CollegeInvest closing prepaid tuition fund

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DENVER — A state fund designed to help families better afford college tuition is shutting down later this year after it was found financially unsound.

The Colorado Prepaid Tuition Fund will shut down Nov. 1. According to College Invest, which runs the fund, a recent study found it had a negative cash flow and was “no longer financially viable.”

The fund works by allowing investors to pay for future college tuition costs at present-day rates. Usually states will guarantee a rate of return that rises as does tuition.

The Colorado fund became unsustainable because tuition in the state has been rising faster than the fund could keep up.

The fund currently has about $24 million invested — all of which is safe, said CollegeInvest spokeswoman Susan Hagar.

The tuition fund is different from CollegeInvest’s 529 college savings plan. This plan allows investors to contribute money to a fund (generally a mutual fund or a money market) that can then be used to pay for the cost of college at a later date.

“The CollegeInvest 529 fund is alive, strong and doing well,” Hagar said.

Notices were sent to about 1,500 homes on July 24 announcing the prepaid fund closure. Enrollees will get a 5.5 percent return on their investment in August. They will have until November 1 to move their money, Hagar said.

“We take the stewardship of our customers’ college savings very seriously, including those in this legacy program,” said Angela Baier, CollegeInvest’s CEO. “This decision was made with the contract holders’ best interest first and foremost, in keeping with our own high standards for customer care and current best practices for college savings.”

CollegeInvest is a non-profit division of the Colorado Department of Higher Education.

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