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The rising cost of college tuition has almost everyone wondering how they will ever afford a higher education. The College Board estimates the annual cost of tuition, room and board, and fees at a four-year private college will cost $26,094 in 2003; the cost at a four-year public college will cost $9,805. Factoring in increases in coming years, a degree could eventually cost as much as $85,000 at a four-year public college and $200,000 at a four-year private college.
To help families offset the rising cost of higher education, Upromise, a Brookline, Massachusetts-based company (www .upromise.com or 888-434-9111), has partnered with more than 140 national companies to provide a program that allows parents, family members, and friends to register their credit cards to receive predetermined rebates toward a college student’s future education costs. For example, Toys “R” Us will contribute 2% of a purchase to a student’s Upromise account; and ExxonMobil will contribute 1 cent for each gallon of gas purchased. The accumulated money can be automatically swept into a tax-deferred Section 529 college savings account set up for the enrollee’s child, which goes into a Upromise account and is professionally managed by Salomon Smith Barney or Fidelity Investments. The other two options are to (1) take the money back in the form of cash and invest it yourself or (2) pool your money with other members (i.e., your mom and dad) to open one account for the student.
Funds are invested in various mutual funds to craft portfolios sensitive to each child’s age, years left until enrollment, and/or family investment goals. The goal is to choose investments that will produce the best returns when it’s time for the student to enter college.
Keisha J. Atha, 25, a manager at Kids “R” Us, was so impressed with the program that she saw no reason to delay, even though she had no children at the time. The Baytown, Texas, resident quickly enrolled after attending a company seminar on the program in October 2001. At the time she thought, “Why not save now for the children I plan to have,” says Atha, who now has a 3-month-old daughter.
Upromise spokesperson Jim Doyle says the program can be seen as a win-win for the companies that provide the rebates and those who set up Upromise accounts. “We’ve convinced companies to put what they would have used for endorsements into college savings,” he explains.
Doyle says by helping customers meet education costs, Upromise partners increase customer loyalty, which equates to long-term company success. “People would probably buy a GM car or truck (and get $150 toward their Upromise account) because of Upromise, but they won’t buy products they don’t need,” Doyle emphasizes.
While some criticize the program as promoting frivolous spending, Atha, who got married in April 2002, disagrees. “It’s free money that will eventually be put to good use,” she asserts. And not a moment too soon as she and her husband plan for their firstborn’s education.