COLUMBIA, SC – New tax benefits and a guaranteed return on investments have made the South Carolina Tuition Prepayment Program (SCTPP) very attractive to families saving for increasing college costs. The volatile market and skyrocketing higher education costs have brought national attention to the benefits of prepaid tuition plans¹ as SCTPP kicks off its fourth enrollment period. The annual enrollment closes on January 31, 2002.

"With the unbridled growth of the market over the past few years, folks were looking for bigger returns. Suddenly, with tuition costs rising exponentially each year and the market fluctuating – paying for future college costs at today’s prices is looking very good to investors," State Treasurer Grady Patterson said.

New federal and state tax benefits have been added to make contributing to SCTPP more affordable. All contributions after July 20, 2001, are South Carolina tax deductible, and qualified withdrawals – which were previously tax-deferred – are now tax-exempt at the state and federal level.

SCTPP links contributions to South Carolina’s tuition inflation. That means a contract purchased today – based on current costs for in-state, public universities – for a child in kindergarten will cover his/her in-state tuition beginning in 2014.

Contracts can be purchased for any child from newborn to a sophomore in high school. The contracts are purchased in a lump sum or in monthly contributions that equal the contract amount.

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Treasurer Patterson – 2

SCTPP contracts may be purchased for either 2-years or 4-years of tuition expenses at any of South Carolina’s public college and universities.

SCTPP contract pricing is based on the child’s age, the SCTPP plan selected, and the weighted average tuition expenses at SC’s senior, public higher education institutions. For example, a SCTPP contract to cover four-years of tuition and fees may be purchased before January 31, 2001, for a child in kindergarten at a lump-sum cost of $16,307, or a monthly cost of $396 for 48 months, or a monthly cost of $172 for 129 months.

The SCTPP enrollment fee is $75.

All contributions to SCTPP made after July 20, 2001, allow the contributor a state income tax deduction for the full amount of the contribution.

The SCTPP account grows state and federal tax-free. Qualified distributions (withdrawals used to pay for tuition expenses or refunds given in the case of scholarship, death, or disability) are not subject to state or federal income taxation.

The SCTPP contract may be used to cover tuition costs at a private college in South Carolina or an accredited out-of-state institution. The SCTPP Contract amount paid to those schools is determined by the weighted average tuition cost for South Carolina’s public universities at that time.

The contract may be cancelled at any time and a refund returned to the contributor in the form of a non-qualified withdrawal, subject to a cancellation fee and an IRS penalty on earnings.

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On average, college graduates earn about 52% more than high school graduates, while those with two or more years of postgraduate studies earn almost 75% more (Federal Reserve Bank of Cleveland)

According to the Council for Aid to Education, if tuition rises in the next twenty years as it has in the past 20, 6.7 million students (about half of those expected to want to attend college) will be "priced out" of higher education.

According to a national study conducted by the College Savings Plan Network, 73 percent of parents currently are putting away part of their income for their children’s college education, and most consider it as important as saving for retirement. The majority of savers (70 percent) say they prefer a program with a guaranteed but modest rate of return as opposed to a program with a higher rate but no guarantees.