The News Courier in Athens, Alabama


September 1, 2012

PACT parents playing the waiting game

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Parents who have college students covered by the state’s Prepaid Affordable College Tuition program may be relieved that it will cover tuition this fall while the plan awaits a court decision.

Their relief is likely to be short-lived, though. Whichever way Montgomery County Circuit Judge Johnny Hardwick rules, the PACT program is sure to face significant changes.

If the judge determines that state officials can retroactively apply a new law allowing reduced tuition payments, he paves the way for the Alabama Supreme Court to OK an earlier settlement based on the lesser benefits.

This would require parents to chip in, but it’s still the best strategy for keeping the program alive longer.

If the Montgomery court says no, however, PACT’s future would be cut short because it might have to honor its obligations in full. An actuary told the board recently that the plan would start running out of money in 2014 if tuition payments aren’t reduced.

When it was created, the PACT program was intended to help Alabama families send their children to college by paying into a plan years ahead of time. Indeed, it was a great concept that worked well for two decades. But no one could have foreseen the crash of the stock market in 2008, which caused the value of PACT’s investments to plummet just as tuition was skyrocketing.

It’s understandable that some families feel cheated by the possibility of reduced payments, but there’s not much of an alternative. Now, with enrollment closed, there’s no more revenue coming in, which leaves the program without sufficient funds to fulfill its original promises. The Legislature approved a bailout in 2010, but that wasn’t enough, either.

As actuary Dan Sherman told the PACT board recently: “When we get a ruling from the court, we are going to be in really good shape or really bad shape.”

Observers say it’s not clear when the circuit judge will rule, and it could take months for the state Supreme Court to have its say.

The uncertainty may not be fair for enrolled families — especially during a down economy — but they have little choice but to wait for a final answer.

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