secure backup funding may not be secure!!

Parents Forum
1

<p>son really wants an out of state school but always in the back of my mind was, if that wasnt possible ie didnt get good merit aid (we don't qualify for need aid) I still had the state pre-paid tuition plan... so in state was secure. BUT just got letter....</p>

<p>"As you know the stock market has dropped approximately 50% in past 14 months. This event has had a significant negative impact on the invested assets of the PACT trust fund....the board is working hard and considering options to maintain the viability of PACT"</p>

<p>missed the boat on withdrawing funds from mutual funds and dont even look at statement anymore , wont qualify for need aid and now this!</p>

2

<p>You should look at the terms of the agreement you have with the state. Even if the state fund tanks they may have to give you full credit or something similar at the schools.</p>

3

<p>I was thinking same thing, just have to find the original papers. we actually took out the pact for our eldest son back in 1990 (he was in grade 2 or something...paid a total of 6K to guarantee 4 yrs pd tuition) He then went out of state to college and the plan only pd out $100 per credit for out of state and as he went to a dramatic academy ...we decided to transfer it to our middle son and took out loans for our oldest instead. I sure hope the plan survives as if the end result is we get 6K back that really wont work. The letter does say they are talking to the universities and colleges so fingers crossed!!</p>

4

<p>well, an update is that they are meeting with universities and colleges to see if something can be worked out but here is their worst case scenario</p>

<p>"What is the worst case scenario?
We believe the worst case scenario would be that principal monies would be returned to the PACT purchasers. However, our goal is for PACT to pay tuition benefits to PACT students and this is the goal that we are working towards achieving. '</p>

<p>I found our original contract and it says:</p>

<p>SECTION III Contract benefits </p>

<p>The PACT Program guarantees payment of undergraduate instate tuition and mandatory fees on behalf of the qualified beneficiary......135 semester hours or until the award of baccalaureate degree (whichever comes first) </p>

<p>what is interesting is that there is absolutely no language regarding PACT inability to pay just language about refund in the event that I terminate the contract or beneficiary dies etc.</p>

<p>As we put in our money in 1990 we paid 6K with the promise of 4 years of tuition..a return of 6K now wont even cover 1 year.</p>

5

<p>Wow, a 20 year interest free loan to the state!</p>

6

<p>yep and knowing my luck if they refund the money they will probably take out administrative or handling fees LOL!!!</p>

7

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<p>Since the state is a different funding agent than the actual universities, it is not like the state can just let you in without the school expecting payment from somewhere. So there needs to be something worked out.</p>

8

<p>Parent, is the agreement between you and the state or you and PACT? Is PACT guaranteed by the state?</p>

9

<p>PACT, like most state prepaid tuition plans, is not backed by the full faith and credit of the state.</p>

10

<p>dadX3 is correct. i didnt realize that until recently. I guess when you read everything over the years and the literature comes from the State Treasurer's Office you assume it is a state guarantee. and the legalese of the contract mentions section such and such Code of Alabama etc.
wonder if this means anything..."contract between the contract purchaser and the State Treasurer of the state of alabama as chairman of and on behalf of the board.</p>

11

<p>wow, just found out something... my contract is from 1990 ..apparently after 1994 the word guarantee was removed!!! my does say it is guaranteed and signed by the state treasurer! wonder if that will make a difference should the fund become non viable</p>

12

<p>
[quote]
like most state prepaid tuition plans, is not backed by the full faith and credit of the state.

[/quote]
</p>

<p>I thought my state program, Virginia, was guaranteed by the state. I'd have to check but I think it's call VTAP.</p>

<p>What state is PACT?</p>

13

<p>found another page of my contract it is actually signed by George Wallace Jr and has the alabama seal on it. sent a email to the address provided expressing my concerns and reminding them of the wording of the 1990 contracts!</p>

14

<p>savingforcollege dot com says this about the Virginia prepaid tuition plan:
It is not backed by the full faith and credit of the state, but "state legislation currently provides a financial guarantee in each year's state budget to cover VPEP's contractual obligations in the event of a funding shortfall."
I guess that means that the guarantee might not be in place in the future.</p>

15

<p>Thanks dadx3. I searched for more information but yours basicallys says it all. If the state doesn't fund the shortfall via the line of credit I guess I'll take out loans and work it out.</p>

<p>Any idea if the state legislation is in jeopardy?</p>