COLORADO

Scholars Choice College Savings Program

Type: Savings (with prepaid option)

Phone: 888-572-4652, 800-478-5651 in Colorado

State tax deduction for residents: Full contribution is deductible

Open to nonresidents: Yes

Refund provisions: Penalty of 10% of earnings (plus fees in the prepaid option)

Minimum/maximum contributions: (Prepaid) $1,000 / $14,784; (Savings) $25 / $235,000

Residents have a strong incentive to look at the savings plan run by Citigroup Asset Management plan first, as they get an unlimited state-tax deduction (the top tax rate is 4.63%) for contributions. Expenses are reasonable when the plan is purchased directly, at about 1% per year. Broker-sold shares carry sales loads and/or additional annual expenses. Nonresidents pay an extra $20 per year.

The plan's age-based portfolio has outperformed its peers in the last year -- particularly the agressive portofolio for children ages 0-3, which had the highest returns for its age bracket. The plan also offers five fixed portfolios but lacks an ultra-safe safe choice for students about to enter college: 100% equity, 100% fixed income, 80% equity/20% fixed income, 80% fixed/20% equity and 50/50. The balanced fund had the highest returns in the last year of all moderate 529 portfolios.

Colorado vastly improved the prepaid portion of its plan in 2000. However, it is not accepting any new enrollments. It added a minimum guaranteed return of 4% (tuition increases, and thus returns, had been averaging about 2% per year). Plus, if the underlying investments significantly outperform tuition inflation, participants may receive the excess. Colorado also removed onerous refund provisions -- now, after the first year, you get back your contributions plus growth, less a 10% penalty and $50 to $100 in fees. There are no enrollment fees or annual fees.

State College Savings Plans