Some people are telling me to pull the money out of college Illinois and put it into college savings plan such as a Vanguard fund. If something is to be done about college Illinois would I t be better to stay and not transfer the money to another fund?
Terry Says: Ever since the state announced it does not stand fully behind the CollegeIllinois contracts, there has been great concern that in a financial crisis (ie pension issues, etc) the state might not make good on its promises to grant instate college tuition to planholders. You’re not alone in being concerned. Recently the state announced that only around 480 new contracts had been sold in this past year — far below the numbers of previous years.
It’s hard to know what advice to give in this situation — and a lot depends on the amount of money in the plan, and the age of your children. The plan offers a huge reward (tuition) at a substantial discount to those who buy early. So the transfer of any money already in the plan certainly won’t go far in building a college fund in a traditional 529 plan. And if college is coming soon, the state will likely make good. Remember, this is an accounting process –not strictly a cash outlay. I’m thinking that they could offer “vouchers” to state schools if the money isn’t there. But given the Illinois legislature, which has difficulty in making hard decisions, I cannot predict with any confidence how this will play out.
In a financial crisis that pits “general obligations” of the state –ie. bondhoders, — with competing interests such as paying prison staff, Medicaid recipients, university professons, contractors, etc — I’m just not sure where the plan purchasers stand. I just know it is NOT at the top of the line. Sorry for such gloomy news, but I hope that this will help you make an informed decision.