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(DAILY_WILDCAT)

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By U-Wire
Arizona Daily Wildcat
September 24, 1997

Illinois plan helps parents save for college

(U-WIRE) EVANSTON, Ill. - Starting next fall, Illinois residents can start paying college tuition 10 years in advance at today's prices.

In August Gov. Jim Edgar approved a pre-pay college fee plan that will allow students and their families to invest money into the Illinois Student Assistance Commission, a state education agency that will use the collected interest to pay for the cost of tuition at any public or private university in the nation.

"Illinois families can buy a contract that would lock in tuition and mandatory fees at today's prices," said Don Price, a developer of the pre-pay plan.

The invested money will collect interest during the 10 years before a student enters college. When a student is ready to attend a college, ISAC will pay the earned amount directly to the college. A family's earnings each year will surpass inflation and tuition increases, Price said.

The principal amount is tax-exempt from state income tax, and earnings are taxed federally at the student income tax rate once they are used to pay for tuition, but not while they are growing, Price said.

The plan is designed to help families pay for college, Price said. They can either choose to pay in one lump sum or in an installment plan over nine to 10 years. And payments can be made for the full cost of tuition or just for a semester at a time, he said.

The payments are based on the mean weighted average of current tuition at public universities within Illinois. No matter where students choose to go to school, they will collect the same dollar amount to use for tuition, based on the initial investment.

ISAC guarantees the investment will fully cover tuition at Illinois public universities and community colleges, Price said. But at out-of-state schools and private universities, the family will have to pay any difference between the funds and the tuition.

"You only lose the guarantee that it would be paid in full," Price said.

But losing the guarantee that private schools will be fully paid brings questions from Northwestern administrators.

"Where's the promise of keeping moderate growth (of tuition)?" asked NU Associate Provost Rebecca Dixon.

Dixon said she was wary of the plan because the state could not guarantee that colleges wouldn't raise tuition costs over the rate of inflation, like the 17 percent tuition increase NU officials announced this summer for the 1998-99 school year. The state needs to make it clear that the money may not cover all of the tuition at a place like Northwestern, she said.

Despite being critical of the plan, Dixon said she recognizes its importance in helping to pay the cost of college.

"They're simply trying to help people save," she said. "It's a good strategy to say, 'It's important to save and we're going to help you do it.'"

A student who uses the pre-pay college plan must wait three years after the purchase of the contract to enroll. This is to ensure that the funds are financially sound, Price said.

And the contract must have an Illinois connection, he said. Either the owner of the contract or the student whom it is for must be an Illinois resident.

Price said he doesn't think the pre-pay tuition plan would have any effect on tuition prices at colleges and universities, but it may affect scholarships and grants that are not part of the state's need-based money award program.

If a student chooses not to attend college, the money is refunded with interest, Price said. It can be used at the discretion of the contract-holder and is taxable.

Illinois is not the first state to try such a program.

"Thirteen states have experience with it," Price said. "I just think it's a

great program."

The plan will go into effect next year, pending approval of start-up funds by the state Legislature. But Price is optimistic that they will receive the go-ahead, after both houses of the Legislature approved the plan unanimously.

The first contracts will be available in the fall of 1998 for students enrolling in 2001.


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