Collegesure 529 Tuition Indexed Programs

 describes two 529 plan Tuition indexed programs.

Two states, Arizona and Montana, offer 529 savings plans which utilize the College Savings Bank's tuition-indexed CD as the funding mechanism of the plan. The Collegesure CD is designed to provide a variable interest return that tracks the College Board’s Independent College 500 (IC 500) Index of four year private college tuition costs. The CD is offered with maturities ranging from 3 to 22 years and is backed by FDIC insurance. The Collegesure CD interest rate adjusts each July 31 when the IC 500 Index is updated. The annual percentage yield (APY) over the term of each CollegeSure CD is not less than the college inflation rate less a 3.00% margin. The CD carries a guaranteed minimium 2.00% interest rate.

When you invest in the CD you purchase units. One unit, at maturity, is equal to one full year's average tuition, fees, room and board at the average four-year private college as measured by the IC 500 Index. Thus, if the current annual tuition cost as measured by the index is $37,200, a full unit would represent this value. Because of the 3.00% interest rate margin, the purchase price per unit exceeds the value of the IC 500 at the deposit date. In this example, today's cost for 10% of one year of private college ($3,720) would require a deposit of $5,736 to purchase .10 units of a CollegeSure CD for a three-year old child looking to enter college in fifteen years. At maturity you'll receive 10% of one year of whatever private college costs are in fifteen years (see graph at right.) Interestingly, since the interest rate is based on an index of tuition costs, an individual university may require less than or more than one unit of tuition. Based upon 2005 data, .44 units prepays about one year at the average public college (in-state). About 1.28 units prepays one year at the average Ivy League college.

Consistent with most CD's, the Collegesure CD imposes penalties for early withdrawal.

Arizona

 * Arizona Collegesure 529 Tuition Indexed Program

The interest rate on the FDIC-insured CDs available through this 529 plan is pegged to a private-college tuition index, less a 1.5% margin, not to fall below 2% annually. (If average private-college tuition increases by 6% in a year, the yield on the CD is 4.5%.)

Program match on contributions: None

State tax deduction or credit for contributions: In 2007, contributions to 529 plans are not deductible in computing Arizona taxable income. In 2008 through 2012, contributions to Arizona and non-Arizona 529 plans of up to $750 per year for an individual taxpayer, and $1,500 per year for a married couple filing jointly, are deductible in computing Arizona taxable income.

Note: Effective August 2016, InvestorSure CDs are no longer offered by this plan; Effective October 2016, CollegeSure CDs are no longer offered by this plan.

Montana

 * Montana Collegesure 529 Tuition Indexed Programs

Two FDIC-insured options are offered in this 529 plan. The interest rate on the CollegeSure CD is pegged to a private-college tuition index, less a 1.5% margin, not to fall below 2% annually. (If average private-college tuition increases by 6% in a year, the yield on the CD is 4.5%.) The InvestorSure CD has a five-year maturity, and earns interest at a rate pegged to a percentage (between 85% and 100%) of the increase in the S&P 500 Index.

Program match on contributions: None

State tax deduction or credit for contributions: Contributions to any of Montana's 529 plans of up to $3,000 per year for an individual taxpayer, and $6,000 per year for married taxpayers filing jointly, are deductible in computing Montana taxable income. Only contributions made by the account owner, the account owner's spouse, or the account owner's custodian/parent are deductible. Contribution deadline is December 31 postmark.

Note: This plan has been closed to new enrollments since July 2015.