State Tuition Program in Financial TroubleBy Jeffrey Hess | Published 30 Apr 2013 03:44pm |
An audit of a popular Mississippi college savings program is revealing some built-in problems undermining its long term stability. The Mississippi Prepaid Affordable College Tuition (MPACT) program is roughly $100 million under-funded.
The program, known as MPACT, is currently closed to new enrollees while the college savings board considers whether it can be stable over the long term.
State Treasurer Lynn Fitch, who chairs the board, says a major problem is MPACT has never been changed since its inception in the mid-90's.
"When it was created 15 years ago we were getting double digit interest earnings. So it was very fit. It was very sound. But as you can see we have gone through the recession. We have gone up and down. The market has been very volatile. And so that has caused us to have issues within our program. Issues with our investments. And those have to be addressed now before we can move forward," Fitch said.
An audit of the program is identifying a number problems such as an over estimation of investment returns, unpredictable increases in college tuition and no way to adjust the program after a bad year.
One of the Auditors, Ken Alberts, told the board that minor changes...such as reducing the expected rate of investment return by eight-tenths of a percent...could be enough to put MPACT back on a sustainable track.
"So we have looked at different aspects of this. We have made some suggestions. We have recommended some changes. And we hope that you will take a look at this. We think that if you make small changes now and put in a process to continually review the program we will have a program that is going to be sustainable over the long term," Alberts said.
The auditors offered a series of recommendations that the board is now considering.
Treasurer Fitch says it is not clear when the program will be re-opened but when it is it will likely be more expensive to enroll.
"The pricing of these contracts has not been done in numerous years. So it would be prudent to open it up and have reasonable pricing to go with the contract. Which would still be an excellent cost saving for individuals to be in this program," Fitch said.
Roughly 22,000 Mississippians are currently enrolled in the program, which will be backed by state taxpayers should the fund ever come up short.
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