Proposals aid savings for tuition

By Pam Schmidt

Proposals from the Missouri State Legislature and Columbia University in New York will be introduced Wednesday at a Senate-mandated task force meeting for pre-paid college tuition.

The proposals differ from the plans currently introduced in the Illinois State Legislature because they do not guarantee tuition to be paid in full.

Richard Anderson, from Columbia University, suggests a plan called the Certificate of Tuition Program. According to the plan, parents would buy certificates worth a specified amount of education. For example, if parents invest in a certificate worth $1,000, they might be able to buy one year of education at a community college or one semester of education at a state university.

The certificates would be good at any college or university that participates in the program, regardless of the location. A cash refund option would be available for students who do not attend college.

Thomas Duncan, assistant to the governor for education and policy in Missouri, said the Missouri State Legislature is supporting a plan different from the Michigan pre-paid tuition plan because it does not guarantee full tuition payment. The Missouri plan offers a solution to concerns about the guaranteed tuition option and the uncertainty if the Internal Revenue Service would exempt the money from taxes, he said.

The Missouri plan, called Family Education Savings Accounts, would work similar to Individual Retirement Accounts. Participants could save up to $2,000 yearly, one account per student. The money saved would be exempt from state taxes, Duncan said.

The proposal does not require participants to deposit the money into a specific account and, therefore, allows the option of transferring money from account to account to get the best deal on the market, Duncan said.

Also, the proposal does not require students to commit to a certain college, allowing them to attend an out-of-state university or trade school without penalty, he said.

Under the plan, students who withdraw money for purposes other than college expenses or who do not attend college will be taxed on the savings, he said.

Duncan said the bill does not address the question of whether the savings would be considered income if the funds were not enough at the time the student entered college. “That is one of the concerns,” Duncan said. “We want to encourage the parents to save and not borrow.”

State Treasurer Jerry Cosentino favors a bill because “it is important to find some way to solve the problem of financing education for the young people in Illinois.” The education bill keeps getting bigger and there needs to be a solution, Cosentino said.

Satterwaite said, “The real advantage to the state is in having the people get into the habit of thinking about the cost of education very early in life.”