The Texas Tomorrow Fund, a guaranteed trust fund backed by the state, is facing the possibility of bankruptcy. The organization is cutting its payout on canceled contracts.
Many parents who signed up for the fund are expecting a payment they may not receive.
The fund, later named the Texas Guaranteed Tuition Plan, gave parents the opportunity to prepay tuition at locked-in rates. The payout could go toward tuition, books and on-campus living or, if the prospective college student died or received a full scholarship, parents could receive a payout based on the up-to-date costs of public universities.
In 2003, college tuition was deregulated in Texas and college costs increased greatly. The original payout promised to parents is now the equivalent of the return on a high interest money market account – low risk, high return. Many parents discontinued their Texas
Guaranteed Tuition Plan accounts when their children received scholarships.
Since the government insured the fund, parents felt safe and secure with the investment.
In the case of canceled contracts, parents were shocked when told that the state would reimburse only the amount parents originally put into the fund minus yearly administrative fees.
Tuition rates soared when lawmakers gave universities the power to set their own tuition and fees. State officials, in fear of the Texas Tomorrow Fund reaching ruin, suspended enrollment in the fund. They decided to cut their losses and violate the contract.
The Houston Chronicle reported Friday the state still has an obligation to pay the approximately 108,000 of the remaining active contracts over the next 15 to 20 years, in spite of a projected shortfall of $1.7 billion to $2.1 billion by 2030.
When two entities enter into a contract together, the agreement is supposed to be binding.
If one entity breaches their side of the contract, the other one can sue them. Can an individual sue the government? The parents who were deceived, lost money from this endeavor can do absolutely nothing about the situation.
The lesson here is that the government cannot always be trusted. If it seems too good to be true, it just might be.
President Ronald Reagan once said, ‘The nine most terrifying words in the English language are, ‘I’m from the government, and I’m here to help.”
Matthew Keever is a communication junior and may be reached at [email protected]
