Avoiding Student Loans Seems Impossible For Texas' Future College Students

October 29th, 2009 by Reed Allmand

According to an article in the Dallas Morning News, Parents who invested in Texas’ prepaid tuition plan to pay for their child’s education and avoid student loans may be out of luck after November 30, 2009. On November 30^th new rules governing the program take effect that will change the way the Texas Guaranteed Tuition Plan calculates refunds.

The article said:

“The plan, which started selling contracts in 1996 as the Texas Tomorrow Fund, gave families the chance to prepay tomorrow’s college tuition and required fees at Texas public and private colleges and universities at about what it would cost today. In other words, it was designed to help protect families from the rising cost of tuition and other college costs…Under the plan’s original design, administrators would invest payments and use the investment returns to cover the full cost of college. It was a no-lose proposition for initial participants. If your child decided against attending college, you could get a refund of everything paid in, plus the investment return.”

Now all of that is changing.  Participants who cancel their Texas Tomorrow Fund after November 30^th will only get back what they paid into the plan, minus administrative fees. Many parents had paid into the plan hoping to avoid the rising costs of college education and student loans.  But with the closure of the Texas Tomorrow Fund (they’re not taking any new participants) and the recent rule changes, it looks like future college students may have no other choice than to consider student loans as the cost of college education in Texas increases by 8.9 percent each year.