NASHVILLE, Ten. (AP) — A new college savings plan in Tennessee aims to help more students afford a higher education, state officials announced Tuesday.
Gov. Bill Haslam, joined by the state treasurer and both legislative speakers, announced the "TNStars College Savings 529 Program."
The governor called the plan a "great opportunity for Tennesseans who want to attend college."
"There are a lot of issues around why Tennessee is behind the national average in college attendance and college graduation, but affordability and access is at the heart of those issues," he said.
The plan takes its name from section 529 of the Internal Revenue Service code, which authorized the creation of tax-advantaged plans in 1996.
To encourage enrollment in the program, Tennesseans who open accounts with at least $50 will receive a one-time $50 match from the state. Those who roll over their account balances from other 529 college savings plans, including the state's prepaid plan, will get $100.
The program also offers federal tax-free earnings if the money is used for higher education expenses, and low fees that compete with some of the top-rated plans in the nation.
The state is spending more than $3.3 million to market the program, including payment to a private marketing firm and television ads.
"In this highly-competitive and changing economy, it is important that we keep our children focused on achieving a higher education and post-secondary education that qualifies them for the 21st century specialized workforce," said state Treasurer David Lillard.
About four years ago, the state partnered with Georgia to start a college savings plan that allowed families to put away money for their children's higher education expenses.
The new one is specific to Tennessee and allows participants to control how they manage their investments. The plan has an age-based option in which investments are more aggressive when children are young and become more conservative as they approach college age.
Rich Rhoda, executive director of the Tennessee Higher Education Commission, told The Associated Press earlier this week that the new program is more viable.
"There has been one (college savings program) in place in Tennessee over the years, and this is basically breathing new life into it," he said. "This is where families can start saving for their children's, grandchildren's college education way ahead of time. It's a safe investment."
Mark Schneider is vice president of the American Institute for Research and the author of a recent study that examined how much graduates from Tennessee's colleges and universities earn their first year in the workforce. He said Tennessee's new plan is a good idea.
"It's all about college affordability and debt," he said. "So, as colleges become more and more expensive, parents and students are looking for more and more ways to finance college. And the 529 plan is one way of trying to accumulate ... the money that you need to send your kid to school."