College Illinois Facing Long-term Challenges, but Stable for Now

Illinois program to underwrite prepaid tuition contracts at Illinois colleges and universities faces long-term challenges. The College Illinois program, operated by the Illinois Student Assistance Commission (ISAC), asks contractual depositor/investors to provide money up front for a future college student named by the investor. Funds deposited in College Illinois are used to prepay tuition at an Illinois public college or university for that student. College Illinois is an approved, tax-advantaged investment vehicle under Section 529 of the federal Internal Revenue Code. Section 529 prepaid tuition programs, like College Illinois, should be distinguished from Section 529 college savings plans such as Illinois’ Bright Start program, operated by the Illinois Treasurer’s office.

Popular in the 2000s, state prepaid-tuition programs like College Illinois have come under fiscal challenge in the 2010s due to changes in public perception of governmental probity and falling rates of return on invested capital, even as tuition rates continue to increase. ISAC reported on Tuesday, June 9 that over a two-year period, they have sold too few prepaid tuition contracts to enable persons connected with the program to feel assurance that it can continue to operate indefinitely. During this two-year period 1,084 contracts were sold (438 in 2013-14 and 646 in 2014-15), well short of the 3,000 contract sales required for the program to enjoy sustainability.

Monies invested in College Illinois by existing contract holders are being invested and managed on a professional basis, and the program has partly recovered some of the unfunded deficits that appeared in the depths of the 2008-13 economic downturn. Sharp returns on monies invested in Wall Street equities have enabled College Illinois to keep its immediate commitments and partly claw back its standing. ISAC has told House Republicans that families with College Illinois contracts that are close to maturity are highly likely to enjoy a full return on their assets invested.