TTF_II.ppt

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TTF_II.ppt

  1. 1. Texas Tuition Promise Fund BUC$ Conference October 15, 2008 Linda Fernandez Comptroller Educational Opportunities and Investment Division Manager and CFO [email_address] 1-800-531-5441, Ext. 3-4863
  2. 2. Meet the Staff Educational Opportunities and Investment Division <ul><li>Customer Service-Higher Education </li></ul><ul><ul><li>Diane Schmidt, Team Lead </li></ul></ul><ul><ul><li>Cookie Wheeler </li></ul></ul><ul><ul><li>Alex Mendez </li></ul></ul><ul><li>Kevin Deiters, Director </li></ul><ul><li>Linda Fernandez, Manager and CFO </li></ul>
  3. 3. Texas Tomorrow Funds’ Program Prepaid Plans Savings Plans Closed to new enrollment in 2003 Opened Sept 10, 2008 Direct-Sold Advisor-Sold
  4. 4. Texas Tuition Promise Fund (TTPF) <ul><li>Objective </li></ul><ul><li>Allows participants to lock in tuition price </li></ul><ul><li>Promotes targets and goals of “Closing the Gaps” </li></ul><ul><li>Establishes Texas Save and Match Program </li></ul><ul><li>Plan Design </li></ul><ul><li>Sold in tuition units </li></ul><ul><li>Must meet Texas residency requirements (either beneficiary or parent-purchaser) </li></ul><ul><li>Use at Texas public 4-year and 2-year colleges, Texas private schools, and out-of-state schools </li></ul><ul><li>Governance </li></ul><ul><li>Authorized by IRS Code, Section 529 (“529 Plans”) </li></ul><ul><li>Administered by Texas Prepaid Higher Education Tuition Board (Agency #315) </li></ul><ul><li>Established by Texas Education Code, Subchapter H (HB 3900) </li></ul><ul><li>Implemented by Administrative Rules (34 TAC, Sections 7.121-7.145) </li></ul><ul><ul><li>Posted for 30-day comment period </li></ul></ul><ul><ul><li>Sent to representatives of UT, A&M, and Texas Tech </li></ul></ul>
  5. 5. TTPF Key Dates <ul><li>HB 3900 signed into law June 2007 </li></ul><ul><li>RFP issued for plan manager Nov 2007 </li></ul><ul><li>Board selected OppenheimerFunds, Inc. Feb 2008 </li></ul><ul><li>Contract signed June 2008 </li></ul><ul><li>Administrative Rules adopted Aug 2008 </li></ul><ul><li>Enrollment opened Sept 10, 2008 </li></ul><ul><li>Enrollment period Sept 2008 – Feb 2009 </li></ul><ul><li>Newborn enrollment period Sept 2008 – July 2009 </li></ul><ul><li>Sales period for current prices Sept 2008 – Aug 2009 </li></ul><ul><li>1 st payment due May 2009 </li></ul><ul><li>Disbursements to colleges June 2012 </li></ul>
  6. 6. <ul><li>TTPF will only cover out-of-state accredited career schools/colleges. </li></ul><ul><li>Guaranteed tuition plan will pay for career schools/colleges. </li></ul><ul><li>Both plans pay portion of tuition and required fees at out-of-state colleges. </li></ul>In-State Room & Board Books & Materials Lab Fees  *   Required Fees  *   Tuition Private Institutions Career Schools / Colleges Public Junior Colleges Public Senior Institutions Costs
  7. 7.       Room & Board            Books & Materials          Lab Fees     Required Fees     Tuition Private Institutions Career Schools / Colleges Public Junior Colleges Public Senior Institutions Costs
  8. 8. How TTPF Works <ul><li>2008-2009 Unit Types and Prices </li></ul><ul><li>Units represent a fixed amount of tuition – 1 unit = 1% of 1 academic year </li></ul><ul><li>100 units = 1 academic year, 30 semester credit hours </li></ul><ul><li>TYPE I ($98.50 per unit) </li></ul><ul><li>Type I units are priced to cover undergraduate resident tuition and required fees at the most expensive four-year public college or university in Texas </li></ul><ul><li>TYPE II ($67.65 per unit) </li></ul><ul><li>Type II units are priced at the current weighted average cost of undergraduate resident tuition and required fees across all Texas public 4-year schools </li></ul><ul><li>TYPE III ($16.99 per unit) </li></ul><ul><li>Type III units are priced at the current weighted average cost of undergraduate resident tuition and required fees across all Texas public 2-year schools </li></ul><ul><li>Minimum Unit Purchase: 1 unit of any type needed to establish an account </li></ul><ul><li>Payments as low as $15 after establishing an account </li></ul><ul><li>Maximum Unit Purchase: 600 Type I units; 873 Type II units; 3,478 Type III units </li></ul><ul><li>Max of $320,000 per beneficiary in all Texas 529 plans </li></ul>
  9. 9. Example of Tuition Units Needed for Selected Colleges for 2008-2009 Figures shown represent tuition and required fee costs for the 2008-2009 academic year and tuition units that would be needed to cover that academic year.
