Parents question college fund changes

October 26, 2009 5:27:31 PM PDT
Texas parents will soon be faced with a huge decision -- should they abandon the Texas Tomorrow Fund and lose a significant amount of invested money, or stay in?While parents have just 35 days to make up their minds, state lawmakers are trying to put the brakes on some changes to the program.

The Texas Tomorrow Fund will no longer give parents interest earned on their investments if they chose to leave the plan after November 30. For those with children who may or may not go to college, staying in or leaving the plan is an agonizing decision that has the potential to cost them thousands of dollars.

"It is a huge decision to have to make financially, because of tax repercussions," investor Norma Stransky said. "Then, you are saddled all over again -- 'How am I going to pay for my kid's tuition?'"

While Stransky has four more years before she will know for certain if her son will attend college, she has to decide soon what to do with the money she's saved for his education. She believes the refund changes made to the Texas Tomorrow Fund constitute a breach of contract.

"It makes you question if they had the right to make you make that decision," she said.

State Rep. Scott Hochberg has the same question.

"We've asked Attorney General (Greg) Abbott to look to see whether that board had that authority to make this kind of retroactive change," he said.

While he and many parents will have to wait for the attorney general's opinion, state lawmakers are also proposing their own changes.

One option would be to allow parents to use the funds for room and board instead of only tuition as the rules currently state. Another option would allow families to receive at least some interest on their investment if they choose to leave.

But given the state legislature will not meet again until 2011, parents who choose to leave the plan in the next few weeks may not be let back in.

"I would tell them not to opt out yet, I would say wait to see if there is something the legislature -- something can be done," State Rep. Carol Alvarado said.

Attorney General Greg Abbott said he is looking at the contract wording and, while he can decide after the deadline, it is hoped an opinion will come before Nov. 30.

Until a decision is made, officials recommend parents participating in the program should talk to a professional financial advisor.

Officials said the deregulation of tuition prices could be the cause of the problem. The spike in state tuition is projected to cause a $2 billion shortfall in the plan over the next 20 years.

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