OHIO EDUCATION College saving program offers more

Vanguard's lower-cost index funds are now part of a state savings program.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
New options are available for participants of the state-sponsored college saving program, with more being considered.
Last month, Ohio Tuition Trust Authority added investment options that are managed by The Vanguard Group.
So far, investors in the state's CollegeAdvantage 529 Savings Plan have put about $12 million in the 15 new Vanguard options, said Jacqueline Williams, executive director of the trust authority.
Overall, the program manages $4 billion in investments, about half of which belong to Ohio residents and the rest to residents of other states. The program previously only had investment options managed by Putnam Investments.
Williams said executives are looking at adding bank savings accounts and certificates of deposit as investment options, but those are at least a year away.
In all states
All 50 states have 529 savings plans, which are designed to encourage people to save for college. Returns on the investments are not subject to Ohio or federal taxes if used for higher education expenses.
Williams said the trust authority's decision to broaden its options isn't related to the mutual fund scandal that has enveloped Putnam and other companies.
Class-action suit
Last month, the trust authority was named the lead plaintiff in a federal class-action lawsuit that seeks to recover money from Putnam. Government investigators said Putnam and other companies engaged in improper short-term trading.
Williams said the trust authority is comfortable with Putnam's managing CollegeAdvantage accounts because of management and policy changes that have been made.
Putnam's five-year contract with the state expires next year but would be automatically renewed if it meets certain performance, marketing and customer-service criteria. She said Putnam is meeting those standards so far.
The changes in investment options follow a survey that showed investors wanted more conservative, low-cost options, she said.
Vanguard's options are index accounts that seek to match the performance of a particular market index. Putnam offers actively managed accounts that seek to outperform indexes.
The expenses for Vanguard's options are normally half as much as the expenses for Putnam's options. Details are available at www.collegeadvantage.com.
Williams said about two-thirds of CollegeAdvantage investors opt for age-based options, which automatically shift money from stocks to bonds and money market investments as a child gets closer to college age.
Safer options
She said even safer options are being considered to try to reach more people. These would be bank-type investments that are backed by the federal government.
"There is a group out there that is extremely, extremely conservative," she said.
The trust authority started in 1989 by offering prepaid tuition accounts. The CollegeAdvantage program was created in 2000.
The authority has closed the prepaid tuition program, now called the Guaranteed Savings Fund, to new investors for this calendar year. Investments were not keeping pace with the rise of college tuition, she said. By this coming fall, the average annual tuition of at public universities in Ohio will have risen 50 percent over four years, she said.
shilling@vindy.com