Managing college tuition inflation using a surplus framework methodology

Authors

  • Judson W. Russell Vice President, Industry Research, Global Corporate & Investment Banking, Bank of America, NC1-005-11- 02, Charlotte, NC 28255, USA
  • Robert Brooks SouthTrust Professor of Financial Management, Department of Economics, Finance and Legal Studies, University of Alabama, 200 Alston Hall, Box 870224, Tuscaloosa, AL 35487, USA

DOI:

https://doi.org/10.1016/S1057-0810(99)00025-6

Keywords:

Portfolio Choice, Computational Techniques, Investment Policy

Abstract

This paper explores prepaid college tuition plans and develops a methodology for managing college tuition inflation. A surplus framework methodology is derived that employs various securities and incorporates both the assets and liabilities associated with prepaid college tuition plans. Although we present a methodology for plan management, the approach is applicable for individuals who manage their own college investment accounts. An interesting result of this analysis is that U.S. Treasury inflation-indexed securities should be included in the asset allocation decision for college tuition inflation management. By incorporating both the assets and liabilities from the plans into a surplus framework methodology, this paper provides a new portfolio management tool for plan administrators and individuals. Our assertion is that better managed plans offer more college financing alternatives for individuals. © 1999 Elsevier Science Inc. All rights reserved.

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Published

1998-12-30

How to Cite

Russell, J. W., & Brooks, R. (1998). Managing college tuition inflation using a surplus framework methodology. Financial Services Review, 7(4), 257–271. https://doi.org/10.1016/S1057-0810(99)00025-6

Issue

Vol. 7 No. 4 (1998): Financial Services Review

Section

New Original Submission

License

Copyright (c) 1998 JAI Press Inc.

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