Someone reminded me the other day about Colorado Promise and I realized I’d never written about it. Most Coloradans are (hopefully) aware of the College Opportunity Fund, which pays a stipend for Colorado residents to attend in-state public universities (and some in-state private universities). They are also (hopefully) aware of Colorado’s College Invest 529 plan, which gives you a state tax deduction on contributions and then your contributions are invested and you can withdraw them tax free (both federal and state) for qualified post-secondary education expenses. Both of those have been around for a while and have no income restrictions. Colorado Promise is a relatively new program (2024) and is much more generous, but does have income limitations.
The Colorado Promise program essentially pays for the first two years of college (tuition and fees) for lower-income residents who attend a public college in-state. It is important to realize that it is a retroactive reimbursement, so you do have to pay tuition and fees and then you get reimbursed when you file your taxes the following year. There are also several restrictions that are important to be aware of:
- You have to enroll at a Colorado public college or university within two years of high school graduation.
- You have to have a household Adjusted Gross Income (AGI) of less than $90,000.
- You have to complete the FAFSA or CASFA each year.
- You have to maintain at least a 2.5 GPA.
- You have to complete at least 6 credit hours each term.
Note that many Colorado colleges have even better Promise programs, although they have even lower income limits so will be harder to qualify for (but for some institutions it covers every year not just the first two).
This is a fantastic benefit for lower-income Coloradans. It is also something that some very early retirees may be able to take advantage of. Some early retirees are able to keep their AGI very low, typically because they are living off of their taxable brokerage accounts and/or withdrawing some Roth IRA contributions. For many of these folks, it will be pretty easy to get both ACA subsidies and two years of tuition and fees free (and perhaps even qualify for some of the Institutional Promise programs which might give them all four). This does require some planning because eligibility is based on your FAFSA/CASFA, which is based on your tax return two years prior. But for anyone who has been able to retire very early, they are likely able to manage this. And if they are typically a bit over the $90,000 AGI limit, they can get creative and take steps to lower their AGI during the two-year window (perhaps by withdrawing extra in the third year prior to tide them over).
For folks who are still working, creative use of pre-tax deductions (like 401k/403b/457b/IRA contributions, HSA, Medical FSA, or Dependent Care FSA contributions, or pre-tax insurance premiums) might also be able to get you under the $90,000 AGI limit. Again, it’s important to carefully determine the correct two-year window for your income for each student, but if you’re close it’s definitely worth the effort as the benefit could be well over $20,000 (and perhaps over $30,000).