  10. 10. Example: Type II Unit Redemption ABOVE Weighted Average Cost of Tuition EQUAL to Weighted Average Cost of Tuition BELOW Weighted Average Cost of Tuition You are fully covered, and you will have reserve units in your account. $965 of excess tuition units available for use School C $5,800 You are fully covered No extra money needs to be paid for tuition and required fees School B $6,765 You will need to make up the cost difference: Purchaser or Beneficiary responsible for balance of $235 due for tuition and required fees School A $7,000 Amount of Tuition and Required Fees covered Value of your tuition units compared to the Weighted Average Value Cost of Tuition and Required Fees Unit Redemption – 100 Type II Units @ $67.65 per unit = $6,765
  11. 11. Payment Options for Participants <ul><li>Lump Sum Plan </li></ul><ul><ul><li>Purchase set number of units or dollar amount in a single purchase </li></ul></ul><ul><li>Installment Plans </li></ul><ul><ul><li>Price is locked in for the life of the installment plan </li></ul></ul><ul><ul><li>All installment payments include annual interest component </li></ul></ul><ul><ul><li>Annual or Monthly Payment Plan options include 5 Year, 10 Year or # of Years to Projected High School Graduation Date </li></ul></ul><ul><li>Pay-As-You-Go Plan </li></ul><ul><ul><li>Buy units whenever you want </li></ul></ul><ul><ul><li>Contribute as little as $15 once minimum of one unit is purchased </li></ul></ul><ul><ul><li>Plan prices change annually </li></ul></ul>
  12. 12. Payment Comparison 100 Type I Units $9,850.00 1 Lump Sum Payment or Multiple Pay-As-You-Go Payments $9,850.00 Only Lump or Pay-As-You-Go Due to Beneficiary’s Age-Installment Not Available 15 Yrs of Age $138.32 96 $13,279.00 Mo Installment Until High School Grad 10 Yrs of Age $85.61 216 $18,492.00 Mo Installment Until High School Grad Newborn $9,850.00 1 $9,850.00 Lump Sum Newborn Payment Amount # of Payments Total Cost of Contract Payment Option Beneficiary’s Age
  13. 13. Use of Units <ul><li>Flexibility </li></ul><ul><ul><li>Any of the three unit types can be redeemed to pay tuition and required fees at any eligible school </li></ul></ul><ul><li>Unused Units - 3 Options </li></ul><ul><ul><li>Transfer units to any 529 college savings plan where proceeds can then be applied to other costs such as room and board, books, etc. </li></ul></ul><ul><ul><li>Transfer extra or reserve units to another qualified beneficiary </li></ul></ul><ul><ul><li>Request a refund for remaining units </li></ul></ul>
  14. 14. Redemption of Units <ul><li>3-Year holding period (June 2012) </li></ul><ul><li>Units must be paid-in-full prior to use </li></ul><ul><li>Texas public colleges will receive lesser of: </li></ul><ul><ul><li>Amount paid for units, plus earnings, </li></ul></ul><ul><ul><ul><li>Earnings = greater of: </li></ul></ul></ul><ul><ul><ul><ul><li>actual return on investments OR </li></ul></ul></ul></ul><ul><ul><ul><ul><li>5% return on investments, subject to the availability of money in the fund for that purpose </li></ul></ul></ul></ul><ul><ul><li>OR </li></ul></ul><ul><ul><li>101% of current tuition and required fees at the time of redemption </li></ul></ul><ul><li>Residency established at purchase for semester hours paid by tuition units </li></ul>
