COLLEGE ILLINOIS!

Frequently Asked Questions
General Questions

What is College Illinois!, the Illinois Prepaid Tuition Program?

College Illinois!, the Illinois Prepaid Tuition Program, is administered by the Illinois Student Assistance Commission, the agency with primary responsibility for student financial aid for Illinois students and their families. College Illinois! is a program designed to give individuals the chance to prepay tomorrow’s college tuition and mandatory fees at Illinois public institutions at today’s prices. The program was enacted by the General Assembly and signed by the Governor in 1997.

Who oversees the program?

College Illinois! is administered by the Illinois Student Assistance Commission (ISAC), an agency of the state of Illinois in existence for over 40 years having responsibility for administering post-secondary student financial aid programs and services for Illinois students and their families. The agency is headed by an Executive Director, Larry Matejka, who is responsible for the day-to-day operations and a Commission consisting of ten members appointed by the Governor. The College Illinois! program is housed within ISAC and is administered with advice and counsel from an Investment Advisory Panel consisting of seven members appointed by the Commission. The panel members include one recommended by the State Treasurer, one recommended by the State Comptroller, one recommended by the Director of the Bureau of the Budget, and one recommended by the Executive Director of the Board of Higher Education. Each panel member possesses knowledge, skill, and experience in at least one of the following areas of expertise: accounting, actuarial practice, risk management, or investment management. Panel members serve without compensation but are reimbursed for expenses.

Exactly what does College Illinois! cover?

College Illinois! is intended to pay tuition for the normal course load for a full-time student for the number of semesters of education selected and paid for under a specific contract.

College Illinois! also pays mandatory fees. Mandatory fees are those fees required as a condition of enrollment for all students. The program does not cover any other fees or costs that a student is obligated to pay, such as, but not limited to, individual fees related to participation in a particular sport or activity, individual course fees such as lab fees, books, room and board, or any fees not listed on the school’s invoice.

A student who attends an institution other than an Illinois public institution is responsible for paying the amount by which the tuition of that institution exceeds the amount payable under the contract for the beneficiary. A beneficiary who attends an Illinois public institution but does not qualify for the in-state tuition rate is responsible for paying the amount by which the tuition of that institution exceeds the amount payable under the contract. All payments for tuition and mandatory fees are made directly to the institution each academic term.

Will contracts be expanded to include room and board?

At this time College Illinois! contracts do not cover room and board expenses, and no change in this area is anticipated in the near future.

Who can purchase a College Illinois! contract?

The purchaser of a contract must be 18 years of age and a resident of the State of Illinois for at least 12 months prior to the date the contract is purchased. Any nonresident may also purchase a contract as long as the beneficiary is either an Illinois resident or an individual under the age of one who is related to an Illinois resident. Corporations and organizations may also purchase a contract for a qualified beneficiary. The beneficiary must be an Illinois resident for at least 12 months prior to the date of the contract or less than one year of age and a relative of an Illinois resident. A non-Illinois resident can be a beneficiary if the purchaser meets the 12-month Illinois residency requirement.

What is the minimum and maximum age of a beneficiary of a College Illinois! contract?

There is no age limit with regard to the beneficiary of a College Illinois! contract. However, when purchasing a prepaid contract for a beneficiary over the age of 14, it is important to note that funds cannot be used until the contract has been in effect for at least three years and is paid in full.

No, we cannot accept an application for a child that is not yet born. However, when your child is born you can enroll him/her at the prices for the past enrollment period through August 1 of that year. Please call our toll-free number (1-877-877-3724) and select Option 3 for more complete information on how to enroll your newborn.

Yes, College Illinois! allows the purchaser to plan ahead by paying for tuition and mandatory fees today. When the beneficiary is ready to go to college, the funds will be available. Payout of benefits is based on the cost of tuition and mandatory fees at the time the beneficiary enters college.

Example: The cost of an eight semester contract for a one-year old today is $15,893 and that child will not enter college until 2016. The projected weighted average cost of tuition and mandatory fees for that child enrolling in a public university in Illinois for four years beginning in 2016 will be approximately $60,000. College Illinois! will pay whatever the cost may be to cover tuition and mandatory fees for the beneficiary at the four-year Illinois public institution in which he/she enrolls.

