MPACT’s reopening has stronger financial grid

The Mississippi Prepaid Affordable College Tuition program reopens Oct. 1 following last week’s vote by the plan’s board of directors approving a more expensive and more strongly funded plan. It will guarantee up to four years of full university tuition or two years of community college tuition regardless of cost increases, with investments usually made well ahead of anticipated college enrollment.

The program was closed in 2012 under the guidance of Mississippi Treasurer Lynn Fitch, who raised warning flags about the plan’s underfunding measured against guaranteed program enrollment and projected outlays.

Fitch’s position caused a kerfluffle within the ranks of state officials and legislators, some insisting the plan was not in trouble. Fitch’s position prevailed, and all enrollment was halted.

The reopening has been cast as a new plan, with new investments going toward tuition guarantees from Oct. 1 forward, not in support of contracts made in 2012 or before.

The old plan is backed by the state’s full faith and credit, which means the Legislature could be required at some point to bridge the gap between payouts and shortages, if investment gains don’t erase the gap.

The new contracts will cost 60 percent to 90 percent more than when last offered in 2011.

Plans are offered in six versions: universities, community colleges, and a combination of both.

Lump sum payments may be made, but communications director Diane Hartman said most customers choose monthly investment options extending as long as 12 years. All plans guarantee tuition at the level in force when the contract is made regardless of how high the retail cost rises.

At today’s level the cheapest option, one year of community college for a newborn, will cost $3,381. The most expensive option, four years of university for an eighth grader, will cost $44,477.

A four-year university contract will guarantee up to 124 credit-hours of tuition over eight years. The old program guaranteed 128 hours.

The plan seeks to charge enough to have 115 percent of assets required to pay tuition, keeping a cash cushion if investments falter or tuition increases accelerate.

A stronger plan, fully funded, was the only reasonable option in reopening.