Investing money can be confusing. And, when it comes to your child’s upcoming college expenses, it can be nerve-wracking too.
Even if you’re aware of “529” savings plans, odds are you’ve heard a mix of sound information and speculation. Don’t let fear of the unknown stand in the way of your kid’s future. Here, the Michigan Education Trust debunks some top savings-plan rumors.
MYTH 1: YOU NEED A LOT OF MONEY TO START AN ACCOUNT.
TRUTH: MET’s pay-as-you-go plan lets you pre- buy one college credit hour. Get started by Sept. 30* for as little as $110 for a community college contract – or $589 for full benefits. Or, for $14-$209/month, commit to buy one semester over four, seven, 10 or 15 years. The younger the child, the more payment options you can choose from.
MYTH 2: I HAVE TO MAKE BIG SACRIFICES TO AFFORD IT.
TRUTH: You can make a few, sure, but you could also make little sacrifices and watch them add up. Try brewing your own coffee instead of buying it, brown-bagging lunches and dining at home instead of out on the town. And with a MET pay-as-you-go plan, after the initial investment, you can add to it in increments as low as $25.
MYTH 3: IF MY CHILD DECIDES NOT TO GO TO COLLEGE, I’M OUT THE MONEY.
TRUTH: Not every child goes to college. MET is prepared for that reality. When your child turns 18, he or she has the option to pass that contract on to a member of his or her immediate family – or to terminate the contract for a refund.
MYTH 4: THE RIGID STRUCTURE OF THESE SAVINGS PLANS WON’T FIT MY LIFE.
TRUTH: MET offers plans to fit any circumstances. Pay-as-you-go allows you, family and friends to contribute freely in increments as low as $25. Lump sum lets you purchase full semesters or years at a time. And with monthly, there’s a set sum to bake into your budget, with rates depending on the duration of the monthly plan you choose.
MYTH 5: MY CHILD MAY TAKE A “GAP YEAR” AND LOSE HIS OR HER MET CONTRACT.
TRUTH: Whether he or she takes a year off between senior year and that first year of college – or a year off in the middle – MET is there. Students have 15 years from their expected high school graduation year to use all of their credit hours, transfer their credits to a family member or terminate for a refund.
MYTH 6: A MET CONTRACT WILL HINDER MY CHILD’S FINANCIAL AID PACKAGE.
TRUTH: Lots of factors go into this, including what type of financial aid form is used, who owns the contract and your child’s college’s formula on how 529 plans are counted toward financial aid. In general, if a student uses the Free Application for Federal Student Aid (FAFSA) and the plan is owned by the custodial parent(s), then it is considered a parental asset and can reduce financial aid by a maximum of 5.64 percent. Depending on family income, it may not affect the financial aid at all. That means on $5,000 worth of savings, a maximum of $282 would be deducted from the financial aid package.
MYTH 7: MY CHILD HAS TO GO TO SCHOOL IN MICHIGAN.
TRUTH: It’s called the Michigan Education Trust; however, your child can benefit no matter where he or she chooses to further his or her education. So, if that means an out-of-state college, a MET refund can be directed to that college.
MYTH 8: IF MY CHILD GETS A FULL RIDE, I’M OUT THE MONEY.
TRUTH: You won’t be punished for your child’s high academic achievements! In the case of a full scholarship, the contract can be terminated for a refund. And, for partial scholarships, the excess money will be refunded by the university to the student.
MYTH 9: THERE’S NO WAY I CAN MAKE A DENT IN THE RISING COST OF TUITION.
TRUTH: College costs are increasing, but with MET, you can pay your child’s future tuition at lower rates today, making it much easier to start saving now than paying more for it later.
MYTH 10: THERE AREN’T ANY TAX BENEFITS.
TRUTH: Lump sums, monthly payments and pay-as-you go payments are deductible on the purchaser’s Michigan income tax form in the year they are made. Plus, both purchasers and students may be exempt from state or federal income tax on the earnings of their MET plan when the benefits are used for qualified higher education expenses.
Get more information and get started saving for your child’s future at SETwithMET.com.