If your house is anything like mine, your children are starting to get excited about going back to school – new teachers, new supplies, new and old friends, and, in some cases, a new school. For your children, another year older means another year wiser. However, back-to-school season is also a good reminder that another year older means another year closer to high school graduation and, for most students, college.
According to a 2017 Sallie Mae survey of current college students, 86 percent of families always knew their child would go to college. Unfortunately, only 39 percent of those surveyed made a plan to pay for college. It makes sense, with the rising costs of college tuition, that parents are feeling overwhelmed when it comes to college savings. I have heard every excuse in the book. I am here to put your worries to rest. College savings is within your reach.
I don’t have enough money to start saving
Plenty of flexible college savings options are available for today’s parents. For example, you can get your child started with the Michigan Education Trust (MET) Pay-As-You-Go option for just over $100. MET is Michigan’s 529 prepaid tuition plan that allows for pre-purchasing undergraduate tuition. The prepaid amount is based on today’s rates and then paid out at the future cost when the student is ready for college.
With a MET plan you have the flexibility of three purchase options: Pay-As-You-Go, monthly purchase or lump-sum payment. The Pay-As-You-Go option allows purchasers to initially pay for individual credit hours rather than semester increments. Monthly purchase contracts can be purchased in four-, seven-, 10- or even 15-year increments depending on the age of the child at the time of purchase. A number of payment options are also available with this type of contract, including coupon book, electronic transfers and payroll deductions. Lump-sum purchases are typically chosen when purchasing a full four-year contract; otherwise, it is beneficial to use the Pay-As-You-Go purchase option, since that leaves the contract open to future contributions.
MET also allows grandparents and others to prepurchase undergraduate tuition. Every year, my parents have contributed to my children’s college savings plans as a birthday gift. It may not be the big truck or the fancy doll they asked for, but they will thank them later!
I don’t know enough about investing to get started
You don’t need to be an investment wizard to understand Michigan’s 529 prepaid tuition plan. MET is meant to be a flexible college savings option open to people of all financial backgrounds. The Department of Treasury, Bureau of Investments – which has successfully managed Michigan’s $57 billion pension system for state employees – manages MET’s investments.
Another great benefit of a MET plan is that the total contract price (lump sum) or payments made in a calendar year are deductible on your state income tax return.
My child is still young – I have plenty of time to start saving
A friend of mine welcomed her first child earlier this year, and while she was thinking about the added expenses she needed right now – diapers, wipes, formula and clothes, among others – she wasn’t yet thinking about the future costs. After all, it can be hard to think about saving for the future when you are spending so much money in the present. But when you think about the fact that students who have at least $50 in a college savings account are seven times more likely to attend college, you might consider saving for college a little earlier.
There will always be an excuse not to save – the cost of school field trips, sports teams, braces and more – but there are so many benefits to starting to save early. Saving early offers the benefit to be able to put smaller amounts away over a longer period of time. It really is never too early or too late to start saving for college.
My child will have other financial options
You might be thinking: What if my child receives a full-ride scholarship? What if my child qualifies for more financial aid than initially expected? While scholarships and financial aid are great options to consider when thinking about college tuition costs, you cannot count on them. The same Sallie Mae survey found that while scholarships and grants are covering the largest share of tuition in over a decade, they are still accounting for only an average of 35 percent of costs. And only an average of 27 percent of tuition costs are being covered by parent/friend/relative income and savings plans. Funds for the rest of the expenses are being borrowed.
And in the case that your child is fortunate enough to receive tuition scholarships, grants or other forms of tuition assistance and not need all of the educational benefits provided under a MET contract, the institution where he or she enrolls will refund any excess amount.
Open enrollment for Michigan Education Trust continues through Sept. 30. For more information, visit MET4college.com.
Something my family and I learned from MET is that we have options. There is so much more available to families today. They are here to educate and support you as you venture into this uncharted territory known as college savings.
