The cost of buying into Florida's prepaid tuition plan will plunge this fall thanks to a little-noticed provision in a new state law. That may sound like a great deal for parents investing in their child's future higher education. But in the long term, this is reinstating a bad policy that offers consumer price protection but potentially undermines the quality of Florida's public colleges and universities. Prepaid plans will be more affordable thanks to the law, but there's less guarantee the institutions will have the resources to provide a quality education when it's time to cash in.
Since 1988, the Florida Prepaid College Board has offered an attractive deal for families: Pay the tuition, dorm costs and/or fees all at once or in installments, locking in "tomorrow's prices at today's rates." They can buy a plan from the time a child is a baby, all the way up until high school, potentially saving thousands of dollars. But for most of the plan's existence, prepaid plan rates have been suppressed because the Legislature capped how much the plan had to actually pay a state college or university when the contract matured. The result: Colleges and universities could see discounted tuition receipts because their enrollees had prepaid tuition plans.
That cap was lifted in 2009 when the Legislature also implemented differential tuition at universities and scaled back the state's investment. Money was needed from somewhere. Without a cap and with annual tuition increases of up to 15 percent at universities, costs for prepaid plans grew quickly.
Now the new law (HB 851) will reduce those contract costs, both by restoring the cap but also because the state's differential tuition policy is being curtailed so only the University of Florida and Florida State University can charge it, and at a rate of no more than 6 percent. Florida Prepaid estimates the new law will bring down the cost of purchasing a four-year university contract for newborns by nearly $20,000 from its current price of $54,000. The board also estimates that about 26,000 existing prepaid plans will see refunds or deductions, totaling as much as $50 million.
That all sounds good until buyers consider that for all their commitment to investing in their child's future education, they have no guarantee the state will do its part. Between 2007 and 2012, as average tuition at state universities soared 69 percent, the state's contribution to higher education dipped 41 percent. So right now in Florida, students are spending dramatically more even as the institutions have significantly less to spend on them, meaning bigger classes and fewer offerings.
Continuing to cap artificially discounted prepaid tuition plans just increases the odds that shortchanging universities and state colleges is a long-term proposition in Florida. Lawmakers like the politics of lower-cost prepaid plans but they never acknowledge that the savings to the plan just shifts the burden onto other tuition payers and the taxpayer — or even worse, will force future education cuts. Families may like the lower prices, but ultimately may not be pleased with what their investment buys.