Yes, College Illinois! allows for the flexibility to meet the changing needs of your family by allowing changes to your prepaid tuition contract. You may change your contract to reduce benefits (such as changing from the University Plan to the Community College Plan) at any time. Just write College Illinois! and ask for this change to a lower-priced plan. There is a small service fee for this type of plan change.

Increasing your contract benefits (such as changing from the Community College Plan to the University Plan) is called a plan conversion. Upon request of a plan conversion in writing, College Illinois! will make an actuarial analysis of your contract and provide you with new pricing and options available to complete this change to an increased prepaid tuition plan. There is a small service fee for this type of plan change.

Why should I prepay my child’s tuition?

Although tuition and mandatory fees in Illinois are lower or equal to those in many other states, they have been rising. Tuition and mandatory fees at Illinois public colleges have increased nearly 70% since 1990! That’s more than twice the rate of increase in the average family’s household income. It is also higher than the interest rates paid on insured investments, such as typical passbook savings accounts and certificates of deposit.

Statistics from all sources show that across the United States college tuition and fees are rising every year, usually at rates higher than inflation, and that student loans have become the single largest source for meeting college costs.

What kind of tax advantages does College Illinois! offer?

Earnings on your contributions are exempt from Illinois state income tax. Federal income tax on earnings is deferred until the beneficiary begins to draw upon benefits, and at that time, earnings are taxed at the student rate which is likely to be lower than the purchaser’s rate.

What happens to the contributions I make toward my contract?

While the Illinois Student Assistance Commission, an agency of the State of Illinois, administers the program, contributions from all purchasers are pooled into the Illinois Prepaid Tuition Trust Fund and then invested by independent investment firms selected by and responsible to the Commission. Investment strategies will be based upon sound investment criteria approved by the Commission, with the advice and counsel of an Actuary, an Investment Adviser and an Investment Advisory Panel of experts in finance and investments. Purchasers are prohibited by federal law from having personal direction of their College Illinois! contributions.

No, but if a student has prepaid benefits remaining after receiving an undergraduate degree, those remaining funds may be applied to graduate study tuition and fees.

What happens if I move out of Illinois after purchasing a College Illinois! contract? Can I continue paying for the contract? Can I purchase more contracts?

If you purchase a College Illinois! contract and then move out of Illinois, you may continue to pay on your College Illinois! contract. You cannot purchase additional College Illinois! contracts for your children if they now live with you in another state. If you are a divorced parent and the other parent resides in the state of Illinois, that parent may purchase a prepaid contract for the child as long as the purchaser meets the 12-month Illinois residency requirement. Also, as an out-of-state resident, you can purchase additional contracts for beneficiaries who meet the Illinois residency requirements.

Is the program protected or insured?

The prepaid tuition program is backed by the State of Illinois.

Will the program affect a student’s eligibility for financial aid?

The receipt of contract benefits by a beneficiary will not affect a student’s eligibility for any scholarship, grant or monetary assistance available through State of Illinois programs. However, it may affect a beneficiary’s qualification for federal financial aid.

Prepaid tuition is not reported directly on the Free Application for Federal Student Aid (FAFSA) form. Funds a student receives from a prepaid tuition program are usually treated the same as a scholarship by the school’s financial aid office and are part of the student’s reported income in subsequent years.

No, you do not need to choose the college, university or community college the beneficiary expects to attend until the time of enrollment in that institution. The beneficiary will receive a College Illinois! identification card confirming that he/she has a prepaid tuition contract to present to the school’s business office. Payments are made directly to the college, university or community college by College Illinois!.

What happens if a student is not admitted to college?

Having a prepaid contract does not guarantee that a beneficiary will be admitted to college. A beneficiary has ten years from the projected college enrollment date to enroll in an eligible institution of higher education. If he/she does not enroll and request disbursement of benefits within the stipulated ten-year period, the contract will expire. (See Article VII - Termination, Expiration and Refund, Number 2, of the Master Agreement.)

