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Texas Tomorrow Fund May Go Bankrupt

Posted By admin || 12-Sep-2009

The Texas Tomorrow Fund (now known as the Texas Guaranteed Tuition Plan) which allowed parents to prepay for tuition at locked-in rates is facing bankruptcy. The now-closed fund, also promised that if a child dies or received a full scholarship, parents could cancel the contact and receive a payout based on current tuition and fees at public universities. Sounds like a sweet deal?  The only problem is that the fund is now facing bankruptcy because of the rising costs of tuition which is three times higher than it was 10 years ago.  According to an article in The Chronicle, due to the possible bankruptcy of the fund, administrators have decided to go back on their promises to parents with canceled contracts.

The article said:

"But last week, a letter went out saying that in case of canceled contracts, the state would reimburse only the amount parents paid into the fund, minus administrative fees of around $36 per year... R.J. DeSilva, a spokesman for State Comptroller Susan Combs, said the Texas Prepaid Higher Education Tui­tion board voted in May to make the change, which becomes effective Nov. 1. Combs "has always had concerns about the financial stability of the fund because of the fact that it is going to go into a hole," DeSilva said. "In terms of looking for ways to maximize the resources of the fund, she and the board felt this was a way to try and address that."


But despite the fund's cancellation of its promises to parents with canceled contracts, the fund is still responsible for paying off around 108,000 active contracts over the next 15 to 20 years.  The projected shortfall of up to $2.1 billion could send the fund into bankruptcy.

Categories: Bankruptcy, Economy
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