University May Suspend Tuition-Prepayment Plan

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The board of directors of Duquesne University is set to decide this week whether to suspend its tuition-prepayment plan, which attracted national attention when it was adopted in 1985.

"A change in the market forces us to re-evaluate the plan," which has allowed parents to pay their children's tuition at birth, said Ann Rago, the Pittsburgh university's director of public relations.

According to Ms. Rago, the return on the bonds used to finance the plan has declined, while the university's tuition has risen faster than expected. As a result, she said, it would cost parents much more than it originally did to participate in the plan.

State legislators and officials of other colleges considering similar programs will be watching Duquesne's decision carefully, those tracking such proposals say.

"What this will do is make states that have not passed something reluctant to do so," predicted Jennifer Afton, a research assistant for the Education Commission of the States.

Eight states have enacted tuition-prepayment programs, but only one--in Wyoming--is already in operation.

The director of Wyoming's program said last week that conditions like those that brought about Duquesne's proposed action were unlikely to threaten his state's plan.

"The basis for our whole thing is entirely different from Duquesne's," said Bruce Hooper, manager of university loans and receivables at the University of Wyoming.

"Our whole plan is based on projected costs," he said."We have the ability to adjust the price of contracts on a quarterly basis."

Concern over soaring tuition costs has prompted growing interest in various forms of college-savings plans.

But they have also come under increasing scrutiny. Some critics have warned that the programs may be based on overly optimistic economic assumptions. Others have charged that they restrict students' educational choices. (See Education Week, Aug. 5, 1987.)

Rising Rates

When Duquesne, a private Roman Catholic school, began the prepayment program three years ago as a service to its alumni, parents of a newborn child could pay $4,450 to guarantee four years' tuition.

Last year, that rate went up to $8,630. Some 622 families have already invested in the program, which is no longer restricted to alumni.

Their investments would not be affected by a suspension of the program, according to Ms. Rago.

Duquesne has re-examined the plan each year, and has decided to continue it each time, she said.

"This is the first year we were forced to see otherwise," she said.

If the plan is suspended, Ms. Rago added, "we will re-evaluate it next year, and, depending on market conditions," may resume it.--rr

Vol. 07, Issue 25

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