A review found that the University of Virginia’s savings program $1 billion surplusLawmakers are proposing to use the money for scholarships for low-income students.
“I think this is a unique opportunity for us to spend those dollars forever.” Senate Bill 1461“As soon as I saw that I had a surplus of that size, I wanted to stop using it.”
Slovell’s bill would create the University of Virginia Opportunity Fund and Endowment to distribute hundreds of scholarships annually to eligible Pell Grant Virginia students attending any of 12 public universities.
He estimates that he can award at least $2,200 in $25,000 scholarships annually from surplus funds.
Universities designated under the law are schools with lower endowments than prominent institutions such as the University of Virginia and Virginia Tech. Slovel said the fund will allow other universities to “find Pell-qualified students more efficiently than they currently do.”
University of Virginia Savings Program
In July 2021, the state’s oversight agency, the Virginia Joint Legislative Audit and Review Board, determined that, following an actuarial review, the state’s Legacy Prepaid529 program, a college savings plan that suspended participant enrollment in 2019, $1 billion or more in surplus revenue.
Lawmakers then directed committee staff to investigate whether some of that money could be reinvested in financial aid or other higher education goals. Last year, the Senate Education and Health Committee also found, as part of a study, 2021 bill from Surovell I would have used the surplus money for scholarships from the “University of Virginia Stock Fund.” The bill failed to move forward because JLARC and Virginia 529, the administrator of the state’s tax-advantaged savings plan, were still scrutinizing the legality of the transfer at that time.
In November of this year, a JLARC report found that $1.3 billion can be safely withdrawn over at least five years from the comprehensive college savings fund, known as the Defined Benefit 529 Fund, and used to support education.
One factor in the surplus was administrative expenses, which increased to approximately $631 million.
The researchers also found that moderate growth in tuition and compulsory education costs at public four-year institutions has increased the surplus.
“If the surplus funds are not withdrawn and used for other higher education purposes, they will simply remain funds collecting investment returns, the surplus will continue to grow, and Virginia will lose the opportunity to use the funds for other beneficial purposes. Let’s go,” said Jamie Bitts, a legislative analyst at JLARC.
Bitts said some of these uses include improving access and affordability for students with significant financial needs, or reimbursement efforts for traditional prepaid 529 holders who contributed to the surplus. There is a possibility.
Kimberly Sarte, associate director of JLARC, said if certain factors, such as market returns, do not match expectations, “the large surplus could still grow again.”
Less deductions from surpluses could also lead to continued growth for the fund, Bitts said.
law
Slovell’s bill would allow the surplus to be used for programs that send scholarships to students who attend or plan to attend any of 12 eligible universities, including Christopher Newport, George Mason, James Madison and Longwood. Other eligible schools are Norfolk State University, Old Dominion University, Radford University, Virginia Commonwealth University, Virginia Military Institute, Virginia State University, Mary Washington University, and Wise College of the University of Virginia.
Students must be eligible for a Pell Grant and be committed to working or attending a graduate education in Virginia for at least eight years after graduation.
As part of the bill, the University of Virginia Savings and Planning Commission would deposit $250 million in surplus funds annually into the University of Virginia Opportunity Fund to pay for scholarships.
An independent advisory board may reduce annual deposits if certain conditions related to savings plan status are not met.
The five-member Commission consists of the governor’s appointee, the investment director of the Virginia College Savings Program, the state treasurer, and the staff directors of the House and Senate Funds Committees.
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