Contributions to North Dakota's tax-favored College SAVE plan plummeted 26 percent last year, but most people who did invest stuck with riskier stock funds instead of bonds, an audit says.

The plan allows for a child's parents or relatives to set aside money for future education expenses. Investment earnings are not taxed, and North Dakota residents may be eligible for state matching grants and income tax deductions. The plan offers six investment options through investment management company Vanguard Group Inc. that range from a low-yielding money market fund to a portfolio that tracks U.S. and international stock markets.

The plan's overall value fell from $330.1 million to $262.9 million last year, according to the audit presented last week to the state Industrial Commission, which oversees the state-owned Bank of North Dakota. The bank administers the plan.

Investments alone lost $69.5 million in value in 2008, the audit showed.

Contributions to the plan, which totaled $37.3 million in 2007, fell to $27.4 million last year. But despite a significant plunge in the stock market, savers favored portfolio options mostly or exclusively invested in indexes that track the broad performance of U.S. and foreign stock markets.

College savers put $19.4 million, or 71 percent of last year's total contributions, into funds made up of at least 50 percent stock holdings, the audit said. The most aggressive portfolio, which is invested exclusively in U.S. and foreign stocks, received $7.6 million, or 28 percent, of contributions.

Gov. John Hoeven, Attorney General Wayne Stenehjem and Agriculture Commissioner Doug Goehring make up the Industrial Commission.

Hoeven said the college savings plan's investment losses were less severe than the overall stock market downturn. He said state tax incentives and the possibility of matching grants keeps the savings strategy sound.

"The key is, with the tax deferral, with the matching funding that comes in - over time, the College SAVE program is a very good way for people to save for their children's college education," Hoeven said.

Eric Hardmeyer, president of the Bank of North Dakota, said interest in state matching grants for college savers has perked up since eligibility requirements were loosened in January.

North Dakota couples who make less than $40,000 annually may qualify to have their first $300 of savings matched by the state for up to three years. The same is available to single North Dakota residents who make less than $20,000 annually.

Single taxpayers who make up to $40,000 annually - along with couples who earn up to $80,000 - also may be eligible for one $300 matching grant. Couples also may deduct as much as $10,000 in contributions from state income taxes.

Only 15 people claimed matching grants when they were first offered in 2007, said Kirby Martz, a bank senior vice president. The number rose to 58 last year, and 83 claimed the grants during the first six months of 2009, he said.

Hardmeyer said the bank has been touting the grants to the public.

"We're out there quite a bit," he said. "We've hit it pretty hard, and I think our numbers reflect that."