If you think that the child will not qualify at any time, you may request a refund. You will receive a refund payment equal to all contributions, plus 2 percent interest compounded annually, less administrative cancellation fees.

You may also transfer the prepaid funds to another member of the family. As defined in the Internal Revenue Code, Section 529(e)(2), as amended, this means an individual who bears a relationship to a beneficiary as follows: (1) a son or daughter, or a descendant of either; (2) a stepson or stepdaughter; (3) brother, sister, stepbrother, stepsister, half-brother, or half-sister; (4) father or mother or an ancestor of either; (5) stepfather or stepmother; (6) son or daughter of a brother or sister; (7) brother or sister of the father or mother; (8) son-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law; (9) the spouse (which must be a member of the same household and have the same principal place of abode) of any of the above; or (10) the spouse of the beneficiary (which must be a member of the same household and have the same principal place of abode).

If I buy nine public university semesters this year, may I purchase another nine semesters next year when College Illinois! contracts are offered?

Yes, but not for the same beneficiary. A beneficiary cannot have more than nine semesters of tuition and mandatory fees prepaid on their behalf. A beneficiary may have multiple contracts purchased by one or more purchasers in the same year or over several years, however, benefits may not exceed a total of nine semesters for that beneficiary.

No, you must complete an separate application for each child. The first application fee will be a nonrefundable $75 and subsequent applications must include nonrefundable fees of $40 each as long as the purchaser is the same on all applications.

Will I receive written documentation of my contract?

Yes, you will receive a Participation and Payment Schedule and a copy of the Master Agreement as a part of your welcome package.

Yes, a family can have a combination of Illinois College Savings Bonds and a College Illinois! contract. There are no disadvantages to having both.

The Illinois College Savings Bonds are tax-exempt, zero coupon bonds, backed by the State of Illinois and issued periodically for the purpose of providing individuals with a long-term investment to help fund college education. Additional information about the College Savings Bonds may be obtained by contacting brokerage firms and banks within the State of Illinois.

When can I enroll in College Illinois!?

Contracts are offered for sale during a designated enrollment period each year, usually from mid-fall to mid-winter. Our next enrollment period is October 18, 1999 through February 18, 2000.

No, there will not be a limit on the number of contracts sold. The goal is to make College Illinois! contracts available to as many purchasers as request them.

What types of prepaid tuition contracts are available?

College Illinois! offers three plans: Public University, Public Community College and a Combination Plan.

The Public University Plan allows a person to prepay from one to nine semesters of tuition and mandatory fees at any Illinois public university.

The Public Community College Plan allows a person to prepay from one to four semesters of tuition and mandatory fees at any public community college.

The Combined Plan allows a person to prepay four semesters at a public community college and four semesters at a public university.

Benefits can also be transferred for use towards tuition and fee costs at private and out-of-state colleges and universities. There is a small charge per semester for transfer of benefits to private and out-of-state colleges.

Do I have to contract for a full four years of college tuition?

No, a purchaser may purchase from one semester, or 15 credit hours, to four semesters or 60 credit hours under the Community College Plan, or from one to nine semesters or 135 credit hours under the Public University Plan. A purchaser may convert from one plan to another, in accordance with the provision of Article VI (5) in the Master Agreement.

If I choose to have the monthly payments automatically deducted from my bank account, how does this process work so I can make certain that there are no lapses in payments?

If you choose automatic withdrawal when you apply for College Illinois!, an automatic payment authorization form will be sent to you shortly after you receive your welcome package. You will be notified of the effective date of the first withdrawal. You can switch to payment using a coupon booklet at any time by sending College Illinois! a written request to change your method of payment. We will send you the necessary forms to make the change. There is a minimal service fee for making this type of change. You can make a similar request to change the method of payment from coupon book to automatic withdrawal, but continue to make payments by check until you are notified the change is in place and of the effective date of the first withdrawal.

What if I want to pay for part of the plan in a lump sum, and part in monthly payments? Is that possible?

Yes, we now have payment options that allow you to pay for most contracts with a down payment of $1,000, $2,000 or $5,000 and the balance in reduced monthly installments over 5 years or 10 years (if you purchase an 8 or 9 semester plan).

