Educational plan victims still feel the sting

Metro Manila (CNN Philippines) — A decade has passed since the pre-need industry in the Philippines crashed—taking with it the dreams and hopes of many parents who only wished for a good education for their children. These parents are still reeling from reeling of losing their hard-earned money, all invested in pre-need educational plans that failed to fulfill their promise.

As another school year begins, it's not just parents who have to find ways to pay for ever-increasing college tuition fees.

In many families, young professionals are stepping up as breadwinners and sending their younger siblings to university.

Kaye Guzon, 27, supports her younger brother's schooling. Her parents took out an educational plan for her brother as early as the 1990s. They retired later on, confident they had put aside enough money for his college years.

He is now midway through college, but the Guzons still haven't received a single check from the College Assurance Plan (CAP).

Ann Marie Cunanan, now 32, was just a fresh graduate when she became the breadwinner of her family. Her parents also bought a CAP educational plan for her younger sister.

It was supposed to be the family's Plan B, she said. Her father was a jeepney driver and her mother, a sari-sari store owner. They knew they didn't make enough to pay for college tuition fees in one go. So, they shored up their savings over the years and placed the money in an educational plan.

When CAP crumbled, it took their money along with it.

"The most logical thing for me to do was to help my parents and send my sister to school. We really had no choice," Cunanan said.

She reckoned she paid about P60, 000 a semester for four years until her sister graduated.

For Guzon, costs can go even higher.

"Tuition is one thing. But then there are books, the allowance, and the ingredients. My brother is taking up Hotel and Restaurant Management and they need to buy ingredients every week for projects. It probably costs me about P90, 000 a semester," she explained.

It's a sizeable amount for anyone – but even more so for those who are young and starting out in their career.

Guzon admitted, "Sometimes when I'm working, when I'm trying to look for work, a sense of panic kicks in. I have to make ends meet."

Fight for claims

Educational plans rose to prominence in the 1980s. CAP was the pioneer in the field but soon, nearly a hundred other pre-need companies followed.

Their  proposition? Parents make small, periodic payments to the company over the years and when the time comes that their children enter college, the company will pay for their tuition — no matter how much it costs in the future.

The model worked in the 1980s, when tuition fees were regulated and the Philippine economy was booming. Companies could invest the money entrusted to them and easily grow it to cover tuition fees, even if they increased.

But the government stopped capping tuition fee hikes in 1992. Five years later, the Asian Financial Crisis hit and markets took a nosedive.

It wasn’t just economic forces that caused the turmoil. The Sobrepeña-led CAP, in particular, came under intense scrutiny for its investment decisions.

It invested heavily in real estate — well above the amount allowed by regulators. This tied up bulk of its money in illiquid assets. Even more questionable was the fact that many of the properties CAP invested in were businesses owned by its board members like Nasugbu Properties and Camp John Hay Development.

The industry’s then-regulator, the Securities and Exchange Commission, was also heavily criticised for its oversight. Regulation has since been transferred to the Insurance Commission (IC), and a Pre-Need Code was passed in 2008.

Nearly a million Filipinos were affected by the downfall of the pre-need industry, especially when it came to educational plans. CAP alone had about 800,000 planholders. The Legacy Group had some 50,000 planholders, while the Yuchengco-owned Pacific Plans had more than 30,000.

John Apatan, chief of the Insurance Commission’s Conservatorship, Receivership and Liquidation division, urged planholders to try and get their money back. He said there were still ways to file claims, even if the pre-need company had already stopped operations.