As New School Year Gets Underway, American Century College Investing Study Shows Education a Top Priority for Parents.

Business Editors

KANSAS CITY, Mo.--(BUSINESS WIRE)--Sept. 25, 2000

Learning Quest Program Open to All U.S. Residents

As children get settled into school for another year of learning, a study by American Century Investments finds that 96 percent of parents expect their children to pursue education after high school.

"College education is second only to retirement as a reason people want to save money," said Doug Lockwood, director of shareholder education at American Century. "Finding the resources to cover the rising costs of education is one of the biggest challenges facing parents today."

The American Century-sponsored study of 500 parents with children under the age of 18 found that of those who plan for their child to pursue postsecondary education, nearly seven in 10 expect the child to attend a four-year public or private college. The study found that 76 percent of parents expect to pay at least half of the post-high school education costs.

But many parents seem to underestimate the future costs. Of parents with their oldest child age 15 to 18 years, nearly half expect a single year of postsecondary education expenses to cost less than $10,000. For parents with their oldest child age 5 to 14 years, about 30 percent expect one year to cost under $10,000, while nearly one parent in five had no idea how much a year of college would cost.

However, estimates(note a) for the average total cost of four years at an in-state public college - including tuition, room, board, supplies and other expenses - are $47,000 to $54,400 for children who currently are 15 to 18 years old. Estimates for a private college for those children soar to $102,000 to $118,000. For a 10 year old, the estimate for four years at an in-state college is nearly $70,000 and is more than $150,000 for a private college. For a child born this year, the estimate for an in-state college is $113,000 for four years. For a private college, the figure is nearly a quarter of a million dollars.

On a regional basis, parents seem to have different expectations for college costs. Half of all parents in the South expect one year of postsecondary education to cost less than $10,000, while only 29 percent of parents in the Northeast have the same cost expectation. Thirty-seven percent of Midwest parents and 33 percent of parents in the West expect the cost to be under $10,000 a year.

The good news from the study is that about three-quarters of parents who plan post-high school education for their child already have started saving. The bad news is that 43 percent of those have saved less than $10,000 so far. Moreover, one out of every four hasn't started saving yet. Sixty-two percent of the non-savers do plan to start saving in the future, with almost two-thirds expecting to start saving within the next one to three years.

"Learning Quest, a new state-sponsored 529 savings program, can help parents fill that savings gap between what they need for future costs and where they are right now," Lockwood said. "With the vast majority of parents indicating postsecondary education is a top priority, clearly the time is right for Learning Quest."

With the recently launched Learning Quest Education Savings Program, investors across the country can set aside money for a child's education. Study respondents ranked several features that are "most important" in an education savings program, including the ability to send a child to any accredited school in the U.S. (88 percent), parental control of the account (88 percent) and tax-deferral on the account's growth (75 percent).

Specific benefits of Learning Quest include:

-- Flexibility to attend any accredited college and certain vocational programs
anywhere in the U.S. (some foreign programs also are eligible).

-- Account owner maintains control over the account until it is depleted.

-- No federal tax on earnings in the account until they are withdrawn (most
states also defer taxes - check with your tax advisor).

-- Professional investment management tailored to time horizon and risk
tolerance.

-- High contribution limits - currently $127,000.

-- Low minimum investment requirement.

-- No income limits for those contributing.

-- Withdrawals for qualified expenses are taxed at the student's tax rate.

-- Account owner can transfer the account to a family member of the student.

-- Any U.S. citizen or resident can open an account for anyone, including
himself or herself.

-- Individual contributions of up to $50,000 per student in one year are free
from federal gift tax if no additional gifts are made to the same student
during the next four years.

-- Contributions are removed from contributor's taxable estate but the account
owner maintains control over the account until it is depleted.

Learning Quest offers three investment tracks: conservative, moderate and aggressive. The account owner chooses a track based on a self-assessment of risk tolerance and time horizon when the account is opened. Within each track is a series of asset allocation portfolios that automatically adjust to a more conservative mix of investments as the student gets closer to college. Various combinations of American Century mutual funds serve as the underlying investment vehicles for the asset allocation portfolios.

Elrick & Lavidge, a national research firm, conducted the 500 phone interviews for the "American Century Investments 2000 College Investing Study" in early summer 2000. Only parents indicating they had a child under the age of 18 were included in the random sample. Findings are significant within +/-3 percent at a 90 percent confidence level.

More information on Learning Quest is available by calling 1-800-579-2203 or by visiting www.learningquestsavings.com.

American Century is a mutual fund, brokerage and investment services company serving nearly two million individual and institutional investors. It was recently selected as one of FORTUNE Magazine's 100 Best Companies to Work for in America. Through its broad selection of more than 70 mutual funds, the Kansas City, Missouri-based company manages more than $115 billion in assets. James E. Stowers Jr. founded the company in 1958 and serves as chairman. His son, James E. Stowers III, is chief executive officer and William M. Lyons is president and chief operating officer. For more information on company products and services, visit its Web site at www.americancentury.com.

Learning Quest is administered by Kansas State Treasurer Tim Shallenburger and managed by American Century Investment Management, Inc. Accounts established under Learning Quest and their earnings are neither insured nor guaranteed by the State of Kansas, the Kansas State Treasurer or American Century.

(note a) Source: Estimate based on data reported by the College Board from "Annual Survey of Colleges in Trends in College Pricing, 1999," www.collegeboard.org.