Local financial planners urge caution on College Illinois prepaid tuition plan

SPRINGFIELD — Some suburban financial planners are urging parents to be at least a little more cautious when it comes to investing in the state's College Illinois prepaid tuition plan.

A report in Crain's Chicago Business Monday outlined that the fund had the biggest gap in the country between its assets and liabilities, raising questions about the program's long-term future.

Wheaton financial planner Theresa Hannon says she spotted that trend nearly a year ago and advised her clients to leave College Illinois. She said it was clear the state's investments wouldn't be able to keep up with rising tuition costs.

In addition, the Crain's report points out that the state is under no obligation to bail out the program should College Illinois run short on funds.

“At some point it has to implode,” Hannon said.

When parents sign up for College Illinois, they lock in current rates for tuition for their children, who may not go to college for many years. Then, the state invests the parents' money in hopes it'll grow and cover the higher cost of tuition when the child heads to college.

But recently, tuition rates at state universities have risen faster than the state's investments have grown, leaving the state with a gap between the amount of money they have and the amount they'll eventually need.

“The cost is going up a lot higher than they're making in their investments,” said Bob Mecca, a financial planner from Hoffman Estates.

Mecca still thinks the College Illinois program can be a viable option for some parents if they understand the risks. And others agree.

Mark LaSpisa, a financial planner in South Barrington, said it's OK for investors to get into College Illinois to lock down tuition rates. He suggests, though, that parents diversify their savings into other funds as well and then make more conservative investments once their children get closer to college.

The risks involved with College Illinois are something investors have to keep in mind, he says.

“You can't ignore the fact that you live in Illinois,” LaSpisa said.

College Illinois is not the same as the Bright Start program run by the Illinois treasurer's office. Losses in that program dogged former treasurer Alexi Giannoulias on the campaign trail when he ran for U.S. Senate.

A spokesman for the Illinois Student Assistance Commission, which runs College Illinois, said Monday's report shows another problem with the cost of rising tuition.

“We are doing what we can to make college affordable for students,” spokesman Paul Palian said.