Connecticut Has Been Encouraging Saving for College for 25 Years

Twenty-five years ago, the Connecticut state legislature established the Connecticut Higher Education Trust (CHET) direct-sold college savings plan as a means of helping Connecticut families save funds for future college education costs.

From that start in 1997, the CHET program has grown to more than $3.5 billion in assets and 132,000 accounts. Over $2.1 billion has been withdrawn from CHET accounts through the years to help more than 57,000 students pay for college expenses.

Funds deposited into a CHET account have tax advantages – including some added during it’s 25-year history - and can be used at accredited colleges and universities across the country, including vocational and technical schools, and some colleges abroad. Funds can be used for a range of college expenses – most notably for tuition, but also for room and board, books and computer equipment.

Connecticut residents are allowed to deduct 529 contributions from their state income taxes – up to $5,000 for an individual or up to $10,000 for a married couple filing jointly.  That benefit has been in place since 2006, advocated by former State Treasurer Denise Nappier and approved by the state legislature. There is no annual fee or minimum required to open or maintain a CHET account. 

Earnings on CHET account savings grow federal and Connecticut income tax-deferred, and qualified withdrawals are free from both federal and Connecticut income taxes.  In addition to college expenses, CHET account savings can be used – up to $10,000 per year – for elementary, middle and high school – private, public or religious. 

More recently, the legislature in 2014 approved the addition of the CHET Baby Scholars program, which provides a $100 state contribution to new CHET accounts opened for babies less than a year old who reside in Connecticut or adopted children who reside in Connecticut and have not reached the 1-year anniversary of their adoption.  With the opening of a  CHET account, $100 will automatically be deposited into the account— “with no contribution required from you” the program website explains. 

Investment earnings are exempt from state and federal taxes if used for qualified educational expenses. As of March 2021, the CHET 529 College Savings Plan - Direct Plan has been managed for the State Treasurer’s Office by Fidelity Investments.  For two decades previously, the investment manager was TIAA-CREF.

Nationally,  despite their advantages only 29% of college-saving parents use 529 plans, according to Sallie Mae’s 2018 report “How America Saves for College.”  Forbes magazine reported earlier this year that “the biggest reasons to consider a 529 plan are the structured savings and the tax benefits. Merely having a specific college savings vehicle could encourage you to save more than you would have otherwise. And choosing a 529 plan rather than a traditional savings account gives you the benefit of tax-free growth on investments and a potential state tax break.”

The CHET program is currently in the midst of its Dream Big! Competition for K-12 students. To enter, students are asked to submit a drawing, short essay or video answering a question, depending on their grade level, focusing on their dreams for the future.

More than $300,000 in CHET 529 College Savings Plan – Direct Plan account contributions will be awarded to students in grades K-12 along with technology prizes to schools across Connecticut. Entry deadline is October 21. Three prize-winning students will be awarded $25,000 prizes, 15 will be awarded $7,500 prizes and 240 will be awarded $500 prizes. In addition, each school in Connecticut that is represented by at least one student entry will be eligible for a random drawing for one of 25 technology prizes.

For more information about Connecticut’s CHET program, visit www.AboutCHET.com