Rising tuition costs driving up state’s prepaid program

Jennifer Knight

Wednesday, Aug. 21, 2002 | 9:01 a.m.

The rising cost of college is driving up the price of Nevada's prepaid tuition plan, state officials said Tuesday.

Parents who locked into last year's rates for the prepaid college savings plan did so just in the nick of time. University and community college tuition increases kick in this fall semester. The state treasurer's office, which runs the prepaid tuition program, will raise prices to make up for those changes, Kathryn Besser, assistant state treasurer, said.

"Rates are now going higher than we expected at the university," Besser said. "We usually adjust our rates according to what tuition is expected to be."

Tuition this fall will increase 3.5 percent at community colleges and universities. Starting in 2004, university tuition in Nevada will increase another 15 percent over two years. During the same period, tuition for community colleges will increase 8 percent.

State officials don't know yet how much the new prepaid tuition plan will cost, but with rising tuition, parents both in Nevada and across the nation are becoming wise to these types of programs, which are gaining in popularity.

By the end of this year, all types of college savings plans nationwide are expected to reach $25 billion and climb to $65 billion by 2006, said Luis Fleites, an analyst for Boston-based Cerulli Associates, a marketing research firm that tracks such trends.

"The increase in popularity is rooted in the fact that you are guaranteed a certain rate of return as long as tuition keeps going up," Fleites said.

Nevada's prepaid tuition fund has $34 million invested, with about 9,000 people participating. The state saw a great demand for the program in beginning years, but enrollment, unlike the national trend, tapered off last year, Besser said.

Under Nevada's prepaid plan, a parent paying for four years of a university education would typically make 41 payments of $266.

Besser said that with college budgets cuts, schools have no choice but to look to students to make up the price.

"It is a big concern," Besser said. "I think people will begin to see that it's a good deal to lock into tomorrow's tuition at today's rates."