New law slashes cost of Florida Prepaid College Plan

A new law that drastically limits tuition increases at state universities will result in $900 million in savings for families enrolled in Florida Prepaid College Plans.

About 18,000 families will receive $197 million in refunds because their paid-in-full accounts now exceed expected tuition costs. Another 22,000 families will see their bills reduced by more than $700 million over the remainder of their contracts.

There are 7,265 families in the Tampa Bay area, and 14,009 families in the Miami area that will receive refunds or price reductions.

These savings are the result of House Bill 851, approved during the 2014 session. The bill got the most attention for a provision allowing undocumented immigrants to qualify for in-state tuition, but it also froze tuition at current rates and repealed a state law that allowed public universities to ask the Board of Governors to increase tuition up to a maximum of 15 percent.

Known as “differential tuition,” that ability to seek higher rates was approved by the Legislature in 2007 to supplement income at certain state universities when state funding was slashed. By 2009, all state universities were using it.

HB 851 eliminated differential tuition for all but Florida State University and the University of Florida, which are now capped at 6 percent. Universities didn’t publicly oppose the bill, but their supporters quietly wondered if the legislation will harm higher education if another economic downturn causes lawmakers to again cut state funding.

What’s certain is that the new law “has a huge impact on what you expect college to cost in the future,” Florida Prepaid executive director Kevin Thompson said.

During the years that differential tuition was in play, the Florida Prepaid College Board drastically increased the price of new plans to reflect the possibility that tuition could increase as much as 15 percent each year.Thursday, the board revised rates to reflect savings under HB 851.

For example, a four-year university plan that once cost a family with a newborn $350 a month — $54,000 total — now costs $173, or less than $28,000.

Gov. Rick Scott, who has made holding the line on tuition a priority, issued a press release applauding the savings and criticizing Democratic challenger Charlie Crist, who was the Republican governor when differential tuition became law.

“Reducing Florida Prepaid rates by undoing the previous administration’s tuition hikes was a critical step toward our goal of keeping college affordable,” Scott said.

Crist’s campaign fired back by pointing out that Scott allowed differential tuition to remain on the books for most of his term. However, no state universities have received tuition differential increases since 2012, largely due to Scott’s opposition.

Florida Prepaid, created in 1987, is the oldest program of its kind in the nation and the largest, with 560,000 active accounts. Families who purchase plans lock in at current prices and spread payments over monthly installments until a child graduates from high school.

The plans are guaranteed by the state regardless of how markets perform and can be stacked on top of scholarships or other types of financial aid, such as Bright Futures. The money can also be used to pay the costs of private colleges or out-of-state universities.

Florida Prepaid officials are hoping the new price reductions coupled with a temporary waiver of the $50 application fee will entice families to join the program. Interest fell off in recent years because of the tuition differential cost increases coupled with the economic recession.

There were only 14,000 sign ups last year, down from 30,000 to 40,000 before the law went into effect. Thompson has a goal of 30,000 new customers during the open enrollment period that starts in October and ends in February.

“We’re looking to more than double this year, but we think it’s possible,” he said.

Florida Prepaid has a variety of plans for families to chose from, including options for students who want to attend four years at a state university, two years at a community college or two years at each. This year the plan is also launching a new program called the “one-year university” plan that will allow families to sign contracts to pay for one year of college tuition at a time if they can’t afford to pay for more.

“Hopefully it’s one year less that the student has to borrow and have student loan debt,” Thompson said.

Contact Tia Mitchell at (850) 224-7263 or tmitchell@tampabay.com. Follow @tbtia.

Who gets a refund?

Families who purchased Plans at higher prices in recent years will benefit from the lower prices. They will have their monthly payments reduced or receive refunds if their Plans are paid-in-full. Approximately 18,000 families are expected to receive refunds totaling almost $200 million. More than 22,000 families will see a reduction in their monthly payments and realize more than $700 million in savings over the lifetime of their Plans.

The Plans impacted are those purchased since 2008 that include a Tuition Differential Fee component.

The dramatic reduction in prices is tied directly to the new law created by House Bill 851 and the fact that it reduces the maximum annual increase of the Tuition Differential Fee to six percent for preeminent State Universities and zero percent for all other State Universities. Previously, the Tuition Differential Fee could increase by up to 15 percent annually at all State Universities.

Those eligible do not need to take any action. They can expect to receive notification from the Board this month regarding their specific refund and/or payment reduction information. It is anticipated that payment reductions will be applied to Prepaid Plan payments, beginning Sept. 20, 2014, and refund checks will be processed and mailed within 4-6 weeks of that date.

For more information, visit www.myfloridaprepaid.com.