Rebate plans offer head start toward paying college costs

PERSONAL FINANCE

Saving for college by going shopping

August 11, 2002|By EILEEN AMBROSE

COLLEGE IS is a long way off for 17-month-old Abigail Cohen, but paying for it is never far from her parents' thoughts.

"If you look at any report of what college will cost, it's an enormous figure and ... certainly a scary one," said her father, Steven Cohen, a public relations executive.

Every bit of savings counts, Cohen said, which is one of the reasons the Kensington parents signed up in October for a program in which they earn rebates on gasoline, groceries, books, dining out and other purchases from retailers and manufacturers. The rebates can be directed into a college savings plan, or the Cohens can receive a check and invest the money.

Abigail's grandparents also are signed up, so their rebates will go into savings for her.

The Cohens haven't changed their shopping habits, and they have racked up $276 in rebates. If their purchasing remains the same, the program estimates, they will save $5,000 in 15 years.

"I'm hoping when my daughter goes to college, $5,000 still has some value," Cohen said.

The rebate program the Cohens joined, Upromise, started last year in Brookline, Mass., and has more than 2 million members. BabyMint Inc. in Atlanta, a similar program that also began last year, says its membership is in six figures.

Both programs are free to consumers. Upromise and BabyMint are funded by participating businesses and manufacturers hoping to generate brand loyalty. Though the programs are designed to boost college savings, members can use rebates for anything they want.

"As long as they are going to spend the money anyway, why not have a small portion allocated to college?" said Judy Miller, a financial planner with College Solutions in Alameda, Calif. If the programs remain free, Miller suggests, parents might want to join both.

She warned, however, that participants should not justify overspending by figuring that they're saving for college. And they should realize that rebates alone won't generate nearly enough for college, she said.

Tuition and fees for four years at a Maryland public college are expected to total $68,471 in 18 years, according to Maryland Prepaid College Trust. The cost could be more than double that once room and board, books and other expenses are added.

Though similar, the two programs differ in enough ways that consumers might want to check on which program best suits their shopping habits. Here are the basics of each:

When signing up for Upromise at www.upromise.com, members register their credit and debit cards and grocery store loyalty cards, which allows Upromise to track purchases for rebates.

Upromise rebates range from 2 percent to 5 percent on products and 10 percent at restaurants. Consumers can get 3 percent rebates on Coca-Cola drinks, Kellogg's cereal, Skippy peanut butter and Huggies diapers at participating grocers. They also can earn a penny a gallon for gasoline purchased at Exxon or Mobil stations and 4 percent on AT&T long-distance charges.

If they buy or sell a house through a participating Century 21 real estate agent, they'll get a rebate worth half of 1 percent of the home's price.

Members can earn additional rebates by signing up for the Citi Upromise Card. The MasterCard has no annual fee and pays a 1 percent rebate on all purchases, with total rebates limited to $300 a year.

Accrued rebates can be sent to one of a half-dozen state-sponsored college savings plans, managed by Fidelity Investments, New York Life Investment Managers or Salomon Smith Barney. Or the rebates can be sent directly to members, who then can send the money to the plan of their choice.

People can sign up for BabyMint online at www.babymint.com.

Members earn rebates in several ways. They can shop at more than 150 online retailers through BabyMint's Web site or print out grocery coupons to use at the thousands of stores that accept coupons. Or they can purchase gift certificates through BabyMint to be used at national retailers including Crate & Barrel and Macy's.

Rebates average 5 percent to 10 percent, although some are up to 20 percent.

The BabyMint MasterCard also charges no annual fee and pays a 1 percent rebate on purchases, and there is no limit on the rebates each year.

Once a member racks up $25 in rebates, BabyMint forwards the money to any state's college savings, prepaid tuition plan or other savings account that the member requests, said spokesman William Koleszar.

BabyMint also recently introduced a Tuition Rewards Program in which members enrolled in a 529 plan or other approved savings vehicle can earn a reduction in tuition at more than 140 mostly small, private schools, Koleszar said. Someone earning $5 in merchant rebates also will get $5 knocked off the tuition at, say, Drexel University in Philadelphia.

The program doesn't guarantee a student's acceptance at the school, and the rewards could reduce financial aid from the college.

Mark Annulis, a software engineer and father of two from Finksburg, signed up for both programs. "They complement each other," he said.

He uses Upromise for rebates on gasoline and groceries, and BabyMint for a 5 percent rebate on his daily Starbucks coffee and for a coming stay at a Marriott Hotel.

His Upromise rebates will go into a Fidelity college savings plan he set up a couple of years ago, and the BabyMint money will be deposited in Maryland's plan managed by T. Rowe Price Associates.

Though the rebates are pennies for every dollar spent, Annulis said they're a nice perk. He said he will patronize retailers in the programs as long as they're not out of his way or their products are not more expensive.

"I'll be brand loyal. I used to get my gas at Citgo, and now I'll get it at Exxon and Mobil," he said.

To suggest a column idea, contact Eileen Ambrose at 410-332-6984 or by e-mail at eileen.ambrose@baltsun.com.

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