1. New Yorks 529 College Savings ProgramDirect Plan Be Ready When the Bell Rings for College

2. Todays Agenda

The goal of college

How New Yorks 529 College Savings ProgramDirect Plancan help

Additional savings through Upromise Rewards

Important considerations

To learn more

3. The cost of college may be rising Estimated Cost of One Year at College 4. 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.

5. Todays Agenda

The goal of college

How New Yorks 529 College Savings ProgramDirect Plancan help

Additional savings through Upromise Rewards

Important considerations

To learn more

6. A Partnership for New York Investment ManagementBy: The Vanguard Group Program ManagementBy: UpromiseInvestments, Inc. Office of the StateComptroller (OSC) Alan G. Hevesi State Comptroller Higher Education Services Corporation (HESC) George E. Pataki Governor 7. Before and After the Transition from TIAA

On November 14, 2003, all Program accounts and assets previously managed by TIAA-CREF transitioned to Upromise and Vanguard.

0.60% of assets 0.60% of assets Management Fee Online capability for most frequent transactions Paper forms available online Online Account Management Same

Single filer: up to $5,000 per year

Married filing jointly: up to $10,000 per year

New York State Income Tax Deduction 15 Options 4 Options Investment Options The Vanguard Group TIAA Investment Manager Upromise Investments, Inc.Teachers Insurance and Annuity Association (TIAA) Program Manager After Before 8. 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

9. 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 returneach 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

10. 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 11. 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 states 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

12. 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)

13. 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

14. 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

15. 12 Vanguard Individual Portfolios

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)

• 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.

16. Todays Agenda

The goal of college

How New Yorks 529 College Savings ProgramDirect Plancan help

Additional savings through Upromise Rewards

Important considerations

To learn more

17. Additional Savings with Upromise Rewards

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

• Join Upromise for free throughwww.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 18. 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. 19. 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 20. Todays Agenda

The goal of college

How New Yorks 529 College Savings ProgramDirect Plancan help

Additional savings through Upromise Rewards

Important considerations

To learn more

21. Financial Aid and Other Considerations

State and Federal Financial Aid Consideration

• Program assets not included in New York State financial aid determination

• Considered parental asset (not the students 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 owners 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

22. No Guarantee & Other Important Program Disclosure New York's 529 College Savings ProgramDirect Planis 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.TheDirect Planis sold directly by the Program. You may also participate in theAdvisor Plan , which is sold exclusively through financial advisors and offers investment options that are not available under theDirect 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. 23. Todays Agenda

The goal of college

How New Yorks 529 College Savings ProgramDirect Plancan help

Additional savings through Upromise Rewards

Important considerations

To learn more

24. Were Here to Help!!

Visitwww.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.