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indication of leveling off. Total charges — the average sum of tuition, all manda- tory fees and room and board — will be $24,003 for the 2018-19 academic year, a 63 percent increase from 2008-09, SCHEV says in its most recent tuition report. Virginia529’s prepaid plan, Pre-


paid529, is perhaps the most innovative in its portfolio, but it is also the small- est. The prepaid plan has only 63,858 accounts, a small number compared with Virginia529’s CollegeAmerica plan, which has 2.3 million accounts. The idea behind Prepaid529 is that


participants can purchase the cost of a future college education at today’s tuition levels. But as tuition has spiked, the cost of the prepaid plan has become too high for most parents. For example, during the 2017-18


enrollment period, parents of a newborn could pay $70,600 to cover four years of college tuition and mandatory fees. If a parent pays monthly, fees are added. That means a parent would pay $545 a month until the child goes to college (a total of $118,265). Because of rising contract costs, the


number of Prepaid529 accounts declined 11 percent from fiscal year 2009 to fiscal year 2018, according to a recent oversight report by the Joint Legislative Audit & Review Commission (JLARC), the Vir- ginia General Assembly’s oversight agency. During the past decade, the cost of


a Prepaid529 contract covering eight semesters at a four-year college or uni- versity rose from $44,060 in 2008-09 to $67,880 in 2017-18, primarily because of the rising tuition. As a result, consum- ers shifted to more affordable plans, JLARC says.


Tinkering with the ‘pricing reserve’ Possible changes to Prepaid529 have


been outlined by JLARC, Virginia529 and by two Republican members of the Virginia House of Delegates. JLARC raised the possibility


of reducing the “pricing reserve” in Prepaid 529. The reserve is an amount paid above the Prepaid529 tuition con- tract as a hedge against a potential finan- cial risk to the fund from events such as a dramatic stock market correction.


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Decline in contracts


Because of rising contract costs, the number of Prepaid529 accounts fell 11 percent between fiscal years 2009 and 2018, according to a recent report by the Joint Legislative Audit and Review Commission.


ACCOUNTS


80,000 60,000 40,000 20,000 0


71,847


63,858 11%


09 10


11 12 13 JLARC has made the case for reduc-


ing the pricing reserve from 10 percent to possibly 7 percent, but the agency didn’t make that change a recommendation. Instead, it says Virginia529’s board should consider guidelines that would


14


15 FISCAL YEAR Source: JLARC Virginia529 Oversight Report 2018


reduce the pricing reserve in conjunction with the Prepaid529’s funding status. JLARC noted that Prepaid529 had


funding representing 138 percent of its payment commitments as of June 30, 2017. That is the highest in the prepaid


16 17


18


www.VirginiaBusiness.com


VIRGINIA BUSINESS


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