WITH only P10,000 as regular monthly income from her husband who works as a security guard, Julie Magwan, the mother of a BS Education student, stretches every centavo just to have the family eat three meals a day. The family budget never included college tuition because an educational plan Magwan had finished paying some 10 years ago “assured” her that it would send Shiela, her sole daughter, to college—or so she thought.

After enjoying a year of service from the College Assurance Plan (CAP), hassles sprouted one by one. When CAP did not renew its direct-to-school payment contract with UST in the academic year 2004-2005, the pre-need company required Magwan to pass an assessment of school fees for the first semester. Instead of providing a student admission slip, a document that makes a planholder eligible for enrolment, the pre-need firm issued a check payable to UST. The inconvenience ballooned into chaotic proportions in the second semester when, after undergoing the same process, CAP issued two worthless checks: one payable to the University and one payable to her daughter.

When UST rejected the check, Magwan joined hundreds of planholders queued in an Allied Bank branch in Makati to encash their checks. But like many others before her, the check issued to Magwan was dishonored due to insufficiency of funds. She felt her daughter’s dreams crumble.

The University extended aid to the CAP scholars by allowing them to enroll with a minimum downpayment of P5,000 and a promissory note. The P1,500 penalty for bouncing checks was also waived. Due to the unexpected expenditure, Magwan was forced to borrow money even at high interest rates. But borrowing money from lenders was better than not sending her daughter to school at all.

These difficulties were not part of the original deal. In 1995, Magwan bought a traditional educational plan, the type that guarantees the full payment of the scholar’s tuition, regardless of fee hikes come maturity. She was confident that she made the right investment because CAP was the country’s “largest pre-need company” and it pioneered the traditional educational plans in 1980.


With CAP’s promising offer, parents belonging to the middle and below middle classes purchased educational plans. In 2003, CAP was servicing 101,808 planholders, 3,500 in UST, or more than 10 per cent of the University’s total student population.

When the issue on CAP’s delayed payments to UST and its termination of direct payment agreements with its accredited schools surfaced on dailies starting August 2004, Magwan and most planholders started to frantically pay visits to CAP’s main office in Makati to follow up their claims and to get updates on the status of the pre-need company.

But after lining up for hours in CAP’s main office, Pharmacy student Samson Cuya Jr. was told that CAP would just give him a ring after two months. He had submitted the necessary documents to the CAP office that day. His family paid for his tuition because enrolment came before his check did.

Scholars now pay the tuition and miscellaneous fees with their own money first and later seek reimbursement from CAP, as claiming the checks for enrollment takes about a month. Last semester, some claims even lasted three to five months, some CAP scholars told the Varsitarian.

The causes of the mix up are internal; the operational losses, frozen investments in a losing real estate firm, the effect of the tuition deregulation law and the Asian financial crisis, and trust fund deficit that pushed CAP to its alleged bankruptcy.

Since 1999, there have been three oversight committees that recommended to the Securities and Exchange Commission (SEC) the suspension of CAP’s license to sell plans due to its financial problems.

In 2002, according to Newsbreak Magazine, there was even a group of actuarians (professionals specializing in computation of insurance premiums) who informed SEC that CAP was “bankrupt and has a negative net worth of around P15.4 billion.”

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In October 2003, CAP should have had a P25.6 billion trust fund kept in its seven trustee banks payable to all of its plan holders. However, the company only had P8.9 billion, the deficit at a whopping P17.7 billion. From 2001 to 2004, the trust fund had only yielded a total of 3.06 per cent interest, which could not cover even a relevant fraction of the deficit, the report said.

Speculations rose that CAP’s trust fund, which was allotted for the planholders, was depleted due to operational losses. Actuarial experts, however, said that the losses were due to the discrepancy between the total trust fund and the actuarial reserved liability (ARL). ARL is “the computed liability of the pre-need company to its planholders for a period of 30 years based on interest rates, inflation rates, and in the case of educational plans, tuition increase,” CAP’s President and CEO Enrique Sobrepeña said in his letter to the Committee on Banks and Financial Intermediaries of the House of Representatives. ARL aids the trustee banks of pre-need companies to channel investments to the proper firms in order to yield the computed value in the future.

The discrepancy was caused by more than a 300-per cent increase in school fees in just ten years (1990-2000), which was partly due to the implementation of the Tuition Deregulation Law in 1992 and the Asian Financial crisis that damaged the county’s economy in 1997, Newsbreak reported.

The trust fund deficit and low interest rates were aggravated by CAP’s problem in liquidating its real estate assets. According to the SEC, around 65 per cent of CAP’s trust fund, equivalent to P5.68 billion, managed by the Bank Of Commerce (BOC) were invested in Fil-Estate and MRT bonds, which are both losing businesses.

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Further, that pre-need companies must allow the trustee banks to manage the trust funds independently, but the Fil-Estate, where BOC invested the bulk of CAP’s fund, is also partly owned by the Sobrepeñas. Newsbreak also reported that CAP has invested in its other sister companies such as CAP Pension, CAP Technologies, CAP Management, etc.

These companies salvaged CAP in paying P2.18 billion worth of dues in August 2004 by contributing a fraction of their capital. Using the properties of Fil-Estate as collateral, Sobrepeña also took loans from the BOC and Veterans Bank, another trustee bank. Because of this, some planholders alleged that CAP meddled with the management of its trust fund.

Twenty of these planholders sued CAP in the Makati Regional Trial Court last April 27, asking the court to run after the CAP directors and freeze CAP’s assets where planholder money was invested, place them under a supervisory committee, and return the planholder’s assumed benefits in 300 per cent.

Pre-need plans promised a sure education, but it has been otherwise for Cuya.

“Kinakabahan kami lagi dahil baka hindi mabayaran ang tuition,” he said.

Some parents, in talks while waiting for their turn to be served in the CAP main office, wished they just deposited their money in their savings account where it could have earned some interest.

“Nagsisisi talaga ako dahil baka magsasara ang CAP,” a mother told the Varsitarian.

But Magwan, is keeping her faith, hoping the pre-need company will deliver on its assistance.

“Pinagdadasal ko na sana makabangon ang CAP,” she said.

But until CAP and other pre-need firms clear the issues and fix their troubles, Magwan and other planholders will have to work, sweat, and pay more for their children’s education¾something which ironically, they have already done years ago.


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