  15. 15. Private and Out-of-State Colleges <ul><li>Private or out-of-state colleges will receive lesser of: </li></ul><ul><ul><li>Redemption value of the tuition units if redeemed at a Texas public college, OR </li></ul></ul><ul><ul><li>Amount paid for the tuition units plus actual earnings </li></ul></ul>
  16. 16. Disbursements to Colleges <ul><li>Track purchase price and earnings </li></ul><ul><li>Develop procedures for paying colleges </li></ul><ul><ul><li>Implement legislative requirements </li></ul></ul><ul><ul><ul><li>Payments based on purchase price of units plus actual earnings or 5%, subject to availability of money in the fund for that purpose </li></ul></ul></ul><ul><ul><li>Involve colleges in developing procedures </li></ul></ul><ul><li>Distribute written procedures to colleges </li></ul>
  17. 17. Program Suspension or Termination <ul><li>Board may suspend enrollment to ensure actuarial soundness </li></ul><ul><li>Comptroller can recommend termination if program is financially infeasible </li></ul><ul><ul><li>Contracts remain in effect at termination if: </li></ul></ul><ul><ul><ul><li>Beneficiary accepted by or enrolled in college </li></ul></ul></ul><ul><ul><ul><li>Beneficiary is projected to graduate within 3 years of program termination </li></ul></ul></ul>
  18. 18. Financial Stability <ul><li>Non-Refundable $25 administrative fee to be used directly in maintaining actuarial soundness </li></ul><ul><li>3-Year holding period for redemption </li></ul><ul><li>8% interest charge on installment contracts </li></ul><ul><li>Cap on refunds (2% below actual earnings, not to exceed 5%) </li></ul><ul><li>Program may be suspended or terminated </li></ul>
  19. 19. Information and Enrollment <ul><li>www.TexasTuitionPromiseFund.com </li></ul><ul><li>1-800-445-GRAD (4723), option #5 </li></ul><ul><li>www.everychanceeverytexan.org </li></ul>
  20. 20. TTPF Calculator
  21. 21. Compare up to 5 Schools
  22. 22. Upgrades to Texas Guaranteed Tuition Plan <ul><li>Short-Term Goal </li></ul><ul><ul><li>Establish secure Web site for colleges to obtain information on plan participants and their benefits </li></ul></ul><ul><li>Long-Term Goals </li></ul><ul><ul><li>Establish online electronic annual survey document for tuition and fees </li></ul></ul><ul><ul><li>Establish electronic invoice submittal and tracking process for colleges </li></ul></ul>
  23. 23. Update on HB 2173 Survey Of the colleges that responded “Yes” to offering discounts to individuals in the Texas Tomorrow Funds, the majority noted increased enrollment as the primary reason.
  24. 24. Questions? <ul><li>Contact info: </li></ul><ul><li>Diane Schmidt </li></ul><ul><li>[email_address] </li></ul><ul><li>1-800-531-5441, Ext. 6-6188 </li></ul><ul><li>Cookie Wheeler </li></ul><ul><li>[email_address] </li></ul><ul><li>1-800-531-5441, Ext. 6-6642 </li></ul><ul><li>Alex Mendez </li></ul><ul><li>[email_address] </li></ul><ul><li>1-800-531-5441, Ext. 3-8370 </li></ul><ul><ul><li>Thank you! </li></ul></ul>

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