By Jacob Abrahamson—
Kentucky families might be able rest a bit easier soon. A new bill has been proposed to reform and reinforce the Kentucky Affordable Prepaid Tuition (KAPT) program, allowing those who paid into the program to continue to benefit from the program.
House Bill 279 guarantees that the General Assembly will supply funds to be used for education to those enrolled in KAPT, which is estimated at around 5,600. The last KAPT contract holder is projected to graduate college in 2026, and this bill would close KAPT accounts in 2028.
The 5,600 enrolled in the program will be able to use their funds to pay for any educational expenses. However, anyone not currently enrolled in the program will have to use other means to save for college.
By passing this bill, the General Assembly will be able to save the general fund an estimated $20.1 million, while protecting KAPT account owners.
According to Rep. Mike Denham, this money will be saved by “closing loopholes that have created massive deficits.” These loopholes lie in the ability of account holders to gain refunds, which will continue to grow over time. The bill limits growth on accounts to three percent for two years after the projected graduation rate of the student, and to zero percent after that.
KAPT was introduced in 2000 to allow families to pay current tuition rates for future college education. The specific plans and payment levels vary depending on what school they plan on attending. The amount paid into KAPT was intended to grow at rates similar to tuition in order to cover the future tuition costs.
However, enrollment stopped in 2004 because tuition inflation outpaced the growth of the fund. According to the Kentucky Higher Education Assistance Authority (KHEAA), these funds will be depleted by the year 2020, obligating the General Assembly to pay $18 million from the general fund every year in order to support the fund.
Kentucky provides the Kentucky Education Savings Plan Trust, which allows families to invest in accounts that will change based on the market. According to the KHEAA, approximately 15,000 students are enrolled in the plan. Unlike KAPT, KHEAA does not guarantee full payment of future tuition rates.
More information on KESPT can be found at Kysaves.com.