With individuals having around $47 billion in outstanding student loan debt [links.govdelivery.com] across the state, the Michigan Department of Treasury reminds Michiganders about the importance of saving for college and using a 529 plan to save.
A 529 plan is an education savings plan designed to help families set aside money for future education expenses. Contributions provide state income tax deductions and earnings in a plan grow tax free and are exempt at the federal and state level.
These plans get their name from Section 529 of the federal Internal Revenue Code.
“Students and their families often need to take out student loans to pay tuition bills,” said acting Deputy State Treasurer Anne Wohlfert, head of Treasury’s State and Local Finance Group. “It’s not that they want to take out a loan, but they need to take out a loan. By planning and saving when children are young, you and your family will be in a better position financially to pay for an associate or bachelor’s degree.”
The state of Michigan offers three Section 529 college saving plans that potentially provide state and federal tax benefits: Michigan Education Trust (MET), Michigan Education Savings Program (MESP) and MI 529 Advisor Plan (MAP). These plans can be broken up into two categories:
- Prepaid Tuition Plan (MET) allows for the pre-purchase of tuition based on today's rates and then paid out at the future cost when the beneficiary is in college. Performance is often based upon tuition inflation. Prepaid plans may be administered by states or higher education institutions.
- Investment-Based Savings Plans (MESP and MAP) are different in that your account earnings are based upon the market performance of the underlying investments, which typically consist of mutual funds. Investment-based savings plans may only be administered by states.
To further encourage Michiganders to plan and save for college, Gov. Rick Snyder has proclaimed September as College Savings Month [links.govdelivery.com].
For more information about 529 plans, go to SavewithMI529.com [links.govdelivery.com]. For more information about saving for college, contact MI Student Aid at email@example.com, 1-888-4-GRANTS or @mistudentaid on Facebook, Twitter, Instagram and Snapchat.
Source: Press Release