State lawmakers discuss financial options for higher education
MARQUETTE — Saving for college, which can run close to $70,000 a year or much more, depending on the school, requires more than putting loose change in a piggy bank.
State Sen. Tom Casperson, R-Escanaba; State Rep. Sara Cambensy, D-Marquette; and Robin Lott, executive director of the Michigan Education Trust, presented an information session on the MET and the Michigan Education Savings Program Friday morning at the Peter White Public Library in Marquette.
They want to get the word out about the Section 529 college savings plans, which are administered by the Michigan Department of Treasury and offer tax advantages to help people save for a child’s college education. The department also manages the MET while TIAA-CREF Tuition Financing Inc. manages the MESP.
“It’s for our children’s further education and planning for that well in advance before they become old enough to start out with college, and then the bills start racking up and it becomes more of a problem for parents to manage all that, and for the students themselves,” Casperson said.
However, programs have been put in place to alleviate the financial strain.
The MET allows people to prepay tuition with three contract options and purchase credit-hours at today’s prices for future use. Also allowed are lock-in tuition costs.
The MSEP is an account with nine investment options from which to choose, which can be used at any eligible educational institution. An account can be opened for as little as $25.
Both programs are low cost with no commissions, with earnings tax-exempt for qualified withdrawals. They also are funded with after-tax dollars and can be used separately or together with a $500,000 maximum.
Each program, though, involves planning for the future.
“It makes sense, but sometimes it’s hard to think about those things when your kids are young,” Casperson said.
However, he stressed it’s more productive to not wait until the last minute to save.
Cambensy was the beneficiary of parents who saved early.
“I was lucky to have parents who had the foresight to start putting a little bit of money away each year while my brother and I were growing up, so when we went to college, they had some money to help us out, and I graduated with bachelor’s with zero debt, and I can tell you that going into the work force and not having that debt load has helped me get ahead,” Cambensy said.
Lott said a MET study has determined that many parents struggle with paying for college, and it’s believed a primary reason for that is they’re not aware of the program.
“Every little bit helps, so we hate to see parents get overwhelmed with the picture of, ‘Wow, four years of college costs $70,000,'” Lott said. “We don’t want that to stifle you or deter families from saving.”
A different mindset might be in order.
Lott said that when toddlers move out of that stage, for example, money that would have been spent on diapers can go toward college.
She also put out a shout-out for payroll deduction.
“Many parents will find that it’s really a lot easier to save if the money’s coming right out of your check,” Lott said.
She said participants in the MET can buy credit-hours today, with tuition to be paid at that rate in the future while the MESP is similar to a 401(K) in that it acts as an investment plan.
“Your account balance can be used not only for tuition but for room and board, and books and computers, those other expenses,” Lott said of the MESP.
Lott said contributions toward the MESP are eligible for Michigan income tax deductions. For the MET, the tax deduction is limited only to the dollar amount that’s contributed.
“If you’re saving in MET and the MESP, you can get two tax deductions,” Lott said. “So in the MESP, the deduction is capped at $5,000 for a single filer or $10,000 for a joint filer.”
Both programs’ earnings also are tax-deferred, she said, meaning participants don’t pay taxes as money is earned nor do they pay taxes when funds are withdrawn as long as they’re used for the intended purpose: qualified higher education expenses.
Lott said MET has created a charitable component. For youths who have aged out of foster care, a special trust fund has been set up as an endowment. As a result, in 2017 more than 370 of those youths went on to a Michigan college, reducing their debt load. MET partnered with the Michigan Department of Health and Human Services in that effort.
For more information on the MET, visit SETwithMET.com. For details on the MESP, go to www.MIsaves.com.
Christie Bleck can be reached at 906-228-2500, ext. 250. Her email address is firstname.lastname@example.org.