May 23, 2007

Legislation drafted by State Treasurer Alexi Giannoulias aimed at helping families save more money toward their children’s college tuition has been unanimously approved by the Illinois General Assembly.

The bill, sponsored by State Sen. James Clayborne (D-Belleville) and State Rep. Jack Franks (D-Woodstock), removes the tax penalty for families who invest in out-of-state college savings plans.

The bill passed in the Senate (56 to 0) on Wednesday and in the House (113-0) in February. It now awaits the governor’s signature.

“As elected officials, we need to make sure that Illinois families get the most out of their hard-earned dollars and can afford to send their children to college,” Giannoulias said. “Illinois lawmakers have eliminated a significant barrier that punished Illinois residents who wanted to invest in out-of-state plans. This is a big win for Illinois consumers.”

Along with Alabama, Illinois is the only other state that imposes a 3 percent state tax on the earnings residents receive from tax-exempt savings programs, commonly known as “529 plans,” administered in other states. Mad Money host Jim Cramer even singled Illinois out, calling the state’s tax penalty, “Horrible!”

“It’s estimated that a child born today will pay at least three or four times the current cost of college,” Clayborne said. “This legislation goes a long way in helping families pay for these increased costs so their children can attend college and realize their dreams.”

Franks noted that Illinois should not penalize consumers for wanting to invest in more profitable plans that earn them more money.

“As lawmakers, we have a responsibility to give families the opportunity to invest in a savings plan that will give them the biggest bang for their buck,” Franks said. “With the skyrocketing costs of tuition, the state should not be taxing them on money they’re saving to send their kids to college.”

Giannoulias added that his office recently overhauled Illinois’ Bright Start College Savings program. Beginning this summer, the program will lower its fees and provide stronger investment options so participants can get a better rate of return.

“Illinois families will invest in Illinois’ 529 plan because it provides them the best investment options at a low cost, not because they will be punished if they don’t,” Giannoulias said.

A recent report issued by the College Board, which tracks national tuition costs, stated college costs have tripled during the past 20 years. The report noted that during the 1985-86 academic year, costs at public schools totaled $3,791. During this past academic year, those same costs totaled $12,796. The tuition at private colleges jumped to $30,367 from $8,902 during the same time period.

Bright Start offers a range of investment options accessed directly through the program or through professional financial advisers. Anyone who wants to invest in a child's college education can put money away or establish an account, which can be opened for as little as $25.

For more information on Bright Start, visit:
www.brightstartsavings.com or call the Treasurer's Office at (888) 845-4723.