Prepaid Tuition Plan for State Universities Gains

A bill to reduce parents’ fears about skyrocketing college tuition costs by allowing them to pre-purchase a college education for their child at a California public university at today’s prices was narrowly approved by the Assembly on Tuesday.

A 42-27 vote--one more than the required 41-vote simple majority--sent the measure by Assemblyman Tom Hayden (D-Santa Monica) to the Senate, where it appears to have a strong chance of passage.

“I like the concept and I am strongly inclined to support the bill unless I hear some strong evidence to the contrary,” said state Sen. Gary K. Hart (D-Santa Barbara), who chairs the Senate Education Committee.

A spokesman for Gov. George Deukmejian said the chief executive has no position on the legislation at this time.

A graduate of the University of Michigan, Hayden said he “borrowed” the prepaid college tuition idea from Democratic Gov. James Blanchard of Michigan, who asked for it in his 1986 state-of-the-state message.

Under the Michigan program, which took effect in January, $3,000 paid into a state trust fund now is expected to cover the four-year, $20,000 tuition that the University of Michigan expects to charge in 20 years. Florida and Wyoming have since enacted similar prepaid college tuition plans.

“This bill responds to the anxiety caused by skyrocketing college costs for financially strapped families,” Hayden said.

“Parents need to know that they will be able to send their kids to college in the year 2020. My proposal would provide that assurance by guaranteeing undergraduate tuition, no matter how much the cost of a college education rises.”

As an example, Hayden said, University of California student fees were $980 for a four-year education in 1964, they had risen to $5,548 in 1983, and are expected to exceed $30,000 by 2005.

Comparative tuition figures for the California State University system were $304 for a four-year education in 1964, $2,008 in 1983, and nearly $26,000 in 2005.

The Assembly-approved measure would set up a state trust fund to permit the parents of a child they want to attend a UC or Cal State campus to prepay the child’s tuition at a set rate, either in one lump sum or on the installment plan. Payments also could be made through payroll deductions.

This money would be invested by the state in stocks and bonds and other financial securities. The trust would be entirely self-supporting.

Tuition Guaranteed

When a prepaid-tuition child graduates from high school, he or she would be guaranteed that payment of four-year tuition at the University of California or a state college would be covered, regardless of what the tuition rate was at the time.

If such a child decided not to go to college, chose to go out of state or to a private college, or did not meet UC or Cal State admission requirements, the money would be refunded to parents with interest.

Financial details of the program--including the formulas to determine how much payment into the trust is required for each child or how much should be refunded--would have to be worked out jointly by the trust’s board of directors, the UC Regents and the Cal State system’s Board of Trustees.

Some of the interest earned on the invested money also would be used for university or state college educational grants and loans to low-income students.

Others Could Help

Grandparents, other relatives, friends and corporations also could participate in the prepaid college education plan. And there would be no limit on the child’s age for a buy-in.

An opponent of the proposal, Assemblyman Nolan Frizzelle (R-Huntington Beach) said the bill sounds like a “nice idea.” But he contended that students who are not in the prepaid tuition plan would, in effect, be subsidizing those who had signed up at earlier, lower tuition rates.

“This is bad economics and I ask for a no vote,” Frizzelle told his colleagues.