plan, called Guaranteed Education Tuition (GET), may be in need of an overhaul. That comes on the heels of Tennessee's recent decision to shut down its prepaid college tuition plan, making it the eighth state to do so in the last few years. And in Alabama, legislators are facing a class-action lawsuit brought by parents who say that state's plan is underfunded by $269 million if tuition climbs at its current pace at some of its most popular schools. As of now, only 11 states have plans that are still open to new investment.
That's bad news for a growing number of parents who, still shaken by stock market losses, have come to depend on these plans, which allow parents to purchase university credits at today's prices, and use them at some indeterminate time in the future. Enrollment in Washington's prepaid plan was up 19% this year. In Pennsylvania, where the plan is not threatened, enrollment in the state's 529 Guaranteed Savings Plan rose 15.6% this year.
But investors with outstanding credits in states where they have shut down plans shouldn't worry, say experts: Plans have so far made good on their promises. "If you're already in the program, those terms will not change," says Betty Lochner, director of the GET Program in Washington. The $1.4 billion plan is solvent, she says, but legislators plan to study their options in preparation for a potential shortfall. The plan, which opened to investors in 1998, originally anticipated that tuition would rise 8.5% per year. Now state officials expect costs to rise 11% a year for the next two years. Tuition jumped an average of 13.1% per year from 2009 to 2010
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