What happens if I decide to double my monthly payments, or give you a lump sum of $2,000 or $3,000?

There is no prepayment penalty on College Illinois! contracts. At any time you may pay more than your regular monthly payment. That amount will be applied to the principal owed at that time. The amount of the continuing monthly payments will not be reduced, but the number of remaining payments will be reduced.

What payment options are available?

Contract purchasers may choose from the following payment options:

• a one-time lump sum payment,
• monthly installment payments paid over five years,
• monthly installment payments paid over ten years if at least eight semesters of tuition and fees are purchased at one time for the same beneficiary, or
• a down payment of $1,000, $2,000 or $5,000 followed by fixed monthly installment payments.

How is the total cost of the contract determined?

The cost is based on a number of factors, including: current tuition and mandatory fees, an actuarial analysis of tuition and mandatory fees growth rates, estimates of investment returns, the total number of years until the student enters college and the projected costs of administering the program.

Why is the cost not exactly the same as current tuition and mandatory fees?

Contract prices are based on current tuition rates. However, an actuarial analysis is applied that reflects the risk associated with predicting future tuition and mandatory fee inflation, investment returns, as well as administrative costs for the program.

Are future prices for successive enrollment periods going to be higher than those offered today?

Contract prices will most likely increase for each enrollment period. New prices will reflect increased tuition and fee rates of Illinois’ universities and colleges. As tuition and fees increase, College Illinois! contract prices will increase. Tuition and mandatory fees have increased in Illinois approximately 7.5 percent per year during the 1980's and 6.6 percent during the 1990's. For the 1999-2000 academic year, tuition and fees have increased, on average, by 5.1 percent at Illinois public universities and by 8.4 percent at Illinois community colleges–according to the most recent tuition and fees data reported to ISAC.

If I elect to make monthly payments, why is the sum of my payments greater than the lump sum cost?

If you elect to make installment payments, the state will not have the entire contract amount to invest to keep up with tuition inflation. The fund expects to earn, on average, 8.0% each year on the investments. Therefore, a factor of 8% is included in the monthly payment cost. It ensures that when the beneficiary enrolls in college, the amount paid in, plus accumulated interest, will be sufficient to cover weighted average tuition and mandatory fees for public institutions. At any time purchasers may elect to pay more than their monthly payments; this will reduce the total amount paid over the term of the contract.

Are there restrictions on who may purchase College Illinois! contracts?

Yes, the purchaser of a contract must be at least 18 years of age and a resident of the State of Illinois for at least 12 months prior to the date of the contract. Any nonresident may also purchase a contract as long as the beneficiary is either an Illinois resident or an individual under the age of one who is related to an Illinois resident. Corporations and organizations may also purchase a contract for a qualified beneficiary. The beneficiary must be an Illinois resident for at least 12 months prior to the date of the contract or less than one year of age and a relative of an Illinois resident. A non-Illinois resident can be a beneficiary if the purchaser meets the 12-month Illinois residency requirement.

Yes, military personnel stationed in Illinois at the time the contract is purchased or who claim Illinois as their domicile, no matter where they are stationed, are eligible to purchase contracts.

Yes, a student must still meet all the admission requirements of the school he/she wishes to attend. Being the beneficiary of a prepaid tuition contract has no bearing on the actual admissions process.

No, prepaid tuition contracts are usable at any Illinois community college or public university. Contract benefits may also be transferred to private colleges and universities and out-of-state colleges to apply towards tuition and fees.

What if a college decides not to participate in the program in the future?

The program does not require the participation of any individual college or university. College Illinois! is simply a source of funds which participating students use to pay part or all of their tuition and fees.

What do I do when my child reaches college age?

In the spring of his/her senior year in high school, the beneficiary will automatically receive a "Welcome to College" letter and will be asked to notify the program of his/her intent to enroll in a specific college or university. Students are also sent a student identification card and handbook describing the procedures for using contract benefits during their last semester of high school. Upon enrollment, College Illinois! will transfer the appropriate amount of tuition and mandatory fees in direct payments to the college or university during each academic term.

