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ILLINOIS

Bright Start College Savings Program

Type: Savings

Phone: 877-432-7444

State tax deduction for residents: Unlimited

Open to nonresidents: Yes

Refund provisions: Penalty of 10% of earnings

Minimum/maximum contributions: $25 / $235,000

Managed by Citigroup Global Markets, Bright Start offers a relatively low-cost plan with investment options that have outperformed their peers. The age-based portfolio, which invests 90% in stocks until the beneficiary is age 6, has significantly outperformed its peers over the past three years. The 100% bond option and 100% fixed-income option also have performed well in the last three years. The Principal Protection Income option has been lagging, though. Expenses are 0.99% annually. Residents have a strong incentive to choose this plan, with an unlimited state-tax deduction for contributions and state-tax-free withdrawals.

This plan can also be purchased through Illinois banks, but they will not offer the 100% equity option and may charge an enrollment fee of up to $30.

College Illinois

Type: Prepaid (contract)

Phone: 877-877-3724

State tax deduction for residents: No deduction

Open to nonresidents: No

Refund provisions: Contributions with no interest during the first three years, then contributions plus 2% interest less a $100 fee.

Enrollment: October 29, 2003, through March 31, 2004; newborns through August 1, 2004.

Minimum/maximum contributions: $1,086 for a one-sememster community college contract for a kindergartener or younger / $33,983 for a nine-semester university contract for a ninth-grader.

If you're going to buy a College Illinois prepaid contract, buy it for an eighth-grader. Since Illinois charges the same amount for first- through eighth-graders, your return would be higher on contracts for older rather than younger children. You'll also beat average rates of tuition inflation if your child attends a more expensive college, such as the University of Illinois at Champaign-Urbana.

The plan is guaranteed by the state, but penalties are stiff if the money isn't used for college. Noneducation withdrawals within the first three years of the contract are limited to contributions only. After that, you can withdraw contributions plus 2% compounded. The same penalty applies if you don't use the contract because your child earns a scholarship.

There's an $85 enrollment fee plus additional fees for beneficiary transfers and other administrative changes. You must hold a contract three years before using it for college expenses.

State College Savings Plans