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New option in state's prepaid tuition sales

By Phillip Rawls
Associated Press Writer

MONTGOMERY — The annual enrollment period for Alabama's prepaid college tuition plan opens Oct. 1 with a new tuition option for parents and improved investment returns for the state.

The Prepaid Affordable College Tuition Plan, commonly called PACT, was started by the state in 1990 to provide four years of tuition and mandatory fees at a public university in Alabama or an equivalent amount at a private or out-of-state university.

The enrollment period for this year is Oct. 1 through Dec. 31. Parents, grandparents or others can make a lump sum payment ranging from $21,830 for a newborn to $23,388 for a ninth grader, which is the oldest age covered. Extended payment plans are also available.

Enrollment drops

With Alabama's plan and those offered by other states, enrollment has declined most years as the price increased. State Treasurer Kay Ivey, whose office administers the program, said that in an effort to make PACT more affordable, the state will offer contracts for one year of college tuition and fees.

The lump sum price ranges from $5,767 for a newborn to $6,167 for a ninth grader. Extended payment plans are also offered for one-year contracts.

The board that oversees PACT has hired an advertising agency, Blue Olive Consulting of Florence, to promote the program after 17 years of using the state treasurer's staff to do it.

Account strategist Jennifer Culotta told the board Wednesday that the official title of PACT is cumbersome, and advertising material will use a shorter, easier to understand slogan: "Prepaying a Child's Tuition."

The board plans to pay Blue Olive up to $224,000 over the next two years, with $108,500 of that to be paid to media for ads. The goal of the ad campaign is to increase sales 20 percent this year by targeting women 25 to 40 years old who watch early morning news shows on TV, Culotta said.

The state's PACT board invests the money from contracts and uses the earnings to pay for college when children in the program finish high school. As of June 30, it had $782 million in stocks, bonds and other investments covering 53,348 present and future college students.

A report from the board's investment consultant, Callahan Associates, shows that since the program's inception in 1990, college tuition rates have grown by an average of 7 percent a year, while earnings have averaged 10.24 percent a year. The median for similar public funds was 10.37 percent.

For the last five years, the earnings have averaged 9.80 percent per year, which is the below the 11.49 median for similar state and local investment funds. But for the last year, the return was 17.78 percent, which is above the 17.17 percent median for similar funds. And for the last year, PACT has earned 4.85 percent, which is higher than the 4.27 percent median, Callahan reported.

Bud Pellecchia, a senior vice president with Callahan, said returns for the last year have been very strong.

Alabama also offers the Higher Education 529 Fund, where the amount invested by parents for college education is flexible, but there is no guaranteed return. The return depends on how much the investments earn.

Unlike PACT, which is aimed at Alabamians, the 529 Fund is open to anyone. So far, it is covering 61,169 people across the country, with 8,598 of those living in Alabama. The program's accounts total $660 million, with $70 million of that covering Alabamians, according to the board that oversees the program.

Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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