No, qualified beneficiaries who do not meet an institution’s requirements to qualify as a resident and thus pay in-state tuition and fees will be responsible for paying the difference in cost between the institution’s in-state tuition and fees and charges assessed out-of-state students by the institution.

No, semesters do not need to be used consecutively. However, a beneficiary must use all prepaid funds within ten years following the first disbursement of benefits to the beneficiary. Time served in active duty status with the military will not be included in counting the ten years.

Yes, a combination plan is available that allows the purchaser to buy up to four semesters of a community college contract and up to four semesters of a public university contract. Students may switch between the types of school if they choose,

but if using community college credits at a public university, the student may be required to cover the shortfall.

What if a student is an Illinois resident and goes to school in Iowa or Wisconsin? How is the contract used?

A beneficiary who is an Illinois resident may attend a school in any other state, however, the benefits paid on the student’s behalf will be based on the average weighted tuition and fees at Illinois institutions at the time of enrollment. In most instances, the beneficiary will have to make up the difference in the funds paid out by College Illinois! and the funds needed for full tuition and fees at an out-of-state school.

Does the total amount of the contract have to be paid before the benefits can begin to be used? For example, if an eight-semester contract is purchased with payments over ten years, can you still be paying on the contract when the first term of the contract is used?

A contract must be paid in full before any funds can be used for tuition and mandatory fees. Benefits may not be used until the contract has been in effect for at least three years and has been paid in full.

How much tuition and fees will the prepaid tuition contract cover? Is it just 15 hours of tuition and fees or will it pay for any amount of hours that the school considers a normal full-time course load?

Each semester that you purchase is worth the normal full-time load of 15 hours of tuition and fees. The beneficiary may choose to register for more than 15 hours, but the coverage of those additional hours will be considered accelerated benefits at the time they are paid to the university or college. Public University Plan beneficiaries may also choose to enroll as part-time students (subject to the restriction on the payment of mandatory fees in Article IV (3) of the Master Agreement), in which case the difference between hours paid and normal load (that is, 15 hours minus the actual hours) will remain as a credit that the beneficiary can use in future studies.

How much will the program pay in benefits on behalf of a student enrolled at a private or out-of-state school?

For a beneficiary of a public university plan contract who enrolls at any eligible Illinois private institution or out-of-state institution, the mean-weighted credit hour value of in-state tuition and mandatory fees for Illinois public universities in the same academic year, less any applicable fees, will be paid directly to the specified institution.

For a beneficiary of a community college plan who enrolls at any eligible Illinois private institution or out-of-state institution, the average mean-weighted credit hour value of in-district, in-state tuition and mandatory fees for all Illinois community colleges in the same academic year, less any applicable fees, will be paid directly to the specified institution.

A beneficiary who attends either an eligible Illinois private institution or out-of-state institution is responsible for paying to that institution the amount by which the educational expenses of that institution exceed the amounts payable under the contract.

Example: An eight-semester public university College Illinois! contract is purchased for a one-year-old in 1999 at $15,893, and the projected date for entering college is 2016. If that student chooses to attend Illinois State University, the projected cost of tuition and mandatory fees for Illinois residents for four years is approximately $65,000. College Illinois! will pay Illinois State University the tuition and mandatory fees assessed that student over their four years of full-time attendance. If that same student chooses to attend an out-of-state or private institution, College Illinois! will pay the weighted average cost of tuition and fees at Illinois public universities at that time. That amount is projected to be approximately $60,000. If the cost of attending the out-of-state or private institution is more than the amount paid out by College Illinois!, the beneficiary is responsible for paying the difference.

Where can the tuition and fee benefits be used?

Benefits are portable. They can be used at Illinois public universities and Illinois public community colleges, where tuition and mandatory fees will be paid in full for the number of semesters purchases. Benefits can also be transported to Illinois private or out-of-state non-proprietary public or private institutions, where the mean-weighted average tuition and mandatory fees for Illinois public universities or community colleges will be applied to costs, but will most likely not result in full payment of tuition and mandatory fees at those institutions.

What if the beneficiary decides to attend a private or an out-of-state college?

