New York’s 529 College Savings Program Direct Plan

Be Ready When the Bell Rings for College

Today’s Agenda

The goal of college

How New York’s 529 College Savings Program Direct Plan can help

Additional savings through Upromise® Rewards

Important considerations

To learn more…

The cost of college may be rising…

Estimated Cost of One Year at College

…but there is hope.

Most students receive some form of financial aid – either grants, scholarships, work-study or student loans.

In 2002-2003, total aid per full-time equivalent student averaged about $9,100 ($3,600 of which was in grant aid)†.

† The College Board, Trends in Student Aid 2003.

There are more ways than ever to save for college and more federal and state tax benefits for doing so.

Congress has enabled states to create savings plans under Section 529 of the Internal Revenue Code.

Each State can develop its own unique program.

Today’s Agenda

The goal of college

How New York’s 529 College Savings Program Direct Plan can help

Additional savings through Upromise® Rewards

Important considerations

To learn more…

A Partnership for New York

Higher Education Services Corporation (HESC)

George E. PatakiGovernor

Office of the State Comptroller (OSC)

Alan G. HevesiState Comptroller

Program Management By:

Upromise Investments, Inc.

Investment Management By:

The VanguardGroup

Key Features and Benefits of the Program

Significant Federal and State Tax Advantages

Broad Eligibility and Flexibility

Low Fees and Minimums, High Contribution Limit

Professional Investment Management by Vanguard

Additional Savings through the Free Upromise® Rewards Service

Convenient Online Account Opening and Account Management

Federal and State Tax Considerations

Only 529 program to offer New York taxpayers a State tax deduction

Can deduct up to $5,000 of contributions on state income tax return each year ($10,000 for married couples filing jointly)

* Unless extended, federally tax-free treatment of qualified withdrawals will expire after December 31, 2010.

Federal and State income tax-deferred growth

Earnings grow federal and State income tax deferred until withdrawn

Federal and State income tax-free qualified withdrawals for higher education*

Withdrawals for tuition, fees, room and board, books, and required supplies

Any qualifying post-secondary institution in the U.S., including public and private colleges and universities, 2- and 4-year programs, and vocational schools

Broad Eligibility and Flexibility

Any U.S. citizen or resident alien

Parents, grandparents, relatives, and even friends

No age or income limitations

Multiple account owners can open accounts for the same beneficiary

Account owner retains control of how and when the money is used

“Account Owner” (Person Who Controls the Account)

Any U.S. citizen or resident alien

Your children, yourself, your spouse, relatives, and even friends

No age or income limitations

Account owner can change beneficiaries to a qualifying family member of the current beneficiary without taxes or penalties

“Beneficiary” (Student for Whose Benefit the Account is Opened)

If beneficiary does not attend college, account owner can: (1) leave the money in the account until a

later date, (2) change beneficiaries, or (3) make a non-qualified withdrawal

Federal and State Tax Considerations

Non-qualified withdrawals subject to federal and State taxes

Subject to federal and State income tax on earnings, plus a 10% federal penalty tax on earnings

Any portion attributable to contributions for which a New York State tax deduction was previously claimed will be subject to New York personal income tax

Rollovers to another state’s 529 plan are considered non-qualified withdrawals for State income tax purposes

Withdrawals Due to Death, Disability or Scholarship

Subject to federal income tax on earnings, but not the 10% federal penalty tax

Withdrawals due to death or disability of beneficiary not subject to NY State tax

Withdrawals due to a beneficiary scholarship are subject to NY State tax to the extent they represent earnings and previously deducted contributions

Low Fees, Low Minimums, and High Maximum

One of the Lowest Management Fees of Any 529 Plan

0.58% of your investment annually (no other fees)

Low Minimum Contribution Amounts

$25 minimum for initial and ongoing contributions (EFT or check)

$25 minimum for AIP (bi-monthly, monthly, quarterly)

$15 for contributions made through payroll deduction

High Maximum Contribution Limit

Contribute until the total balance of all Program accounts for the same beneficiary reaches an aggregate maximum, which is currently $235,000 (earnings can continue to accrue after reaching the maximum)

Professional Investment Management by Vanguard

One of the Most Trusted Investment Management Companies

Largest pure no-load mutual fund company in the world

Over $600 Billion in assets under management

Commitment to high-value, low-cost investing and client service

Commitment to “plain talk” with customers

15 Vanguard Investment Options for the Program

3 age-based options and 12 individual portfolios

Choose up to 5 investment options per account

Reallocate among investments once per calendar year or when you change beneficiaries

Vanguard education investment specialists available to help

3 Age-Based Vanguard Investment Options

Conservative, moderate, and aggressive options

Contributions are invested according to your risk tolerance and the age of your beneficiary

As your beneficiary ages, your assets are automatically shifted to more conservative investments to seek to protect your capital

5 Stock Portfolios (100% stock funds)

Aggressive Growth Portfolio

Growth Stock Index Portfolio

Mid-Cap Stock Index Portfolio

3 Balanced Portfolios (mix of stock and bond funds)

Conservative Growth Portfolio

Growth Portfolio

3 Bond Portfolios (100% bond funds)

Bond Market Index Portfolio

Income Portfolio

1 Interest Accumulation Portfolio (100% short-term investments)

12 Vanguard Individual Portfolios

Small-Cap Index Portfolio

Value Stock Index Portfolio

Moderate Growth Portfolio

Inflation-Protected Securities Portfolio

Choose from among these options if you wish to be more aggressive or more conserv-ative than the age-based options allow.

