Background: PACT stands for Prepaid Affordable College Tuition. This program — until last week believed to be supported by the State of Alabama and certainly marketed as if — provides the opportunity to pay by installment or purchase outright a contract that will cover tuition and mandatory fees at an instate college or university [the same amount on average of these costs at Alabama state schools can be used at a private or other state institution] for a child who has not yet completed 9th grade. The idea is that the fund will invest the money over the years before the child enrolls in college in such a way that the money paid will meet future college costs. In the past year and a half, the fund has lost 46% of its value, and now it is beginning to look like the program will implode.
My first posting on this is a letter I’ve sent to The Huntsville Times:
Hi,
Are you going to the PACT meeting in Montgomery tomorrow?
If so, this is the best advice I can give you, and I do have a little political experience.
http://www.leftinalabama.com/showDiary.do?diaryId=3555
Tomorrow is our one chance to get enough contacts together to make an organized attempt to deal with this. Sorry for the short notice. We’ve been trying to get ahead of this thing since the story broke.
I view this as a non-partisan issue. About right and wrong.
I’ll share some more stuff on this that I’ve found when I have time. I’ve found a site where a guy has scanned in a lot of his program documentation, and I think it will prove quite a bit of what you are saying.
If you’re going, or know anyone who is, I urge you to consider my advice and pass it along to anyone who might make use of it. Three or four contacts is better than none, but the more the better.
Will be checking back here, and linking to your story when I have a bit more time.
all the best
Here’s the other site I referred to.
http://www.ahssca.com/pact.htm
Here’s most of what we’ve written on this up to this point.
http://www.leftinalabama.com/tag.do?tag=PACT
Here’s where I am trying to get a wider audience interested in this
http://www.correntewire.com/pseudo_democracy_alabama
Sorry I didn’t find you sooner.
Thanks. Unfortunately, tomorrow my son is having his tonsils out. I’ve just returned from collecting him in Tuscaloosa.
I’ve been doing some research into Callan Associates and State Street Global Advisors which I will post as soon as I can.
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Havealittletalk,
Thanks for the excellent blog. My two PACT contracts were paid in full in 1991 and 1993, when my wife and I lived in a 30-year-old, $50,000 house, and drove 10-year-old cars. The point: we were cautious with our money and trusted the information published and distibuted by the State of Alabama and established through our legislature. At that time, PACT publications stated that it was a guaranteed PRE-PAYMENT of tuition. It was not sold as an means to recieve a finacial gain. As a last resort, a temporary state lottery should be considered to pay for the obligations of the PACT Progam. Will
It seems that authorities everywhere can change the rules on whatever they like.
I took out a student loan in Sweden in 1974. One guarantee was that the most the debt could increase was 3.2%. It soon went up to more than that. Another guarantee was that should you end up with an annual income below a certain amount (according to a standard formula), then you’d be exempt from paying it back. Except, of course, for people who live outside Sweden, who should always pay their debt, regardless of income. I was even informed that for the purposes of paying my student debt, 65% of my husband’s income counted as mine! Then they discovered this wasn’t very equal, so removed the stupid rule again.
They also require proof of earnings, or lack thereof, according to Swedish standards, which the UK tax people are a little taken aback by. But Swedes are more right than others…
“”"As it happens, Mr. Prather, my husband and I are voluntary minimalists. Our monthly mortgage payment is less than one-sixth of our income, our newest car is a 2002 Toyota Echo, and we have exactly one charge card, the balance of which we pay in full monthly. I resent being lumped in the same category as those who have been living way, way beyond their means and now expect to be bailed out.”"”
Perhaps the media depiction of all these folks “living way, way beyond their means” is as accurate as the article that compared folks like you to them.
Just a thought.
Meanwhile if the PACT fund has lost all this money, that fund will need a “bailout” to meet the “entitlement spending” people like you are depending on.
Weird how infuriating the phrases the media tends to use are when applied to your circumstances, isn’t it?
The word “Alabama” should have told you everything you needed to know. As soon as you saw that, you should have run like hell. What on earth made you think they would honor this contract? All you have to do is ask yourself, “What kind of economic system does Alabama feel is worth fighting for?” and the answer is clear. Sorry you ended up at the wrong drinking-fountain.