The program will transfer benefits to eligible private institutions and non-proprietary out-of-state colleges and universities. The amount of the transfer will not exceed the weighted average amount of tuition and mandatory fees under the plan selected, less a processing fee and any other applicable fees. In such cases, payments may be transferred each academic term to the private or out-of-state college or university as necessary to apply toward the cost of tuition and mandatory fees. There is a small service charge per semester for this transfer of benefits.

What happens if the beneficiary does not go to college?

Upon written request, contract benefits may be transferred by the purchaser to a new qualified beneficiary. The new qualified beneficiary must be a member of the extended family of the original qualified beneficiary as defined by Section 529 of the Internal Revenue Code and in the Master Agreement. The contract can also be held for the beneficiary to use at a later date; or all contributions plus 2% interest compounded annually, less administrative cancellation fees, can be refunded to the purchaser.

When may the benefits be used?

Contract benefits may not be used until the contract has been in effect for at least three years, and the contract is paid in full. The beneficiary has ten years from the projected enrollment date to enroll in college and begin using benefits. All benefits must be used within ten years following the first disbursement of benefits to the beneficiary. Time served in active duty status with the military will not be included in counting the ten years.

What if the student doesn’t complete the number of credit hours for which tuition has been prepaid?

The purchaser may receive a refund on the unused portion of the contract by notifying College Illinois!. The refund of the unused credit hours will be paid at the same rate as a refund that is given when a student does not attend college. Any unused credit hours from a contract can also be used for graduate school after graduation from college. Unused contract benefits may also be transferred to another beneficiary, if the new beneficiary is a member of the family as defined by Section 529 of the Internal Revenue Code (see the Master Agreement) and meets the other requirements for a qualified beneficiary.

The costs at Illinois State University are higher than at Eastern Illinois University. How does a College Illinois! contract compensate for the difference in tuition and fee structure?

The actual current tuition and mandatory fees at any public university or community college will be paid. Differences in the cost of tuition and fees at each public university and public community college are taken into consideration when contract pricing is determined. Benefit amounts paid on behalf of students are different for each public university and community college, and if a beneficiary goes to a school out of the plan purchased for her/him, the weighted average tuition for the plan purchased will be paid to the school attended.

How did this plan come about?

The General Assembly found and declared that the general welfare and security of the State are enhanced by access to higher education for all residents of the State who desire that education and who demonstrate the qualifications necessary to pursue that education. They found it necessary to create a prepaid tuition program for the State of Illinois to encourage and better enable Illinois families to help themselves finance the cost of higher education specifically through a program that provided Illinois families with a method of State tax-free and federally tax-deferred savings for college tuition. Legislation establishing College Illinois! became law on November 13, 1997 as Public Act 90-546.

Do other states have prepaid tuition programs?

By year 2001, nineteen states will have prepaid tuition programs, savings programs or both. The prepaid tuition states include Alabama, Alaska, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Mississippi, Nevada, New Mexico, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, and West Virginia.

Do the state programs have reciprocal agreements?

No, the terms and conditions of each state’s program vary. College Illinois! will pay contract benefits to an out-of-state college or university on behalf of a plan beneficiary. The amount paid will be the weighted average of tuition and mandatory fees charged by Illinois institutions at the time the student enrolls out-of-state. A small service fee will be assessed each semester for transferring benefits to out-of-state schools.

What about refunds? Can I get my money back at any time?

If a beneficiary does not go to college, benefits can be transferred to a member of the "family," a term that is very broadly defined under the federal Internal Revenue Code to include virtually any relative of the beneficiary. Another member of the family, as defined in the Internal Revenue Code, Section 529(e)(2), as amended, means an individual who bears a relationship to a beneficiary as follows: (1) a son or daughter, or a descendant of either; (2) a stepson or stepdaughter; (3) brother, sister, stepbrother, stepsister, half-brother, or half-sister; (4) father or mother or an ancestor of either; (5) stepfather or stepmother; (6) son or daughter of a brother or sister; (7) brother or sister of the father or mother; (8) son-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law; (9) the spouse (which must be a member of the same household and have the same principal place of abode) of any of the above; or (10) the spouse of the beneficiary (which must be a member of the same household and have the same principal place of abode).

