What is the CollegeSure CD?
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Answer:
The CollegeSure CD is an FDIC-insured certificate of deposit (CD) with an interest rate that is tied to the annual increase in college costs. The interest rate adjusts annually on July 31. The CollegeSure CD is offered in terms of 1 to 22 years. The term you choose usually coincides with the number of years until your child enters college.
CollegeSure CDs are sold in whole or partial units. A unit is simply a measure of the portion of college costs you have prepaid. At maturity, each whole unit is guaranteed to pay the average cost of one year of tuition, fees, and room and board at a four-year private college. This guarantee assumes interest and principal remain on deposit until maturity. If you choose to purchase only a partial unit, at maturity it will be worth only a portion of the average yearly college cost. Because the interest rate varies annually, a CollegeSure CD might provide a better return than a traditional bank CD or Series EE government bond.
As a CD, interest earned on the CollegeSure CD is taxable, and an early withdrawal penalty applies. However, if your child decides not to go to college, you can get the entire principal and interest back when the CD matures and use it for any purpose.
The CollegeSure CD is offered only by the College Savings Bank in Princeton, New Jersey. For more information, call the College Savings Bank at (800) 888-2723.
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