Iowans contributed $317 million to college savings accounts last fiscal year

DES MOINES – Iowans continue to sock away money for their children's college educations.

A state audit issued Wednesday indicated there were 102,498 participants and 175,719 beneficiaries in the state-managed Iowa Educational Savings Plan Trust last fiscal year.

Fiscal 2011 additions to the $2.845 billion investment trust totaled nearly $798.7 million -- a 59.4 percent increase over the prior year that included nearly $317.3 million in contributions from participants and a net increase of $480.7 million in investment values due primarily to favorable financial market conditions, according to a report issued by State Auditor David Vaudt's office.

Deductions totaled nearly $173.7 million -- a 29.5 percent increase over fiscal 2010 that included almost $172.5 million in distribution to beneficiaries for qualifying educational expenses and more than $1.17 million worth of administrative expenses, according to the audit report.

“We've had a big jump. The market turned around and the investments did great. It was a great year, no question about it,” said State Treasurer Mike Fitzgerald. He noted the U.S. stock market took a financial hit in the current fiscal year that began July 1, but has rebounded in recent weeks.

State auditors found that the average yearly contribution was nearly $1,600 per student in a trust created in 1998 with the state managing accounts for more than 208,000 students who are either going to college or are already enrolled.

“We've found families, through thick and thin, just keep saving for college educations,” Fitzgerald said. “It is really ingrained in people's minds that they need to start saving for college.”

The state treasurer said investing money that is tax deductible through the state-managed trust makes sense for parents and grandparents at a time when college expenses increased by 8.3 percent in the past year – outpacing the 3 percent rate of inflation. “It's the fastest-growing expense out there, so it makes it more dire for families to put money away,” he added. “It's crucial and Iowans are recognizing that.”

Under the program, each parent or grandparent can put $2,865 per child into an account and deduct the investment from their state income tax liabilities. Investors can chose from 13 investment strategies that range from aggressive to conservative and withdrawals are not subject to state or federal taxes if used for qualifying educational expenses like tuition, books and room and board, Fitzgerald said.

A copy of the audit report is available at http://auditor.iowa.gov/reports/1260-6550-0001.pdf.

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