Celebrated tuition freeze puts squeeze on college savings fund

AKRON Ohio
Parents who invested in one of the state’s college savings
funds won’t see an increase on that return for two years because of a tuition
freeze recently celebrated by lawmakers and university officials.

The Ohio Tuition Trust Authority, which oversees the state’s
federally qualified Section 529 college savings plan known as College
Advantage, offers more than 30 investment options.

One of the options, the Guaranteed Savings Fund, is tied to
the weighted average tuition of Ohio’s public universities, and because Gov.
Ted Strickland signed a two-year operating budget that freezes tuition at those
schools, the value of the investment fund will not increase, said Jacqueline
Williams, executive director of the tuition authority.

The state began sending letters July 13 notifying investors.

“Investors will not see an increase in the value of
their investment for the next two years. But on the other hand, tuition at
public universities will not be going up for two years. That is a tremendous
benefit,” Williams said.

The tuition freeze hailed by Strickland, a Democrat, and
Republicans in the state Legislature temporarily halts what had been an average
9 percent annual tuition increase over the past decade that left Ohio’s
public universities nearly 50 percent more expensive than the national average.
The Legislature is pumping an additional $254 million into higher education
over two years to support the freeze.

About 70,000 families are in the Guaranteed Savings Fund,
but not all have college-aged children, Williams said. About 70 percent use the
investment to attend public colleges and 30 percent use it to help pay for
private colleges in Ohio or other
states.

Mike Stone, an engineer with the Geauga
County engineer’s office in
northeast Ohio, and his wife have
invested in the Guaranteed Savings Fund since 1993. They have two sons enrolled
at Ohio Northern
University, a private school in Ada.

Strickland and lawmakers should have made an effort to
ensure that families were given a chance to find other ways to increase their
earnings, Stone said.

Families can still move their money into any of the state’s
other savings plans, which rise in value based on market performance rather
than tuition costs, Williams said. The state offers index funds or portfolios
managed by Putnam Investments, The Vanguard Group and Fifth Third Bank.

But once investors take money out of the Guaranteed Savings
Fund, they can’t return to the plan.

Eric Fingerhut, state chancellor for higher education,
said the two-year tuition freeze will benefit about 380,000 undergraduate
students at public universities.

Information from: Akron Beacon Journal, http://www.ohio.com

– Associated Press



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