Sallie's Tuition Rebates Not Always Worth It

The selection of products that qualify for Upromise is limited, and many are premium brands.
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Upromise, a unit of Sallie Mae (SLM) - Get Report, allows students and their families to save for college by earning rebates on purchases of select products and services.

But the number of qualifying products is relatively small, and there are so many competing loyalty programs that some people wonder if it's worth the bother.

Members register various loyalty cards from grocery and drug stores or gas stations, and every time they purchase a qualifying product a small percentage (usually 1%-3%) of the price is deposited in their Upromise account.

The rebates can be applied toward education savings accounts or directly to student loans.

Participating companies include Citicorp., a unit of

Citigroup

,

Kellogg

,

Kimberly-Clark

,

McDonald's

,

J.C. Penney

, Nestle, Land's End, a unit of

Sears

, and

Johnson & Johnson

, among others.

That sounds like "free" money -- and it is, assuming you were planning to buy these products anyway.

The problem, according to some members, is that there aren't enough products that qualify for the program, and many of those that do are premium brands that cost customers more than they would normally spend.

A number say they have been disappointed at how slowly funds accrue in their accounts.

"I've had Upromise accounts for a long time and I've probably accrued $10," says Jeff Geist, a geologist from Kansas. "It's not worth the hassle."

Rey Hauksson, a graphic designer, has a similar reaction. "I started an account with Upromise about three years ago and I have not saved much," he says. "I just looked at my account yesterday, in fact, and I think there is like 150 bucks there."

Upromise President David Rochon points out that savings are driven by the user: It's up to you to register your cards and make the purchases that result in savings. Users can also register friends' or family's cards and capitalize on their purchases as well.

He notes that Upromise has recently branched out to include larger products, such as auto loans, mortgages and life insurance, where the payback is higher. It has over 500 online partners, including real estate companies like Century 21, where a home purchase can result in up to $3,000 being credited to a member's account.

You can even make 2% using

Cryo-cell

(CCEL)

, a company that stores a baby's umbilical cord blood.

"We want to give people a jump-start on savings. A helping hand," says Rochon.

However, many of the qualifying products that people are likely to use more often, such as those sold in grocery stores, are the more expensive name brands. For example, the Bic Soleil four-count razor package pays back 3%, but it costs $5.49, resulting in a deposit of 16 cents in your Upromise account.

But an equivalent, private-label package of razors sold at ShopRite costs just $3.99 -- a savings of $1.50.

In this case, it would seem to make more sense to buy the cheaper product and deposit the savings into the college fund -- assuming you are disciplined enough to do that.

Upromise does have its fans. "I think it is awesome," says Antonio Torres, a pension analyst at Proctor & Gamble. "My account has grown to over $900 in just about three years. All this from just buying things that I was planning to buy anyway."

Torres acknowledges that the money isn't a windfall, and it doesn't eliminate the need to save for college. "But it is a nice extra that, reinvested over time, will add up to several thousand dollars if I stopped here," he says. "That's as close to free money as you will ever get."

Upromise also administers the 529 college savings plan, a tax-advantaged account similar to a 401(k). It currently works with nine states and expects to add two more by the end of the year. This comes to 1.3 million accounts with $17 billion in assets. Of these, 350,000 accounts are actually linked to Upromise for the additional rewards.

"We've swept $65 million over the past four years to 529 plans from Upromise accounts," said Bernie McNamara, senior vice president of client management.

Upromise members are not required to open 529 accounts, however, and they can ask for balances to be paid out in the form of a check.

"Actually I use it to make principal payments to my wife's student loans. I move money out in $25 chunks," said John Grace, a financial analyst at Capital One.

David Ross, a certified financial planner in New Jersey, likes the convenience. "Signing up was pretty painless, and now it all just happens in the background," he says.

That seems to be the draw of this program. Parents are struggling to save enough for their children's education as college tuitions soar. It's hard to come up with the hundreds of dollars we're told we need to put aside each month and still fork over money for soccer camp.

Upromise may not pay for a degree at Harvard, but it could help pay for books and maybe even a bit toward tuition.