About 224,000 families in the popular Florida Prepaid College Program will receive refunds or rate reductions, officials announced Monday, with the refunds averaging $4,700 and totaling a half a billion dollars.
Refunds and rate reductions to offset the overpayments are worth $1.3 billion.
Officials explained that tuition rates and fees did not rise as much as was expected when the prepaid rates were set.
The program board found that its projected tuition rate proved to be too high and generated excess revenue that must be given back to families, said Florida Prepaid College Program Board Chairman John D. Rood.
The situation relates to a complicated equation involving actuaries and predictions of future college costs. This is only the second prepaid tuition rollback in the program’s 31-year history, according to officials.
The program allows families to pre-pay for college tuition in installments over a period of years.
Florida Prepaid College participants enrolled in 2008 or later will qualify for the refunds or rate reductions. The Prepaid College Board says more than 108,000 participants who have fully prepaid will receive refunds; another 116,000 still making payments will see the required payments reduced, and in some cases their obligations will be paid off early.
“Nearly half of the affected families will be eligible for refunds right now,” Gov. Ron DeSantis said at a press conference at Florida State College in Jacksonville.
Also, the program is reducing the base price of new prepaid tuition plans to $44 a month, which would cover only one year of college tuition. The payments would have to start when the child is a newborn. That rate was $47 before this change.
Rates are higher when buying multiple years of college and when enrolling a future student at an older age.
“Our goal has always been to empower and support Florida families by making college savings simple and affordable,” Rood said at the press conference. “The price reduction reflects our unwavering commitment to that objective.”
Florida is one of about a dozen states that offer prepaid college-tuition programs and one of just a few that guarantee no rate increase over the life of a contract.
Many more states offer 529 education savings plans that offer tax benefits but are subject to fluctuations in the market and are not tied to tuition rates.
For 2020, the lump-sum payment for a prepaid four-year university education is $28,000, if purchased when the future student is a newborn. Future rates for the same product may vary.
For two-year state colleges, often considered community colleges, the 2020 lump-sum rate is $8,300. Going to a community college and then transferring to a four-year college is what’s called the 2-plus-2 plan. That figure is $22,500.