ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Friday, November 29, 1996 TAG: 9611290039
SECTION: VIRGINIA PAGE: A1 EDITION: METRO
DATELINE: RICHMOND
SOURCE: WARREN FISKE STAFF WRITER
Four-year college tuitions for Virginia children will go on sale Monday for less than $17,000 under a new state program that caps college costs for tomorrow's undergraduates at today's levels.
Enrollment in the Virginia Prepaid Education Program will be open through Feb. 28.
The program offers a variety of options for paying tuitions in advance at universities or community colleges for infants to ninth-graders. Parents can pay in a lump sum or make monthly payments that might stretch more than 17 years.
The options run from as little as $12 a month, to guarantee a year of community college for somebody who's an infant today, to a $16,699 one-time lump payment to lock in four years of university tuitions for a ninth-grader.
The program was approved by Gov. George Allen and the General Assembly in 1994 to protect parents against skyrocketing tuitions. Virginia public universities have experienced an average 7.8 percent annual increase over the last 18 years.
Virginia's average public university tuition of $3,959 a year is the second highest in the nation. (Vermont is No. 1.)
Financial experts say the program offers families some attractive ways to begin college savings, but warn that it may not be for everybody.
"The people most likely to benefit are those who are not likely to save money on a disciplined basis," said Don Chance, a finance professor at Virginia Tech. "Those people who do a good job of saving, who are sophisticated money managers and talk to brokers, will almost certainly do better investing their college savings on their own."
There are a few risks with the program. To rein in soaring college costs, Allen and the General Assembly have capped annual tuition increases to 3 percent through 1998. If tuitions are held to moderate increases, families would easily come out ahead investing in stocks and mutual funds without having to worry about restrictions in the program, Chance said.
But Diana Cantor, executive director of the program, said the savings plan isn't designed to maximize returns like a mutual fund. The goal, she said, is to create peace of mind for families concerned about projections that tuition at a four-year college education could range between $60,000 and $80,000 in the year 2015 if trends of the past two decades continue.
"This is a good program for families that want to put concerns about future inflation out of their heads," Cantor said. "They don't have to worry about it anymore. They can lock in to tomorrow's tuition at today's prices. They can replace uncertainty with certainty."
Another advantage is that payments are exempt from state and federal taxes.
The money becomes subject to taxes - reported as personal income to the student - at the time it is being used to pay for tuitions.
Twelve states already offer college savings plans and another six - including Virginia - are on the verge of starting up.
A spate of new programs is expected as states rush to take advantage of the tax-exempt status Congress conferred on the plans in August. Thirty states are studying starting programs, according to Kathy Tyson of the College Savings Plan Network in Lexington, Ky. Only Georgia and Maine have not explored the concept.
Since the official unveiling of the program in August, Cantor's office has received more than 20,000 phone calls from families wanting more information.
Among the Virginians planning to enroll their children on Monday is Gov. George Allen. He has an 8-year-old daughter, Tyler, and a 5-year-old son, Forrest.
"My money is in the checking account waiting to write such a check," Allen said Wednesday.
For more information about the program or an application form: Call the Virginia Prepaid Education Program at 1-888-567-0540.
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