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House Bill 3900 |
House Author: Morrison et al. |
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Effective: 6-15-07 |
Senate Sponsor: Shapiro et al. |
House Bill 3900 amends the Education Code to create the Texas Tomorrow Fund II prepaid tuition unit undergraduate education program under which a person may prepay all or part of a beneficiary's college tuition and mandatory fees by purchasing from the Prepaid Higher Education Tuition Board tuition units that the beneficiary may apply to the payment of undergraduate tuition and fees at a particular institution. The bill establishes three types of units, each equal in value to one percent of the total needed, at the time the unit is redeemed, to cover one academic year's worth of undergraduate resident tuition and required fees at a particular type of institution--either a public junior college or technical institute; a public, private, or independent college or university; or an accredited out-of-state college or university--with the purchaser entitled to purchase units all of one type or a combination of two or three types.
The bill requires the board each year to set the price of each type of tuition unit available for purchase during the next sales period and the percentage of the total cost of undergraduate resident tuition and required fees for one academic year for which each type may be redeemed at each four-year and two-year institution. To help purchasers determine the number of units a beneficiary will need, the bill requires the board each year to prepare a tuition unit redemption chart and post the chart on the Internet. The chart must show for each four-year and for each two-year institution the number of each type of unit purchased that year that would be required to cover the cost of tuition and required fees, based on an academic year consisting of 30 semester credit hours. A prepaid tuition contract may provide for the purchase of additional tuition units in later years at the then-current price of the additional units.
The board may provide for prepaid tuition contract payments in lump sums or installment payments, and if the board allows an installment payment period of more than one year, it must allow payments to be made in single annual installments in addition to any other installment plan options. A purchaser may make payments by electronic funds transfers or, if the purchaser is a public employee, by payroll deductions. The bill provides for the setting of an upper and lower limit on the total amount paid under a prepaid tuition contract on behalf of a single beneficiary in accordance with certain limits set by Section 529, Internal Revenue Code of 1986, and requires a provision for a purchaser to transfer money between a prepaid tuition unit account and an account under another plan established by this state, another state, or other authorized entity in accordance with those federal Internal Revenue Code provisions.
If a beneficiary redeems fewer tuition units than are needed to pay the total cost of the beneficiary's tuition and required fees where the beneficiary enrolls, the beneficiary is responsible for paying the difference between the amount the beneficiary pays by redeeming tuition units and the total cost of the beneficiary's tuition and required fees at the institution. If the beneficiary redeems fewer tuition units than the number of units purchased on the beneficiary's behalf, the purchaser may redeem for cash the amount of the purchase price of the excess units, plus annual interest earned on that money accrued at a rate of up to five percent annually, or transfer the remaining units to another beneficiary.
A beneficiary or purchaser may not redeem a tuition unit before the third anniversary of the date it was purchased, and the prepaid tuition contract terminates on the 10th anniversary of the beneficiary's projected high school graduation date, not counting time spent by the beneficiary as an active duty member of the United States armed services.
The bill establishes the Texas Tomorrow Fund II prepaid tuition unit undergraduate education program fund as a trust fund outside of the state treasury, designates the comptroller as custodian of its assets, requires the board to provide for administering and investing the fund's assets and establishing and administering the accounts of purchasers under prepaid tuition contracts, and restricts use of the fund's assets to payment of the program's administrative and operations costs; payments to institutions of higher education on behalf of beneficiaries; and providing refunds under prepaid tuition contracts.