Pay me now or pay me later Prepaid tuition: State program is a vehicle for families to plan for the expense of college.


MARYLAND'S new prepaid college tuition program is more than an investment option for parents hoping to send their children to college. For many people, it puts a hard-to-grasp expense into manageable terms.

Maryland followed about a dozen states to create a program that allows parents to put away money for their child's future schooling. Some states originally promised parents they could "lock in" present-day tuition for college educations a decade or two from now. Maryland's program doesn't technically "lock in" tuition. Rather, deposits and interest accrued are expected to keep up with the tuition increases, which have averaged 8.5 percent in recent years.

For parents who haven't seriously examined the cost of a goal that seems so far in the future, this plan is worth a look -- and may be an eye-opener.

For example, parents of a kindergartner would need to deposit $160 monthly for the next decade for a four-year college. And that would meet only tuition and fees. Those costs can easily be matched by room and board and books. Rates vary based on the child's age, whether payment is made in a lump sum or stretched over time and whether the aim is a four-year university, a two-year community college or a combination.

Families paying into the trust can deduct $2,500 of these payments from their income on their state income tax. Interest earned through the plan is also exempt from state tax.

A senator who co-sponsored the program described it as a Chevrolet. Indeed, it's not the flashiest savings vehicle on the block, but it's a sound option for a lot of people. Perhaps more importantly, it gets a society that is addicted to credit cards to think seriously about putting away money upfront for the expense of college.

For information, call 1-888-4MD-GRAD. The deadline is June 30 to get this year's rates. They'll rise next year. Some things you can predict with certainty.

Pub Date: 5/30/98

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