Planning for your child’s future is important, and part of that planning involves preparing for the financial aspect of your child’s college education. As tuition costs continue to rise, saving for higher education – and locking in today’s rates with the help of the Michigan Education Trust (MET) – is key.
If you’re confused about investing in a college savings plan like MET’s 529 prepaid tuition plan, or you’ve heard any possible misconceptions, MET can clear up those common college savings plan myths.
Myth No. 1: It’s too late to start saving.
While it is true that the earlier you start saving for your child’s college tuition, the better, there is still time to save – even if your child is in grade school, middle school or high school. There are three payment options to choose from:
- Pay-As-You-Go plan: Buy at least one credit hour, for any age. After that, add $25 minimum at any time
- Lump sum plan: Buy one or more full semesters (15 credits/semester), for any age.
- Monthly plans: Commit to buy at least one semester of college over four, seven, 10 or 15 years.
Myth No. 2: You need a lot of money to open an account.
MET’s Pay-As-You-Go plan allows parents, grandparents and friends to buy one college credit hour in increments as low as $25. With the monthly option, you can purchase options in four, seven, 10 or 15-year increments (depending on the age of your child). Then, your family can bake the expense into your own monthly budget.
Myth No. 3: If my child doesn’t attend college, I lose my investment.
MET knows that college isn’t for every child, so if your child opts to take another path, don’t fret. When your child turns 18 years old, he or she has the option to either pass that contract to a relative – or simply terminate the contract for a refund. On the flip side, if your child does attend college but receives a full scholarship, you can receive a refund. For partial scholarships, the university may apply the excess money toward room and board or refund it to your child.
Myth No. 4: There aren’t any tax benefits.
No matter which payment option you choose, each is deductible on the purchaser’s Michigan income tax form in the year it’s 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.
Myth No. 5: My child has to go to school in Michigan.
Don’t let the name fool you. Your child can benefit from MET even if he or she attends college out of state. In fact, a MET refund can be directed to an out-of-state college or university.
Get more information and get started saving for your child’s future at SETwithMET.com.