PACT votes not to pay full tuition

Trustees of the Prepaid Alabama College Tuition program voted to not pay full tuition to Alabama, Auburn and Montevallo.  The plan must still be approved by a judge but trustees voted to cut payments by the Fall of 2010.  The plan depends on the state legislature pumping 236 million into the program.  PACT families have few options.

It’s important to take note, this pact plan isn’t set in stone but if it’s approved, families have very few options and that includes pulling their money out if their student is already in or about to head to college.

Financial Planner said, “I’m sure it leaves a bad taste in everyone’s mouth.“

That bad taste has been swirling around for about a year now for the Prepaid Alabama College Tuition program.  This time last year, investments plunged, leaving the fund 345 million dollars short.
Without a substantial cash flow - many hope will come from the Alabama legislature – PACT will run out of money by 2016.  And then today, the board voted to cut tuition payments to the states most expensive colleges, Alabama, Auburn and Montevallo.

Westband Financial Consultants, Eric McClain said, “Obviously they’re looking at that and they’re trying to look at what will sustain the program over time and perhaps that is a reduced benefit so that everyone will still have some type of benefit.“

In his job as a certified financial planner, McClain is recommending if you’ve invested in PACT in the last five years, to pull out of the program.  But if your student is in college now or about to go it’s best to stay in the fund.

McClain said, “If you’re close i don’t know that cashing out is the thing to do, it’s quite possible that if you bought a contract a long time ago that the amount of the benefit you’ll still receive under the reduced amount is greater than what you would receive back.“

It’s something PACT families should consider before pulling out their money.

If this new change is approved, families should try to negotiate with the university, to accept the lower amount.  Financial aide, student loans and scholarships may also help fill in the gap.

There are 45-thousand 542 active PACT accounts.  Since January, 21-hundred-57 accounts have been cancelled, totaling 25.8 million dollars.