Saving for your child's higher education can seem daunting, but it doesn't have to be. The Michigan Education Trust (MET) makes saving for a child's education easy and even offers tax incentives for those who participate.
Parents, grandparents and friends can purchase college credits at today's tuition rates that can be used by the child in the future.
"Without some type of college savings in hand, we are setting our children up for financial failure," says MET Executive Director Robin Lott. "Without it, they graduate college with so much debt. Every little bit we save now can really help them in the future."
With MET, the purchasers enter into a contract in which they purchase a minimum of one credit hour for the student. The student does not have to know what college they intend to attend. Contract purchasers pay the same amount based on current college tuition amounts.
There are several ways to save for college that involve more risk, Lott says. With MET, however, families will never earn less than they put into the account.
"You are not investing on your own. With MET, we pool all the invested money together and invest it together. We do so in a way that keeps pace with tuition inflation. When a student goes to college, we pay actual tuition if they attend a Michigan public college," Lott says.
The money can also be applied to tuition for Michigan private and out-of-state institutions.
Lott says the program has enough flexibility that the money can be used for trade and technical schools as well. Money can be cashed out of the MET account, applied to a higher education program and the student would not pay taxes on the earnings as long as they save receipts for income tax purposes.
MET funds must be used for tuition and mandatory fees, however, schools can usually make accommodations to make sure students get the most value from their MET contract.
Students have 15 years from their expected high school graduation date to use their MET benefits. For those who decide not to go to college, or get a full scholarship to college, the contracts are transferable to an immediate family member. The parent can hang on to the contract and transfer it to another child, or maybe even a grandchild.
There is also the ability to have the contract refunded if the student does not attend college, enlists in the military, suffers a learning disability or death.
MET accounts are important for anyone who thinks their child may attend college, Lott says. The younger a child is when a contract is purchased, the more time there is to save. The MET website provides calculators and information on how to save for a child's educational future at any age.
Those who purchase contracts for students are entitled to a state income tax deduction. Anyone can open a contract for a child. It can be a family member or friend. Students can have multiple contracts that can be combined when they go on to their higher education institution.
MET contracts make great gifts for birthdays or holidays, Lott adds. MET offers coupons that can be printed and given with cards so children know the family member or friend is contributing to their future.
"It's important to let the young one know that you are saving for their future. Communicating that to a young one will motivate him or her to do well and go on to higher education," Lott says. "You want to let that child know that you have an expectation that they will go on to do good things and you are there to support them."
Even young students think about what they want to be when they grow up. Let's get them thinking about what it takes to achieve those goals beyond the financial aspect.
For more information, or to start a college savings plan for your child, visit the Michigan Education Trust website.