I am so sorry this has happened to you. Still, even in this post the feeling of judgement you have against others, based on the same sort of reporting that so disturbs you, makes clear that you hold certain prejudices. Why isn’t it possible that the people who were “living above their means” mostly don’t exist. Maybe most the people getting home loans were trying as hard as they could – just like you – and something bad happened. Maybe it was loss of a job. It seems as fair to me to say you are in this mess because you trusted Alabama – point state in stupid race and class-based politics – to do the right thing. That seems as silly as anybody getting a mortgage they can’t afford if one partner loses a job.
This is a class action suit waiting to happen. Good luck!
To DN & Kevin Lyda:
Your criticism is valid.
Instead of “who have been living way, way beyond their means and now expect to be bailed out” I should have qualified the statement: “who knowingly have been living way, way beyond their means and now expect to be bailed out” thus limiting it to that set of homeowners – which may well be a tiny, tiny group — who accepted an ARM for much more house than they needed, knowing fully well that they had no savings.
Most may fall into other categories: a set that ran the figures themselves, weighed the risks, consulted the pundits, and, having no reason not to assume that their jobs were secure, went for it; another set would be those who accepted at face value their banker’s assurances without fully understanding the risks. I’m sure there are other categories. I have sympathy for, and no objections to aid for these second two groups.
I’m open to arguments for why I should feel the same toward the first, the gamblers.
My point remains the same, however. Again, this is Prather’s statement: “And that makes it comparable to the mortgage banker who didn’t tell you that your income didn’t make buying that house on a variable interest rate a really sound business decision on your part.” Purchasing a contract that guarantees your kid’s tuition and fees will be paid through sound investments made over the course of 18 years by instrumentalities of a State treasury is not comparable to being hoodwinked by a mortgage banker’s assurance that buying “that house” is “a really sound business decision.”
To Mooser:
Point well taken.
Thank you for putting this out here.
I’m a college student depending on PACT and student loans. I would not have even known, thankfully my dad linked this in an e-mail.
I’m very worried but will keep an eye on this situation- Thanks again for bringing this to my attention.
jvoice,
You are most welcome! It is encouraging to me to hear from people like you.
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Havealittletalk,
I am indeed a novice at responding to blogs, so please grant me a little leeway. Your story seems to mirror my own experiences and I fully agree with your statements and opinions. In fact, you quoted from one of my “favorite” passages from the PACT program State enabling legislation, 16-33C-6(b), but you didn’t quote all of what I believe is the most essential wording of this legislation. Please allow me to share this passage with you and the readers.
“A PACT contract and any other contract
entered into by or on behalf of the trust, does not constitute a debt or obligation of the
state, and no participant is entitled to any benefits except those for which he or she
contracted.”
I refer to this section as my “favorite” because it clearly states that “no participant is entitled to any benefits except those for which he or she
contracted” and I, as well as thousands of others, by purchasing a “PACT Contract”, are “entitled” to receive what we “contracted” for which is 135 Credit hours of tuition at a state supported university or college.
I am not an advocate of pursuing legal action as the main remedy to this situation. Hopefully, a more viable solution will be forthcoming on this issue. But it does seem that the continuous and almost constant use of the term “contract”, both in the enabling legislation and within almost every correspondence and mention of this program would indicate that everyone, even the media, is aware that the PACT program is a “contract”.
My sincere hope is that the State Treasurer’s office devotes a great deal of time on the “contract” aspect of the PACT program, especially in regard the legal definition of a “contract”. I am not an attorney but in my very humble opinion, the wording of the enabling legislation appears to imply that the State is a party in this “contract” especially since the State Treasurer’s office is a constitutional office of the State.
My family was one of the original participants in the PACT program having received our first contract in 1990. We also purchased another contract in 1996 which hopefully will be used by my daughter beginning in 2010.
Thanks again for your “blog”. Good luck to all of us!
Phil,
Indeed! The passage you quoted is very revealing: “no participant is entitled to any benefits except those for which he or she contracted,” for it says explicitly that the participant has “contracted.”
Our purchase years were also 1990 and ’96, for children born in ’89 and ’95.
Thanks for your comment.
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