PREPAID TUITION PROGRAM WEIGHED.

Byline: EDWIN GARCIA Sacramento Bureau

SACRAMENTO -- California lawmakers are considering creating a state-run savings program that would allow parents to prepay their children's college tuition at locked-in rates.

``I hope to see this bill as a step toward making college education more affordable for all Californians,'' said Assemblyman Jim Beall, D-San Jose, sponsor of the bill.

Undergraduate tuition and fees in the University of California system are expected to climb to $7,347 next school year under Gov. Arnold Schwarzenegger's proposed budget -- up nearly 400 percent from 20 years earlier.

California already has a savings program known as ScholarShare, similar to a 529 college savings plan that is based on tax-deductible contributions. But that program can be affected by economic downturns.

Beall's measure would guarantee students a financial benefit equivalent to the amount of tuition purchased. For example, if parents of a toddler purchased four full years' worth of tuition over the next 10 years, their child would be entitled to four years of tuition whenever he or she starts college -- regardless of the cost.

The measure assumes state government would fund any shortcomings, but also means that if the rate of return on the investment exceeds tuition increases the state would reap the benefit.

More than a dozen states operate similar plans and none has run into financial problems, said Chris Hunter, a program manager with the College Savings Plans Network, a national clearinghouse for college savings programs.

In Washington, nearly 70,000 such accounts have been opened worth $809.5 million, according to Beall. Families that bought four years' worth of Washington tuition -- 400 financial units -- in 1998 for $14,000 are now getting the equivalent of $23,552 in tuition.

Beall's measure, known as the California Prepaid Tuition Program, would allow financial units be purchased over time based on current tuition costs at the University of California, plus some administrative costs.

Each year's tuition would cost 100 financial units.

If students attend a school that charges less than a UC campus -- such as the California State University system, a community college or career and technical education school -- the student would be allowed to use the leftover money for college-related expenses such as books.

If students attend a school that charges more than a UC campus, the prepaid tuition could be transferred to the more expensive school and the difference paid by the student.

California's measure has received a warm response from some legislators and financial experts. A national expert on college savings plans said the program could be risky for the state's finances but provides a significant benefit to parents.

egarcia(at)mercurynews.com

[phone]