Sunday, September 5, 2004

Prepaid tuition plan resumes enrollment

By William Croyle
Enquirer contributor

When Jonathan Miller ran for state treasurer in 1999, the focus of his campaign was to start a prepaid tuition program in Kentucky. He won that election and, in September 2001, Kentucky's Affordable Prepaid Tuition program began.

While more than 7,000 kids enrolled in the first two years, enrollment was suspended in 2003 so an independent agency could study the program's financial health. After determining this summer that it's actually running a surplus, enrollment is now open again through Dec. 13.

Miller, who won re-election in 2003, spoke with the Enquirer Thursday about the program. Here's a summary of Miller's remarks.

Q: How does KAPT work?

It pays for tomorrow's tuition at tomorrow's prices today, and it's all tax-free.

Those who enroll can choose from one of three plans and pay in one lump sum or make monthly payments.

The plans include colleges in the Kentucky Community and Technical College System, the state's public universities and the state's private colleges and universities.

Once you sign up, you have a contractual agreement with the state, and that is guaranteed by the constitution.

Q: Give an example of how it works.

Let's say you have an 8-year-old girl today and you choose the Standard Plan.

You would pay the tuition at the most expensive public university today and that would guarantee the price of in-state tuition when she goes to college. So let's say it costs $10,000 a year to go to the University of Kentucky today and $20,000 a year when she goes to college. You'd pay $10,000 today and get $20,000 when she starts college. You've not only made $10,000 but there are no taxes.

And if there is any money left over (if the child chooses a less expensive in-state public school), the difference can be used for other expenses like room and board.

Q: Can the money be used for an out-of-state school?

Yes. We realize that when your child is 1 or 2, you don't know where that child will go to school. We can only guarantee the cost of in-state tuition, but you can use the money for an out-of-state school and you pay the difference if there is any.

Q. In 2003 you suspended enrollment in the program. Why?

In early 2003, the legislature saw other states, like Ohio, that were having financial problems with their programs. We already had 7,000 kids enrolled in ours and they were fine, but we thought we'd better take a look at our finances and make sure we were OK for the future. An independent study showed that we were not only OK, but we were actually running a $14 million surplus. And if our investments don't keep up with tuition prices, we have the state's Unclaimed Property Fund to back us, which is valued today at $80 million.

Q: Why should someone invest in this rather than a mutual fund?

There are two things that make this great for families to invest in: one is the guarantee. No matter what the stock market does, your money is guaranteed. The other is the tax break you get.

To learn more, visit or call (888) 919-KAPT.


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