Groundwork being laid for tuition prepayment

Tuesday, Aug. 12, 1997 | 8:49 a.m.

The state treasurer's office has entered the business of helping parents save for their children's college bills, a trend that's gaining in popularity across the country.

Details of the Nevada Higher Education Tuition Trust Fund have yet to be worked out, but state Treasurer Bob Seale said his office is aiming for a spring deadline to open participation in the state's first prepaid tuition program.

Prepayment plans allow families to pick up the tab for college costs in advance, rather than paying off loans and interest afterward. The state-run programs allow families to defer federal income tax on earnings until money is withdrawn for college.

Thirty states either have such plans in place or recently have approved one.

The 1997 Legislature earlier this summer approved the program's establishment in Nevada and granted a $1.2 million loan for its start-up. Repayment of the state loan would begin when the trust fund reaches a healthy level.

By Oct. 1, Gov. Bob Miller is expected to fill two remaining vacancies on a five-member oversight board. Once in place, the appointed board members will decide how much to charge parents, grandparents and anyone else who participates in the program on behalf of students wishing to attend Nevada universities and community colleges.

Participants would pay one-time amounts for semester blocks or make smaller monthly payments spread across as many as 18 years, if parents begin participating in the program when their children are newborns.

Those in the plan who opt to send their children to out-of-state colleges or whose children choose not to take college classes would be penalized, Seale said, but would be eligible for refunds.

The oversight board, based on recommendations from University and Community College System of Nevada officials and accountants in the treasurer's office, will decide how much to charge participants for tuition. That amount is likely to be slightly higher than current tuition rates but far less than anticipated future rates.

That's possible, Seale said, because he expects to see a 7 percent to 8 percent annual return on investments, a rate that outpaces recent 4 percent tuition increases.

"There's a huge value to this," Seale said. "I can't find a downside to it."

He added his office has received at least 100 calls from people interested in Nevada's prepayment program.