Purchasers may also choose to postpone the beneficiary’s use of the contract benefits to a later time or receive a refund payment equal to all contributions, plus 2 percent interest compounded annually, less administrative fees which include contract maintenance and other contract-related fees. The voluntary cancellation fee is 50% of all contributions after subtracting administrative fees, up to a maximum of $100.

How do I cancel a contract?

All requests for refunds must be submitted in writing to College Illinois! No refund will be authorized on any prepaid tuition contract for any semester partially attended but not completed. Refunds in excess of the amount paid into the program may be authorized under the following conditions.

When a qualified beneficiary is awarded a grant or scholarship that duplicates the benefits covered by a prepaid tuition contract, the monies paid for the purchase of the contract will be returned to the purchaser upon request in semester installments. The installments will be in an amount equal to the lesser of (i) the original purchase price plus 2 percent interest compounded annually or (ii) the current cost of tuition and mandatory fees at the MAP-eligible institution where the qualified beneficiary is enrolled.

In the event of death or total disability of the qualified beneficiary, monies paid for the purchase of the contract will be returned to the purchaser with all accrued earnings.

In instances of a voluntary cancellation of a contract that has been held for at least 3 years, the amount refunded will be the amount paid, plus 2 percent interest compounded annually, less any benefits used, refunds already paid, and administrative fees which include contract maintenance and other contract-related fees. The voluntary cancellation fee is 50% of the total paid after subtracting administrative fees up to a maximum of $100.

If a contract is voluntarily canceled prior to the third anniversary of the purchase, the amount refunded will be the amount paid less any administrative cancellation fees.

Yes, having a prepaid contract does not guarantee that a beneficiary will be admitted to college. A beneficiary does have, however, ten years from the projected enrollment date to enroll in an eligible institution of higher education.

If you think that the child will not qualify at any time, you may cancel your contract and request a refund.

You may also transfer the prepaid funds to another family member as defined in the Internal Revenue Code, Section 529(e)(2), as amended (see the Master Agreement).

No, refunds are paid to the purchaser of the College Illinois! contract. At no time are refunds given to the beneficiary.

What impact will participation in College Illinois! have on a student’s eligibility for financial aid?

No contributions toward the purchase of an Illinois prepaid tuition contract will be considered in evaluating the financial situation of the student beneficiary of the contract or be deemed a financial resource or a form of financial aid or assistance to the student beneficiary for any scholarship, grant or monetary assistance awarded by the Commission, the State of Illinois, or any state agency. Contributions toward the purchase of an Illinois prepaid tuition contract will not reduce the amount of any scholarship, grant, or monetary assistance that the student beneficiary is eligible to be awarded by the Illinois Student Assistance Commission.

The annual value of tuition and fee benefits paid by College Illinois! will be included in financial aid calculations and therefore may reduce eligibility for need-based federal aid.

What if my student receives a full scholarship for college expenses and has a College Illinois! contract?

A number of options are available in the case of scholarships. Proof of scholarship must be provided. If the qualified beneficiary is awarded a scholarship, the terms of which duplicate the benefits included in the College Illinois! contract, then monies paid for the beneficiary of the contract will be returned to the purchaser, in semester installments that coincide with the matriculation by the qualified beneficiary, in an amount equal to the lesser of:

(i) the original purchase price plus 2 percent interest compounded annually, or

(ii) the current cost of tuition and mandatory fees at the institution where the beneficiary is enrolled.

This refund will be made to the purchaser on a semester-by-semester basis.

The funds may also be transferred at that time or at some point in the future to another family member or they may be left on account in case the student’s scholarship ends. Any unused funds can be refunded later or applied toward the cost of graduate school.

How do I report prepaid tuition funds on my Free Application for Federal Student Aid (FAFSA) forms?

The prepaid tuition plan is not reported on Free Application for Federal Student Aid (FAFSA) forms.

How are College Illinois! monies invested?

