JB Pritzker, Governor, State of Illinois

Saving for College

As a counselor, you may be asked to provide guidance and recommendations about the best ways for parents to save for their children’s education. Because there’s a lot to consider when funding college, there is no single best solution. However, conventional wisdom would suggest that the earlier parents begin to save, the better and the easier it will be to accomplish the educational goal.

With that in mind, encourage the parents you’re counseling to start by asking themselves these questions. Their answers and the four simple steps below can then be used to help determine which college funding options to explore. Print and share this page for their reference.

1. Do Your Research to make an informed decision.

Compare all available college-funding options to determine which is best for you. There are several different types of plans available with the State of Illinois, including ISAC, banks, credit unions, brokers, insurance companies and mutual funds companies.

Investigate the following choices to determine which option might be right for your family. You may want to consider consulting with a financial planner or tax advisor to assist you.

2. Project Your Costs

It’s easy with our online calculator. We’ll help you project how much the cost of higher education will be for your child.

3. Determine What You Can Afford

You have an idea of the expenses you’re facing. Now choose a plan that you can afford.

4. Get Started

The earlier you start, the better.  Stick to your plan, and you’ll reach your goal.

529 College Prepaid Programs and 529 College Savings Programs

529 plans are among the best way to save for college. There are two types of plans: prepaid-tuition plans, such as College Illinois!®, and college-savings plans, such as Bright Start®.

Prepaid tuition plans allow you to prepay for future tuition at current plan rates. College Illinois! enrollment has remained closed since 2017, as ISAC has engaged with legislators and the Governor’s office to help define proposals to address the Program’s unfunded liability. The Program continues to operate as usual for our current contract holders, with no change in benefit payments, customer service, or plan administration. Visit the College Illinois! Program Update page for current program information. 

College savings plans, such as Bright Start®, are different in that they allow you to save money for college in a strategically beneficial way—you earn money over time through interest; and your savings, along with the savings of others, are invested collectively on your behalf.

Both types of 529 plans have federal and state tax benefits that other types of investments do not have.

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College Savings Bonds

In the past, the State of Illinois periodically offered college savings bonds that are zero-coupon bonds (instead of paying periodic interest, these bonds offer a fixed-cash payment at maturity).

No Illinois College Savings Bonds have been sold since the fall of 2002. Should the Governor's Office of Management and Budget announce a future sale of Illinois College Saving Bonds, this page will be updated.

As of January 1, 2005, state law prohibits exempting moneys held in college savings bonds from calculation of financial aid eligibility. Therefore, those moneys will count as assets in determining a student's eligibility for state and federal financial assistance.

Answers to Frequently Asked Questions (FAQ) about Illinois College Savings Bonds are available on the State of Illinois web site.

In prior years, beneficiaries of Illinois College Savings Bonds who met all eligibility requirements could apply to receive funds from the College Savings Bonds Bonus Incentive Grant (BIG) Program. No funds have been appropriated for the BIG Program for several years. If program funds are appropriated in future years, this website will be updated accordingly.

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Savings Accounts

Simple to start and easy to use, this traditional savings method allows you to invest at your own pace. You may find the convenience of automatic deposit a good way to reinforce your own savings discipline. Interest rates vary, so shop around. Ready access to your money can be a mixed blessing. Be aware of the temptation to "borrow" from a college savings account, unless under extreme circumstances.

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U.S. Savings Bonds

The familiar EE-bonds are guaranteed by the government and are virtually risk-free. They are available for as little as $25, often through payroll deduction plans, and never have a purchase or redemption charge. The interest rate paid on these bonds adjusts every six months in relation to the yield on federal five-year Treasury Bonds. Interest is paid at redemption. For EE-bonds purchased after 1989, within income limits, interest used for college expenses is free from federal tax.

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Certificates of Deposit (CDs)

These are short-term investments—usually available without purchase fees or service charges—that guarantee a specific return at a specific time. Because CDs are federally insured, they are very low-risk investments. However, investors also usually pay significant penalties for withdrawing funds before the maturity date.

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Mutual Funds

Investors' dollars are pooled to purchase a diversified collection of stocks and bonds (security portfolio) managed by financial professionals. The investment objectives of mutual funds are outlined in their prospectus, and range from high-risk speculation to lower-risk managed growth. Mutual funds are evaluated annually in several popular financial magazines.

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Common Stock

Ranging from very high risk "speculative" investments to lower risk "blue chip" issues, common stock offers potential income from both capital appreciation and dividend yield. Stock brokerage commissions vary widely between firms. Any stock can lose as well as gain value; investors should acknowledge their own level of comfort with that risk prior to purchase.

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Corporate and Municipal Bonds

These fixed-income investments pay a predetermined rate of interest periodically and return principal at the maturity date. Bonds are rated by the financial markets. Selecting bonds with high ratings that mature over a short time period will minimize your risk.

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Tax-Deferred Annuities

Investors deposit a lump sum with an insurance company and accumulate interest at a competitive fixed or variable rate.

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Variable Life Insurance

The investor's premium is professionally managed to purchase stocks, bonds, money market portfolios or other investments.

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Since the Tax Relief Reconciliation Act of 2001, Education IRAs have developed into Coverdell Education Savings Accounts. This type of account offers a flexible way to save for college, with special tax advantages; and can be used for tuition, fees, room and board, books and more. Your child’s Coverdell account can be used for elementary, secondary or higher education, and assets can be transferred between accounts. Contact your financial consultant for more information about Coverdell.

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Upromise™ is a program that anyone can join at no cost to accumulate extra money for college. Simply set up an account at upromise.com by listing any of your credit cards and participating grocery and loyalty cards. Then use your cards as usual to buy goods from any of the nearly 150 companies that participate in Upromise™. By purchasing items that you would normally buy anyway, you’ll receive rebates, giving you extra money for college. The money is added to your account, and can be used when your child goes to college. Plus, your friends and family can help add money to the account by simply adding their names and credit card numbers to your child’s account. It’s totally free, and the benefits can be found at retail and grocery stores, restaurants, services, online shopping and more. For more information about Upromise™, and/or to sign up for an account, visit upromise.com.

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The Uniform Gift for Minors Act (UGMA) allows you to use your assets toward your child’s college expenses without setting up a trust. The money can be used for any purpose. Plus, your deposits are not limited to you, as anyone can contribute to the account. The account is not subject to gift tax, and you may deposit up to $11,000 per child, per year. It is important to note that at the age of consent (usually age 18), the child assumes control of the assets in this type of account. Contact your financial consultant for more information about the UGMA.

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