why invest

College costs continue to rise. While financial aid is available, most of it is in the form of loans. Loans must be repaid, with interest. Contributions to college savings plans, on the other hand, can grow as you invest. Assuming an annual 6% rate of return, investing $7,300 over a 10-year period nets $10,000. Borrowing $10,000 in student loans, however, costs a total of $14,460 over a traditional 10-year repayment period (at an 8.25-percent interest rate). The gap between borrowing and investing can be substantial — $7,000, in this example.

College saving plan investments — even small amounts — add up if you start investing early.

If you start regular contributions to a college investment program from the time your child is born, here's how much you'll have when he or she is ready for college:

Calculations assume a 6% rate of return and 17-year time horizon. These examples are for illustrative purposes only and do not reflect actual performance or predict future results of the Plan or any Plan series. They do not reflect any reduction for expenses or taxes or state tax benefits. The Vermont Higher Education Investment Plan does not guarantee principal or rate of return. See the Disclosure Booklets on the Plan Options for a discussion of the risks of investing in the Plan.

A VHEIP college savings account provides these tax advantages:

• Earnings on any distributions used to pay a beneficiary's qualified higher education expenses are Vermont tax-exempt.

• Earnings on distributions used for qualified higher education expenses are free from federal income tax. This federal income tax-free treatment of qualified withdrawals and other federal tax benefits are now permanently in place for 529 plans through the passage of the Pension Protection Act of 2006.

• Starting with the 2007 tax year, VHEIP participants will be able to receive a Vermont income tax credit of 10 percent of the first $2,500 per taxpayer contributed to an account, or up to $250 each year per taxpayer per beneficiary.

The Plan accepts contributions as low as $25 per month — or, if you establish payroll deduction with your employer, you can open an Account with just $15 per account per payroll period.

There is no annual maximum contribution limit; however, a lifetime limit of $240,100 applies to all accounts opened for a beneficiary. Your Account may continue to grow beyond this limit based on the performance of the investment option(s) you've selected.

This flexibility — of making either large or small contributions — is an advantage many other college savings plans don't offer.