All investments will be directed by professional money managers chosen by the Commission, in accordance with recommendations from a professional investment advisor. Investment performance will be monitored by the College Illinois! investment advisor and reviewed semiannually by the Investment Advisory Panel of financial experts.

What are the actuarial assumptions of College Illinois!

The program actuaries perform a detailed actuarial analysis of the program each year. This analysis is used to make certain that the fund is financially sound, and to set contract prices for each annual enrollment period. The actuarial assumptions are adjusted each year to reflect changes in tuition and fee rates and investment earnings. The assumptions used in setting prices will be available in the Annual Report.

TAXES

So long as benefits are used for education, then the increased value of any College Illinois! plan will be totally exempt from Illinois state income tax.

 How will a College Illinois! plan be treated under federal income tax regulations?

Federal income tax liability on the increase in value of your College Illinois! plan is deferred until contract benefits are used. At that time, they will be subject to federal income tax at the student/beneficiary’s rate, which is usually lower than the purchaser’s rate.

 How will a College Illinois! plan be treated under federal gift tax regulations?

The purchase of a College Illinois! plan is exempt from federal gift tax liability up to a maximum of $50,000 per taxpayer. Any College Illinois! contributions up to a maximum of $50,000 can be averaged over five years – in place of the annual $10,000 per person gift tax exemption, so long as no further gift tax exemption is claimed during the five-year period. Specifically, College Illinois! contributions are defined by federal law as a completed gift. As such, these contributions are considered to be a present interest for gift tax purposes rather than a gift from which there will be a future benefit.

 Can a College Illinois! plan be shielded from federal inheritance tax?

Yes! All you need do is designate a successor purchaser on a form supplied by College Illinois! at time of purchase or when you need it.

How does College Illinois! differ from college savings programs offered by the state?

Currently, the only college savings program offered by the State of Illinois is the College Savings Bond Program, through which families have been able to purchase state-issued "zero coupon" bonds that have generally ranged in price from approximately $1,100 to $4,500. A zero coupon bond is a bond on which the payment of all principal and interest is deferred until maturity. All bonds issued under the state’s College Savings Bond program are worth $5,000 at maturity. The lowest costs bonds, those that have sold for approximately $1,100, are those with the longest maturity (i.e., 20-22 years).

While both College Illinois! and the College Savings Bond programs have attractive features, there are also some key differences between the two programs. For example, although College Savings Bond proceeds can be applied toward virtually any postsecondary expenses, there is no assurance that any of these expenses will be covered by the bond proceeds. With College Illinois!, contract holders are given a state-backed assurance that tuition and fees will be paid in full, in accordance with the plan selected by the purchaser. Further, while all College Savings Bonds must be purchased by lump-sum, College Illinois! plans can be purchased on either a lump-sum or installment basis.

Both programs offer families significant state and federal tax advantages, and under both programs, savings are not considered when determining a family’s eligibility for state financial aid programs.

The next enrollment period for College Illinois! is scheduled to begin October 18, 1999, and close on February 18, 2000. State officials have indicated that there are no plans to issue College Savings Bonds this year.

It should also be noted that in 1999 state lawmakers approved legislation authorizing the creation of a College Savings Pool, to be administered by the Office of the State Treasurer. That program has not yet been developed and, as a consequence, it is impossible to compare it with the existing College Illinois! or College Savings Bond programs. To the extent that such a program is offered by the State Treasurer, it will not be available until the spring of 2000.

Signing Up

 How do I get additional information about participating in the program?

Program information, including an application form, can be obtained by calling toll-free 1-877-877-3724.

You can visit our Web site on the Internet: http://www.collegeillinois.com.

You may write to us at our e-mail address:

You can send other correspondence including your completed application along with the appropriate application fee(s) to:

College Illinois!
P. O. Box 19292
Springfield, IL 62794-9292

Your application will be processed and you will receive confirmation of your enrollment along with payment information through the mail. Please allow six weeks for receipt of confirmation. The next enrollment period is October 18, 1999 through February 18, 2000. Payments will be due beginning May 1, 2000. REMINDER: Applications for participation in College Illinois! are accepted only during the annual enrollment period which is set by the Illinois Student Assistance Commission.