College plan gets high marks

By Meagan Sexton, GateHouse News Service

Southtown Star / State Journal Register

Published Thursday, April 18, 2008

SPRINGFIELD - An Illinois tax-free college savings program once described as "lackluster" now is ranked among the best in the nation.

Investment research firm Morningstar Inc. this week included Illinois Bright Start among the top state investment programs for college savings from among 529 plans nationwide.

"Illinois is a Cinderella story," Morningstar's analysis said. "Previously lackluster with middling investment options, the plan switched its program manager. It now offers a choice between sensibly constructed, all-index and actively managed age-based options with underlying funds from Vanguard and Oppenheimer, respectively, as well as rock-bottom expenses."

Colorado, Illinois, Maryland and Virginia were ranked as the best programs by Morningstar, while Mississippi, Nebraska, New York and Ohio were at the bottom.

State Treasurer Alexi Giannoulias said Thursday he believes the improved ranking resulted from changes his office made, but he declined to comment on his predecessors' handling of the investment.

"We wanted to make sure we had more options for Illinois families," he said. "So we tripled the portfolio options. For the first time in the program's history, we added index funds. We also wanted to make sure the fees associated with Bright Start were low."

Illinois fees previously were among the highest in the nation, Giannoulias said.

"What we did is cut our fees by more than a half to make it probably the most inexpensive program in the country, and most importantly, we brought in a new fund manager with a better performance track record," he said.

Giannoulias also said his office was able to negotiate with the fund manager for $3.5 million in scholarships. He said his office still is working out the details of scholarship qualifications.

Giannoulias said he believes Morningstar's ranking will increase confidence in the program.

"The tax incentives alone make it worthwhile. Hopefully, it will encourage (families) even more to start thinking about the future, especially when you talk about the skyrocketing costs of college these days," he said.

A Bright Start fund can be started with an initial investment of $25. Subsequent contributions can be as low as $15, and there is no tax on interest. Contributions also can be deducted from state income taxes, according to the treasurer's office.