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Is the College Illinois Prepaid 529 plan a smart college savings program?
There is a big advertising campaign going on right now promoting the newly reborn College Illinois Prepaid Tuition Plan. The campaign seems to be working well as evidenced by the increasing number of families I meet who are investing in it.
With tuition increasing at Illinois universities an average of 8% per year, the College Illinois Prepaid Tuition Plan is certainly an attractive investment.
But is it also a smart investment? Most advisors say no! See why.
Why Advisors Are Not Recommending the College Illinois Prepaid 529 Plan
What families are failing to consider is whether or not the State of Illinois can actually earn returns on its investments required to meet its obligations. Or is the state once again placing a risky bet that could leave you holding the bag?
It wasn’t too long ago when the Illinois Pre-Paid Plan went broke. Other states also experienced problems and only a handful outside of Illinois offer them anymore. Hasn’t Illinois learned it’s a lesson here? Is the success of this plan really based on not much more than wishful thinking?
Except for those slick commercials appearing all the time on our television sets, very few financial advisors touting the Illinois plan. Even local experts like Terry Savage from the Chicago Sun-Times are telling parents to exercise caution. She doesn’t even recommend the Bright Start 529 plan and thinks the fund manager should have been fired a long time ago.
No Guarantees and No Bailouts This Time
What bothers me most about the rebirth of this highly publicized plan is that the State of Illinois has seen to it that there are no guarantees on your money. They also promise no bailouts this time around. That could mean that investors in the plan are going to be left holding the bag!
What if you are already in the plan?
I would take Terry Savage’s advice and keep it. You already own it. Otherwise, you should consider other options.
If you like to play long shots, it might be better to place your bet on a 50 to 1 shot at your local race track to pay for college.