Soaring tuition costs have become a concern not only for Virginia and Maryland families dropping their kids off at college next month, but for those whose children are just starting kindergarten.
The number of Virginians investing in state-run savings programs to help pay for college down the road dropped 70 percent over the last nine years, from more than 10,000 in 2003 to about 3,000 in 2012. In Maryland, participation in the so-called prepaid tuition 529 programs dropped by more than 45 percent, from 4,300 in 2003 to 2,300 in 2011, the latest year of available data.
The trend is directly tied to escalating tuition and mandatory fees at state universities. Tuition has tripled in Virginia since 2001 and doubled in Maryland, documents shows.
|Annual enrollment in prepaid college savings programs|
The 529 plans are just one way parents can save for college and their plummeting popularity is due, in part, because parents are choosing other savings options, state officials said. But the steep drop-off in plan enrollment also demonstrates that soaring costs and lingering economic woes are making a college education less accessible to some families.
Virginia parents with a child just entering kindergarten are looking at a prepaid tuition plan costing $54,600 to attend a state college or university, up from $15,452 in 2001. The cost to Maryland parents in 2011 was $61,776, also up from previous years.
"The cost of a single year right now is pretty close to what four years cost 15 years ago," said Mary Morris, CEO of Virginia College Savings Plan. "It just became harder for more families to afford to save and we need to do a better job of talking about the other options."
In prepaid tuition programs, parents make contributions toward an investment plan that locks them into a favorable tuition rate. The plan will cover the cost of attending any state school or a portion of tuition of private or out-of-state schools. Only 9 states operate prepaid college tuition programs, said Brenda Bautsch, a senior policy specialist at the National Conference of State Legislatures.
Most states instead offer 401(k)-style savings plans that grow with the stock market but don't guarantee a tuition rate. Maryland and Virginia also offer these options.
"The number of people investing in them have skyrocketed and that's a reaction to parents [facing] high tuition costs," Bautsch said, adding that rising tuition rates can still outpace the return on these plans, too.
Not only are fewer people participating in prepaid tuition programs, but far fewer are saving enough to pay for a full, four-year college education.
When the Virginia Prepaid Education Program began in 1996, 75 percent of the plans purchased covered four years of school. Now, fewer than half that number are saving enough for four years. Between 2003 and 2011, the Maryland Prepaid College Trust saw enrollment in four-year plans decrease from more than 60 percent of all plans purchased to less than 40 percent.
More parents are buying just one or two years of college for their children, and in Virginia, parents may soon be able to set aside money for just one semester.
"Any amount that people can save is a good thing," said Lauren Shipley, spokeswoman for College Savings Plans of Maryland. "There are some factors we can't control. We try to have affordable options."