Updated: May 3, 2013 12:14PM
Originally published: August 7, 2001
This is your last chance to get in on a 37 percent off sale--on college tuition!
It’s an opportunity you certainly don’t want to miss. But you’ll have to open an account with CollegeIllinois before Feb. 28 to lock in the current tuition rates at the University of Illinois, which recently announced a 37 percent tuition increase over two years.
CollegeIllinois is the state’s pre-paid tuition plan. If you make a deposit now and add regular monthly amounts to your account, you are guaranteed to have fully paid tuition at a public university or community college in this state when your child is ready for college. No matter how much rates rise between now and then, if you keep making your regular monthly deposits, you’ve locked in today’s tuition rates for the future.
After a year in which many parents saw their kids’ college funds melt down in the Nasdaq wipe-out, the idea of a guaranteed plan is regaining some luster, said Randy Ereford, director of CollegeIllinois. Since the program began in 1998, more than 15,500 accounts have been opened--representing more than 55,000 years of college in the process of being prepaid.
Already this year, more than 13,000 applications have been downloaded from the CollegeIllinois Web site (www.collegeillinois.com), picked up at local public libraries or requested from people calling the toll-free number: (877) 877-3724.
How it works
Parents (or grandparents, friends or relatives) can open an account, naming a child as a beneficiary. Either the purchaser or the beneficiary must be an Illinois resident for at least 12 months.
When you open the account, you decide how many semesters of tuition you want to lock in. Then, the monthly payments are determined by the current age of the child and the number of semesters you’ve contracted--ranging from one to a maximum of nine semesters. If you choose to lock in tuition for a community college, the monthly cost is lower.
For example, if you have a child currently in first- through eighth-grade, and want to sign up for one semester of tuition at a public university, it would cost you a lump sum deposit of $2,395--or you could make monthly payments of $51 for the next five years.
If you wanted to lock in guaranteed tuition for eight semesters for that child, you’d have to make either an immediate deposit of $18,596--or make monthly payments of $378 for five years. You can even stretch out the payments on this contract for 10 years, paying $227 per month.
Monthly payments can be even lower if you can afford a down payment of $2,000 or more. And you can arrange to have the monthly payment automatically debited from your account.
Before the tuition increases are factored into payments for next year’s contracts. You can find the exact monthly costs--based on age, and number of semesters contracted--on the CollegeIllinois Web site, or in the application booklet.
What you should know
CollegeIllinois plans cover only tuition and mandatory fees, not room and board. So unless the student lives at home, you’ll need some additional savings to cover those expenses.
The tuition benefits are free from state income taxes, and federal taxes are paid at the student’s low rate when the benefits are used.
These benefits are not counted against you if the student applies for Illinois student financial aid or scholarship grants.
Benefits can be used at out-of-state schools, but are unlikely to provide enough coverage to pay for tuition there.
Benefits can be transferred to another child or any other family member, if not used by the original beneficiary.
If you’re interested, don’t procrastinate. Get an application now, so you’ll have time to fill it out and return it by Feb. 28. The application fee is $75, but you don’t have to make the first monthly contract payment until May. The toll-free number is (877) 877-3724. This is one investment that’s guaranteed to pay dividends for a lifetime.
And that’s the Savage Truth!
Terry Savage is a registered investment adviser for stocks and commodities and is on the board of directors of McDonald’s Corp. and Pennzoil-Quaker State Co. Send questions via e-mail at firstname.lastname@example.org. Her third book, The Savage Truth on Money, recently was published by John Wiley & Sons Inc.