Bill HB2237 puts in place a college savings program for every newborn baby in Illinois starting in 2021. The parents must claim the savings account for their child before their 10th birthday. If the family moves out of Illinois, the money goes back to the state.
High school graduates would have access to that money, plus any interest and dividends it earns over time, until they are 26. Families would also be encouraged to contribute additional money or set up their own separate 529 accounts.
But if the student does not go on to any form of post-secondary education, he or she would forfeit the original $50, plus earnings associated with it, and those funds would be used to pay for other children’s accounts in the future.
Fiscal Note (Office of the Treasurer)
Based upon Illinois’ current birth rate of 155,000 to 165,000 newborns per year, the annual cost for this program is expected to be $9-10 million per year, beginning in FY21. This includes approximately $8 million for the initial seed funding of $50 per child and an estimated $1.5 million to develop local savings incentive partnerships, engage parents and children in related financial literacy initiatives, and administer the program. Because unclaimed and unused funds will remain with the program for future use, the need for annual appropriations will decline after year 10 of the program as unclaimed and unused funds are recycled.
State Representative Michael Halpin (D) believes the initial $50 will be a kickstart to saving.
“Research shows if you have one of these college savings accounts, a child is much more likely to attend college just by having the account in the first place,” Halpin explains.
But State Representative Tony McCombie ® says the program would help families, but she says the state needs to find a way to fund the program first.
“It’s just a feel-good bill that was passed,” says McCombie. “It is another one of those bills that is subject to appropriation, there is no funding put into the budget.”
To start the program, it will cost the state $8,000,000 and another $1,500,000 each year after.
For parents who think they could invest the $50 and watch it grow, Quad City Investment Advisor, Mark Grywacheski, says the money won’t go far.
“Over the course of 18 years, that $50 with dividends and interest is only going to grow maybe a few hundred dollars,” says Grywacheski.
Grywacheski says that money could help students purchase textbooks at the most.
“If the state of Illinois was really serious about college education, it would restructure the out of control cost structure,” says Grywacheski.
- Chicago Sun Times