The Ohio Tuition Trust Authority has temporarily suspended sales of new enrollments in the Guaranteed Savings Fund. Contributions to the fund will be suspended beginning Jan. 1 and ending Dec. 31, 2004.
The fund is one of 18 investment options available through the Tuition Trust’s College Advantage program. The other 17 investment options will be unaffected.
“It is unfortunate that the board needed to take this action,” said Ohio Tuition Trust Executive Director Jaqueline Williams in a press release. “The Guaranteed Savings Fund has been a popular way for Ohioans to save for college.”
The Ohio Tuition Trust Authority was created in 1989 by the Ohio General Assembly to help families prepare financially for higher education. Contributors to the Guaranteed Savings Fund purchase tuition units which are redeemed at a value equal to 1 percent of the average tuition of Ohio’s 13 public universities. The unit is worth 1 percent of the average tuition cost even if the tuition is more expensive than the original purchase price. The state covers any differences.
While the fund is suspended, the Tuition Trust Board will review the decision to reopen the fund or continue the suspension.
According to the Ohio Tuition Trust Authority, the fund has 130,000 accounts.
Account owners have complete access to their account information. They can also make standard transactions such as withdrawals, reallocations or transfers, Williams said.
“We simply are not taking new enrollments at this time and we will not accept contributions from existing account owners after Dec. 31,” she said.
According to the Ohio Tuition Trust Authority, the fund, as of fiscal year 2003, had a market value deficit of more than $321 million.
“Annual tuition increases are projected at 10 percent for the foreseeable future,” said Judy Cunnigham, spokeswoman for the Ohio Tuition Trust Authority. “The problem is that the investment returns are projected to be only 7 percent annually.”
“The Tuition Trust desires to be fiscally responsible to the State of Ohio and not risk increasing the deficit of the fund at this time,” Cunningham said.
According to the Ohio Tuition Trust Authority, the state may have to appropriate funds in 2014 to cover the shortfall.
The suspension was made as a proactive measure to help protect the fund from future liabilities, Cunnigham said.
“There are a lot of middle income families quickly looking for alternatives to the Guaranteed Savings Fund,” said MorraLee Holzapfel, the spokeswoman for I Know I Can. “These families are now searching for new avenues to pay for college.”
I know I Can is a non-profit organization that “gives every qualified Columbus City School District graduate the chance to succeed by assuring them the opportunity to go to college.” The program was created in January 1998 by business and community leaders.
The suspension is an important problem, said Tally Hart, director of financial aid at OSU.
“Having a savings plan helps families financially,” Hart said. “But the more dramatic impact has to do with the psychological effects of a college savings plan. The child tends to take their education more seriously when the family has a college savings plan.”
“With the suspension of the fund, a major vehicle for college savings has been removed, maybe for good,” Hart said.