The start of another school year can evoke a range of parental emotions.
You might feel sadness about how quickly your child is growing up, happiness over his or her newly developed maturity, or even relief about not having to referee complaints of boredom during summer break.
But someday, back to school will mean sending kids off to college, which can fuel a whole different set of emotions – including anxiety about the costs of higher education.
As executive director of the Michigan Education Trust (MET), the Section 529 prepaid college tuition program administered by the Michigan Department of Treasury, Robin Lott spends a lot of time reassuring parents about saving for college.
Her standard advice: Do what you can, but don’t procrastinate.
That guidance is applicable year-round, but it’s something Lott amplifies each September during College Savings Month.
Here, Lott offers practical tips about saving for college, and provides insight into how MET can fit into a savings plan.
Q&A For College Savings
Q. What’s the best single piece of advice you’d give to parents about saving for college?
A. The best single piece of advice is to just get started – the sooner the better – and to utilize any milestones along the way to increase your savings. For example, when your child is between the ages of newborn and 5 years old, suggest that friends and family contribute to a college savings account instead of buying the latest toy or gadget! But again, the most important thing is to just get started with any amount possible.
Q. What role should the child play in saving or otherwise preparing for college?
A. Your child’s role is to start learning. Children are like a sponge in their early years through age 5. The more parents read to them and present them with interactive toys, the more the learning process accelerates. Families should encourage children to stay engaged in that “learning mode” so they will want to further their education beyond high school.
Q. For those who are unfamiliar with it, can you briefly describe how MET operates?
A. MET is the state of Michigan’s 529 prepaid tuition program that helps families save to pay the tuition portion of higher education. It’s designed to provide for the tuition and mandatory fees if a child attends a Michigan public college, but is also portable to out-of-state colleges. MET is also refundable if the child receives a full scholarship or decides not to attend a higher education institution.
There is also a state tax deduction for families or friends – whoever decides to purchase the MET contract. The earnings are state tax-exempt when used for higher education.
Q. How does MET fit into an overall college savings plan?
A. MET should ideally act as the conservative portion of a college savings portfolio. Think of it like an insurance program. MET essentially guarantees to pay the actual tuition portion, if the beneficiary attends a Michigan public college. However, because it’s refundable, MET also ensures you never receive less than what you originally paid. So if your child goes to a lower-cost university, MET will provide a refund of any unused benefits when they graduate.
Q. What are the ways to purchase a MET contract, and what are the advantages of each?
A. MET has three types of contracts: full benefits, limited benefits and community college. Full- and limited-benefit contracts are priced at the university level, and community college at the community college level. However, there are three ways to pay for each contract: a lump-sum payment option, pay-as-you-go, or monthly purchase. The pay-as-you-go option is newer and allows you to purchase one credit hour and keep the account open for future contributions of $25 or more at any time.
If you have a lump sum to purchase a MET plan, obviously that’s great, because once paid, you’re done. Monthly purchase is an option, as well as pay-as-you-go. The monthly purchase and pay-as-you-go options allow the opportunity to save using payroll deduction, automatic contributions via your savings or checking account, or with a paper check at any time.
Q. What are some other MET features, and where can people go for more information?
A. I should also mention that all contracts are transferable, so if a child doesn’t go to college or gets a scholarship, they can transfer their contract to another immediate family member.
You can find out more information at SETwithMET.com. Don’t wait! The annual enrollment period ends soon on September 30th!