The board of the Alabama Prepaid Affordable College Tuition (PACT) Program has approved a 7-percent increase in the rates its contract holders receive to cover tuition and other fees.
State TreasurerJohn McMillan announced the most recent increase, which will be effective beginning in the fall semester of 2019, in a press release Wednesday afternoon.
“We are able to protect and enhance account holder’s investments thanks to the support the legislature has provided and through sound financial management of the fund,” McMillan said. “We are proud to be able to provide the fifth increase in payments to account holders.”
For 29 years, more than 76,251 families in Alabama bought PACT contracts, which allowed them to pay at their own pace toward credits for their children’s college tuition and other expenses. By paying years in advance, families were hoping to avoid tuition hikes in the future.
However, only a decade ago, the PACT program came close to collapsing entirely after steep losses in the stock market and a steady stream of tuition increases left the program with hundreds of millions of dollars less than it was obligated to pay out to contract holders.
With the help of legislative subsidies from the Education Trust Fund, the program was stabilized. As it stands today, the PACT program has the funding needed to pay out the benefits it owes to its remaining contract holders, though it stopped selling new contracts in 2008.
The PACT Program currently has 14,839 active contracts.
As part of a settlement agreement in a class action lawsuit filed by PACT contract holders years ago, that board agreed to lock the rates it would pay for tuition and qualified fees at the level they were in 2010. Contract holders have been left to make up the difference since then.
However, as the program’s financial outlook has improved, the PACT board has been able to add to the value of those benefits through rate increases.
Including the most recent hike announced Wednesday, the PACT board has been able to increase the rate of its benefit payments to contract holders five times in the past five years at rates of 3 percent, 6 percent, 8 percent, 7 percent, and 7 percent, respectively.
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