One Little-known way to save money for college is through an insured tuition plan. Basically, it's a systematic savings program, billing you for payment once a month. If you die, an insurance company completes the plan for you, thus asuring your child of the money he needs to go to school.
Two companies do most of the insured-tuition business in the country: The Richard C. Knight Insurance Agency, 53 Beacon St., Boston, Mass. 02108, and Tuition Plan. Inc., Donven St. Extension, Concord, N.H. 06301.
At the Knight agency, savings plans can be started even when the child is very young. You estimate how much you'll need for college in the future, and make monthly payments based on that amount. If your child is now six years old, and you'd like to save $20,000 for his education, you'd pay at the rate of around $111 a month for 15 years.
Inflation being what it is, college is going to cost a lot more than $20,000 in 1993. But there's absolutely no telling how much more. The Knight plan pays interest on your money at the rate of 5 1/2 percent, which, compounded over the years, gives you at least some protection against inflation. If you can afford it, you might want to pay more than $111 each month.
Money saved in a bank could earn as much as 7 3/4 percent (on amounts of $1,000 or more). But the Knight plan has an element of compulsion - good for those of us who have never felt very strongly compelled to save. For one thing, there's monthly bill. For another, the plan is covered by insurance, as long as you keep up the payments.
The cost of this insurance is very low - only 60 cents per $1,000 per month for a parent aged 40 to 60, on long-term savings plans. That's just $6 per month to assure your child of $10,000 toward college, even if you die or become totally and permanently disabled. Younger parents pay less.
Some parents, who foresee graduate school in their children's futures, set up a plan covering an estimated cost for six years or more of higher education, and even four years of prep school. If you die or become disabled, those education costs would be paid. If the child doesn't go on to graduate school, you'd get back whatever money you'd saved toward it, plus interest.
So much for those among us who plan ahead.Most parents don't do much about college costs until the bills are practically upon them. The vast majority of Knight's plans aren't begun until the spring of the student's senior year in high school.
At that point, payments are quite large, affordable only by business and professional people with good incomes. To save $3,000 a year, you might have to put up $375 for eight months, then $250 a month for the following three years of college. Interest on short-term plans is paid at 5 percent, but there's not enough time to earn very much on your money. Under the plan, you'd pay Knight once a month and Knight would pay the semester's bills as they fell due.
Insurance is also available on short-term plans, at 80 cents per $1,000 for people 40 to 60. The agency's Frank Kannegieser says they do their best to insure everyone who applies, even those with health problems. If your case is marginal, they might give the insurance for just one or two years, renewable at the company's option.
Tuition Plan, Inc. works on the same principle as does the Knight agency, but with some differences. There are no long-term plans; the earliest you can begin setting money aside is the child's junior year of high school. No interest is paid on the money you save. TPI provides life insurance coverage (but no disability) at a flat rate of 59 cents per $1,000 per month.
The Girard Bank in Philadelphia also has insured tuition plans.
If you can't afford to pay for college out of current income, both Knight and Tuition Plan, Inc. offer college loans.Knight charges 12 percent with up to five years to repay. TPI charges 13.6 to 17 percent, payable over up to eight years. There's also insurance, to repay the loan if you die.