The Virginia House of Delegates has passed legislation that will make it easier for middle-class families to afford college by lowering the price of Prepaid529 college savings plans. The current cost of an eight-semester contract is set to be lowered by more than $3,000 by the Republican-led measure.
Currently, families pay a 10 percent “pricing reserve” on top of semester contract prices, which is in addition to the amount needed to pay future contract benefits to mitigate fiscal risk to the fund. In June 2018, the Joint Legislative and Audit Review Commission (JLARC) published a 40-page report detailing that Virginia’s Prepaid529 program is 138 percent funded – the highest in its 21-year history – just as tuition rates maintain year-over-year increases in college and universities across the state, which increased by over five percent for the 2018-2019 school year.
Therefore, the program is more than capable of meeting all of its commitments to prospective students.
H.B. 1611, co-patroned by House Education Chairman Steven Landes (R-Weyers Cave) and Majority Caucus Chairman Tim Hugo (R-Clifton), provides that the ratio of the assets to the obligations of the Virginia College Savings Plan shall not exceed 105 percent. Moreover, if the plan’s funded status drops below 105 percent, the pricing reserve, set by the Virginia529 Board, may exceed five percent but not 10 percent.
The legislation also requires the governing board of the Virginia College Savings Plan to provide to the House Appropriations Committee, the Senate Finance Committee, and JLARC written notification and a detailed explanation of any change to the pricing reserve within 30 days.
The measure passed during the Tuesday session with a 94-5 vote.
“This commonsense proposal will have a significant impact on families being able to keep more money in their pockets and attend college at a lower cost,” said Delegate Landes in a news release. “The Prepaid529 program was created to make attending a college or university more accessible and affordable; we should be striving to do everything we can to achieve that goal.”
Delegate Hugo added that the Commonwealth has “taken a major step towards helping hard-working, middle-class parents afford to send their children to college. Higher education tuition has outpaced wage growth drastically over the past decade and we must be focused on doing our part to reign in those expenses.”
In June 2018, national student loan debt rose to nearly $1.5 trillion – $620 billion more than total U.S. credit card debt – with students now being tasked with borrowing more than normal if they seek a college degree.
Throughout Virginia, in-state tuition and mandatory fees for matriculation at state universities and community colleges increased by an average of 5.1 percent or $612 for the 2018-2019 school year. The State Council of Higher Education released a report to state lawmakers that found students at four-year institutions would pay an average of $13,370 during that time frame, while community college students would pay an average of $4,620.
Moreover, room and board charges and fees at four-year schools will average $10,633, an increase of 3.5 percent from the last school year.
“Lowering the cost of college has long be a priority for the House of Delegates,” said Speaker of the House Kirk Cox (R-Colonial Heights). “Virginia students borrow more than $1 billion per year to pay for college, a staggering burden that hurts our economy and makes it harder for young people to get started after college. This legislation will go a long ways to helping middle class students and families be able to afford a quality education at one of Virginia’s colleges or universities.”
Republicans led off the 46-day session prioritizing lowering the costs of higher education, headed by Speaker Cox, who said in October 2018 that “the Commonwealth needs to re-brand the effort of bolstering innovation, job creation, and talent acquisition and production.”