Following yesterday’s revelation that Virginia’s average in-state college tuition has increased five percent since last year, Republican lawmakers in the Virginia House of Delegates have introduced a plan to lower costs associated with Prepaid529 tuition savings plans. The proposed legislation will reduce the four-year, eight-semester, contract price by over $3,000, saving parents of college-bound students a lot of money.
On Wednesday morning, House Bill 1611 was introduced by House Education Chairman Steven Landes (R-Weyers Cave) and Majority Caucus Chairman Timothy Hugo (R-Fairfax) into the docket for the 2019 session. The development came after a Joint Legislative Audit and Review Commission (JLARC) review of the Virginia529 College Savings Plan, wherein the body identified opportunities to increase access to a wider range of prospective students and the parents of those students by lowering costs instituted by the Board of Virginia529.
The plan is set to make Prepaid529 contracts more affordable to all Virginians while overseeing that the fund remains “actuarial sound,” according to a press release.
“This is a commonsense proposal that will have an immediate and significant impact on families’ bottom lines,” said Delegate Landes, the chief patron of the legislation. Opening a Virginia 529 plan allows parents to achieve tax-advantaged college savings for their children. Currently, the plan is funded at 138 percent to ensure or offset future financial risk or uncertainty.
The Virginia529 Board sets the Prepaid529 tuition contract price, though it also includes a 10 percent pricing reserve in excess of what is needed to meet future benefit commitments. As of July 2018, the 138 percent funding of the plan is the highest in its 21-year history, just as tuition rates maintain year-over-year increases in college and universities across the state.
“Despite the fund being 138% funded, Virginia529’s leadership has continued to charge a 10% pricing reserve,” Landes said in the press release. “The Prepaid529 program was created to make higher education more accessible and affordable; we should be striving to do that at every opportunity.”
House Republicans are now capping the price reserve the Board charges at five percent to lower costs. The five percent cap will be maintained as long as the Prepaid529 plan is funded 105 percent or greater. Doing so will help prospective college students gain greater access to higher education.
“Higher education tuition costs have outpaced wage growth drastically over the past decade, making it more difficult for hard-working, middle-class parents to afford to send their children to college,” said chief co-patron Delegate Tim Hugo. I’m proud to carry legislation that will directly lower the cost of prepaid tuition and make higher education more attainable for Virginia families.”
In the future, if the plan’s funded status drops below 105 percent, the Board may increase the pricing reserve rate up to 10 percent, but a written explanation must be provided to the General Assembly for the new pricing reserve rate.
As national student loan debt reaches almost $1.5 trillion, with over one million Virginians carrying some type of college debt, restructuring the pricing schedule for Prepaid529 will ensure that families in the Commonwealth are able to send their children to college without assuming a crippling amount of debt.