Unlike the age-based options, your allocation among individual portfolios will remain fixed until you instruct the Program to change it.

Today’s Agenda

The goal of college

How New York’s 529 College Savings Program Direct Plan can help

Additional savings through Upromise® Rewards

Important considerations

To learn more…

Additional Savings with Upromise® Rewards

Upromise Rewards is a free, optional service that can add to your savings

Join Upromise for free through www.nysaves.org

Register your credit, debit, grocery and drug store cards

Get money back for college when you buy gas, dine out, shop online, buy groceries, and more

Link your Upromise Rewards account to your New York 529 account and have your Upromise savings transferred automatically on a periodic basis

Hundreds of leading companies will help you save for college

…and many more

Save for College at the Grocery Store

… at your favorite New York grocery store (over 1,000 participating stores).

Get money back for college on over 7,000 products…

Just register your grocery cards with Upromise.

From Everyday Expenses to Big Purchases

Over 9,000 restaurants Over 7,000 Hotels Circuit City The Sharper Image

Bed Bath & Beyond ADT America Online Many more…

Save for college at over 50,000 stores, restaurants, and services

Staples.com KBtoys.com Dell.com Sears.com Gap.com

Barnes & Noble.com Walmart.com JCPenney.com Many more…

Shop online through Upromise® and save at over 200 online retailers

Century 21 Coldwell Banker ERA

Chase Home Finance CitiMortgage Wachovia Mortgage

Save more for college on big purchases

Today’s Agenda

The goal of college

How New York’s 529 College Savings Program Direct Plan can help

Additional savings through Upromise® Rewards

Important considerations

To learn more…

Financial Aid and Other ConsiderationsState and Federal Financial Aid Consideration

Program assets not included in New York State financial aid determination

Considered parental asset (not the student’s assets) for federal financial aid purposes if parent is the account owner – which means that a smaller percentage is considered available for federal financial aid purposes

Hope and Lifetime Learning Credit Eligibility

Qualified withdrawal will not impact eligibility for the Hope Scholarship or Lifetime Learning tax credits, provided that the withdrawal is not used for the same expenses for which the credit was claimed

Special gift, estate, and generation skipping transfer tax considerations

Contributions are considered completed gifts and are generally removed from the account owner’s estate

Can contribute up to $55,000 in a single year ($110,000 for married couples filing jointly) without federal gift, estate, or generation skipping transfer tax consequences, provided no more gifts are made to the beneficiary for 5 years

No Guarantee & Other Important Program DisclosureNew York's 529 College Savings Program Direct Plan is described in the current applicable

Program Brochure and Tuition Savings Agreement. Accounts are opened by completing an Enrollment Form. All of these should be read carefully before opening an account. None of the State of New York, its agencies, the Federal Deposit Insurance Corporation (FDIC), The Vanguard Group, nor Upromise insures accounts or guarantees the principal deposited therein or any investment returns on any account or investment portfolio. The value of your account will vary based on market conditions and the performance of the investment options you select, and may be more or less than the amount you deposit. Tax benefits are subject to certain limitations and certain withdrawals are subject to federal, state and local taxes. If you are a resident or taxpayer of another state, you should consider whether that state offers a 529 Plan with tax or other benefits that are not available through this Program. You should consult your tax advisor. Investments may be made through Upromise Investments, Inc. and Vanguard Marketing Corporation, as distributors.  New York's 529 College Savings Program currently includes two separate 529 plans. The Direct Plan is sold directly by the Program. You may also participate in the Advisor Plan, which is sold exclusively through financial advisors and offers investment options that are not available under the Direct Plan. However, the fees and expenses of the Advisor Plan are higher and include financial advisor compensation. Be sure to understand the options available before making an investment decision.

Today’s Agenda

The goal of college

How New York’s 529 College Savings Program Direct Plan can help

Additional savings through Upromise Rewards

Important considerations

To learn more…

We’re Here to Help!!

Visit www.nysaves.org to learn more about the Program, request an information kit, and even enroll online.

Call 1-877-NYSAVES (1-877-697-2837) to speak with a Program representative at Vanguard. Monday through Friday, 8 a.m. to 9 p.m.