MET's Pay-As-You-Go option makes college saving less taxing
In recent years, Michigan taxpayers have received an average federal income tax refund of around $2,700. And according to a survey commissioned by Bankrate.com, about 28 percent of people will save or invest those funds.
If you’re part of that latter group, Robin Lott wants to talk to you.
Lott, executive director of the Michigan Education Trust (MET) – the state’s prepaid college tuition program – says that setting aside at least part of a tax refund for college savings is a smart financial move.
That advice is echoed by NerdWallet, which notes that investing in a 529 college savings plan such as MET can also save you a few bucks on your tax return. MET contributions are deductible on Michigan tax returns.
But the main value of purchasing a MET contract comes from locking in future tuition at today’s rates at any public college or university, Lott says.
“College tuition costs have been going nowhere but up, and buying a MET contract today allows you to never have to worry about additional increases,” she said.
Plus, the Pay-As-You-Go purchase option continues to grow in popularity as a convenient way to begin building college savings, Lott said.
Pay-As-You-Go allows purchasers to open MET contracts with a minimum of one credit hour rather than in semester increments. The option lowers the initial cost of establishing a MET contract, which might prove a hurdle for some families.
For example, under Pay-As-You-Go, the current initial cost of one community college credit hour is $109. A limited benefits contract can be established for $470, and a full benefits contract costs $583. A full benefits contract covers in-state tuition and mandatory fees at any Michigan public university, while a limited benefits contract covers up to 105 percent of the weighted average tuition of Michigan's public four-year universities.
On May 1, the initial Pay-As-You-Go costs will rise slightly, to $110 for a community college contract, $474 for limited benefits and $589 for full benefits.
Contract holders can add as little as $25 to their Pay-As-You-Go contracts at their convenience.
Other MET purchase options are to buy a contract in a single lump sum or to make monthly payments toward a contract purchase.
Pay-As-You-Go, which was introduced in December 2015, continues to surge in popularity, MET statistics show.
Since the current MET enrollment period began Dec. 12, 2016, families have purchased 495 prepaid tuition contracts.
That compares with 442 contract purchases during the same period of 2015-16. At this time of year during the 2014-15 enrollment period – which was before the Pay-As-You-Go option became available – families had purchased only 309 contracts.
Nearly 40 percent of contracts purchased so far this enrollment period are of the Pay-As-You-Go variety, Lott says.
“Clearly we’ve hit on a winning formula that has resulted in more families saving for college,” she said. “We’re encouraging current contract holders to use a portion of their refunds to add to their Pay-As-You-Go accounts. And for those who have yet to begin saving for college, it’s also a smart move to use a tax refund to get started.”
Some more facts about MET:
- The program is administered by the Michigan Department of Treasury.
- In addition to any of the state’s public universities, MET contracts may be refunded to pay Michigan private universities as well as out-of-state colleges.
- MET contracts may be transferred to other eligible family members and are refundable if the student does not attend college.
- More than 96 percent of high school graduates with MET contracts have attended a college or university.
More information about MET is available atwww.SETwithMET.comor 800-MET-4-KID.