The Report Card - evaluating states' tuition plans

Kiplinger's Personal Finance Magazine, Feb, 1999

MAINE no grade

$ College Savings Program Will open in first quarter of 1999 (phone not yet available)

Type: savings

Maine's forthcoming plan has "A" potential. The state intends to offer two savings options: one with low-risk investments and a guaranteed rate of return, and a second using stock investments. Earnings will be free from state tax.

MARYLAND C-

Prepaid College Trust 888-463-4723

Enrollment: February to June; ninth grade or younger

Type: prepaid (contract)

If you use the plan at a private or out-of-state school, you lose $10 to $25 per semester to administrative fees. You forfeit at least half your earnings if the money isn't used for college at all. Maryland does not provide a guarantee.

MASSACHUSETTS C

$ U. Plan 800:449-6332

Enrollment: April through May, tenth grade or younger

Type: prepaid (credits)

The U.Plan can be used only at 83 public and private institutions in Massachusetts, including such prestigious names as Amherst and Wellesley (but not Harvard or MIT). if you use the money elsewhere or don't use it for college at all, you get contributions plus interest at the rate of inflation.

Because the credits you buy are really municipal bonds backed by the state, your earnings are not only free from state tax but may also be exempt from federal tax (although the IRS has not ruled on the matter).

In the first quarter of 1999, Massachusetts will also begin offering a savings plan, which will resemble the plans in Delaware and New Hampshire.

MICHIGAN C-

Education Trust 800-638-4543

Enrollment: December through January; eighth grade or younger

Type: prepaid (contract)

When it was launched in 1988, Michigan's prepaid-tuition plan was a pioneer. But newer plans have passed it by. Although the full value of a contract can be used at a public or private school in Michigan, you take a cut if you use the money out of state. Contributions are state-tax-deductible, but Michigan does not back its plan with a guarantee.

MISSISSIPPI C

Prepaid Affordable College Tuition Program 800-987-4450

Enrollment: September through November, under age 18 (newborns anytime)

Type: prepaid (contract)

Tuition and fees at a Mississippi public college are guaranteed. The full value can be transferred to a private or out-of-state school. Contributions are state-tax-deductible and earnings are state-tax-free.

MONTANA B

Family Education Savings Program 800-888-2723

Enrollment: anytime

Type: savings

Contributions are invested in the College Savings Bank's CollegeSure CDs, which pay a rate equal to the increase in a national index of college costs (and guarantees a minimum of 4%). You can contribute up to $176,440, and Montana residents can deduct contributions of up to $3,000 per year. The plan makes sense mainly for college funds you'll need to tap in the next few years.

NEVADA C

Prepaid Tuition Program 888-477-2667

Enrollment: October to November, ninth grade or younger (newborns anytime)

Type: prepaid (contract)

The full value of a contract can transfer to a private or out-of-state school, minus a $25-per-term fee. Refunds are paid with interest at a rate set annually by the state, minus administrative fees.