Important Changes with the Texas Tomorrow Fund May Cost You Money

October 30, 2009

State Representative Phil King

I wanted to bring something important to your attention that may potentially save your family thousands of dollars for your children’s education.

Nine years ago my father bought each of his grandchildren a Texas Tomorrow Fund grant. Since it’s beginning in 1995 as the Texas Tomorrow Fund, the Texas Guaranteed Tuition Plan has been an important educational resource for many Texans, including my family. On August 24, 2009, I received a letter, as did the thousands of other families regarding the Texas Prepaid Higher Education Tuition Board’s decision to change the refund rule for unused tuition hours when a contract with the fund is canceled or a refund is requested.

The board’s decision has triggered two possible options for all plan purchasers in Texas:

1) Keep the contract in the Texas Tomorrow Fund, and plan benefits may be used 10 years after high school, and unused credit hours to apply to a graduate or professional degree if used within the 10-year period.

2) Determine the value of your current contract and decide whether or not to cancel it before the cancellation deadline under the current refund rule. This ultimately means that if you cancel your contract before the November 30, 2009 deadline, you will be able to withdraw the funds with the interest accrued. There are federal income tax implications for the refund payments with earnings and a tax advisor should be consulted. There is also the possibility to roll the funds over into a private 529 account.

The Texas Tomorrow Fund is still constitutionally guaranteed and payment of the tuition and required fees is not subject to change under any decision. A constitutional amendment was passed in 1997 to ensure the fund is fully funded and protected.

Let me encourage you to take the time to run the numbers if you have invested in the Texas Tomorrow Fund. Every situation is different, and it is key as to whether your students will end up attending a state or private university.

Specific questions about your individual situation can be addressed by visiting the Texas Guaranteed Tuition Plan Web site at or by calling their support line at (800) 445-4723.