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Wisconsin Upgrades Its Undergrad Fund

Last May, Wisconsin's college-savings program, EdVest, held $9 million in cash that parents had invested for their children's higher education. By November, EdVest had $120 million in hand.

Last May, Wisconsin's college-savings program, EdVest, held $9 million in cash that parents had invested for their children's higher education. By November, EdVest had $120 million in hand.

The recent growth stems from changes the state put in place to make the program more appealing to residents. They also helped Wisconsin earn a rating of five "caps" (as in mortarboards), out of a possible five, from Joseph Hurley, a CPA who judges the usefulness of state college-savings programs at savingforcollege.com.

Many of the reforms were made possible by federal legislation passed last year. The federal law made earnings on the money in state college savings plans exempt from federal taxes and expanded the type of expenses for which the money could be used. In addition to tuition and fees, the invested money can be used to cover room and board and books.

Wisconsin legislators made earnings exempt from state taxes and created an upfront state tax deduction. Parents can deduct up to $3,000 per year per child for investing in an EdVest account.

EdVest took other program-enhancing steps as well. Where only a parent or grandparent could open an account, now anyone can do so for a future high school graduate. And, the maximum total amount per account that can be invested was raised from $15,000 to $246,000. EdVest expanded from one to seven the number of investment options open to the accounts.

Several other states have made similar overhauls to their programs, helped in part by the new leeway permitted by the federal legislation. The reforms have boosted the number of states with a five-cap rating to 21.

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