Nevada's college savings plan to start in October

CARSON CITY -- Wendy Ernaut is "very excited" that Nevada's pre-paid college savings plan is ready to begin Oct. 1.

With a 2-year-old son and another baby on the way, she and her husband, Peter, want to start putting money away now for their children's college tuition.

The finishing touches were approved last week for the program that will allow a family to start paying into a fund that will finance tuition and books at the University and Community College System of Nevada when the child reaches 18.

Wendy Ernaut, who lives in Reno, says the couple plans a big family -- either three or four children -- and each will be enrolled.

There are 16 states that already offer pre-paid tuition plans with Nevada, Illinois and South Carolina joining this year, according to the College Savings Plan Network. The plans guarantee they will cover tuition for students who attend in-state public universities and community colleges.

Another 10 states have savings plans but don't guarantee tuition. Pam Taylor, director of the National Association of State Treasurers, which oversees the savings network, said she expects 12 more states to start savings plans this year.

The board of trustees of Nevada's saving plan last week set the pricing schedule and it hopes to enroll 3,000 members in its first year. Parents, grandparents or families can either invest by a lump sum or by a payment plan.

For instance, parents would have to come up with a one-time $6,278 payment for a newborn or they could make $55-a-month payments for 210 months. Another option is to enter a five-year payment plan of $126 a month to guarantee the cost of tuition and books for a student attending UNLV or the University of Nevada, Reno.

For a 6-year-old, the lump sum would be $7,851. The extended plan requires 78 payments of $128 and the five-year plan calls for $157 a month.

The present cost to attend a Nevada university is $2,070 a year, a price tag that is expected to grow annually.

Community college annual costs are $1,185 -- the amount of payments to guarantee tuition for community colleges is less than the university.

The trustees will hire a professional money management firm to work with the office of state Treasurer Bob Seale to invest the money.

"The advantage to this is we're saving now for something that is getting more and more expensive every year," Wendy Ernaut and. "And Bob Seale has a good record in investing money."

Peter Ernaut served in the Assembly that approved the bill and he contributed $200 so he would be the first member when the plan started.

Seale, along with Gov. Bob Miller, proposed the plan to the 1997 Legislature. He says press conferences will be held at UNLV and UNR on Oct. 1 to kick off the program on which an estimated $350,000 will be spent on advertising.

The first sign-up period will extend for six weeks. Another sign-up period won't open until October 1999.

Seale said a student could go to an out-of-state school but only the tuition costs in Nevada would apply to that other institution.

If the boy or girl doesn't go to college, the plan will refund the money plus interest at the rate banks pay for savings accounts. For instance, Seale said, the trustees decided to pay a 2 percent rate of interest the first year if somebody invests and then withdraws.

"We don't want people to use this as an investment vehicle," he said. "We want it to go for tuition. The 2 percent will discourage them from leaving."

The interest rate to be paid back if the investment is withdrawn will be set every year.

The interest earned on the money invested in the savings account will be taxed when it is paid out for schooling. And the tax will be computed on the income of the student, which is traditionally lower than that of his or her parents.

Seale said efforts are being made to have the amount invested in the plan tax exempt.

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