Although an overwhelming majority of Michigan parents view a college education as an investment in their child’s future, only about half are currently saving for higher education expenses, a first-of-its-kind survey by the Michigan Education Trust (MET) found.
The study also discovered significant differences in savings rates and knowledge about college savings vehicles among the various regions of the state, with parents in Michigan’s southern half more likely to have a college savings plan than those in the northern portions.
MET – the 529 prepaid tuition plan managed by the Michigan Department of Treasury – undertook the survey to gain deeper understanding into Michigan families’ needs and possible roadblocks to saving for college.
The survey results were released today during a news conference at the state Capitol in Lansing. Also during the event, MET announced a partnership with the Michigan Association of State Universities, in which the association will help promote the importance of saving for college among the alumni of its members – Michigan’s 15 public universities.
The news conference – which also featured state Treasurer Nick Khouri and House Minority Leader Sam Singh, D-East Lansing – was staged in conjunction with 529 Day, observed annually on May 29 to raise awareness of 529 plans, tax-advantaged college savings vehicles named after the section of the Internal Revenue Code that allowed for their creation. Also, Gov. Rick Snyder issued a proclamation recognizing May 29 as Michigan’s 529 Day to encourage saving for college and show appreciation for MET’s 30th anniversary as a 529 prepaid tuition plan.
“There’s a lot of research on saving for college on a national level, but detailed information specific to Michigan families – the people we serve – isn’t readily available,” MET Executive Director Robin Lott said of the reasoning behind undertaking the polling. “While we had anecdotal and other evidence about residents’ saving habits, knowledge and concerns, we were surprised by some of the findings in our statistically valid sampling of Michigan parents.
“The results from this first-of-its-kind survey will help us determine how we can better meet Michigan families’ college savings needs.”
The online survey, based on 742 responses from Michigan residents age 18 or older who have children under 18 living at home, has a margin of error of 3.6 percent.
It aimed to gauge awareness of 529 college savings plans, such as MET and the Michigan Education Savings Program (MESP); perceptions related to saving for college; the value placed on saving for college; barriers parents face in accumulating college savings; and strategies parents use to reduce college costs.
The survey found that 91 percent of Michigan parents view college as an investment in their children’s future and that 77 percent are willing to stretch themselves financially to ensure they can attend college.
But it also discovered that only 54 percent of the state’s parents are saving for college, which is less than the 57 percent nationwide average as determined by Sallie Mae’s “How America Saves for College 2016” report.
The highest percentage of savers – 56 percent – is found in Southeast Michigan. Both South-central and West Michigan have college savings rates of 53 percent. The Saginaw Bay region and Northern Michigan – including the Upper Peninsula – have the lowest rates of college savings, each at 47 percent.
But even parents who are savers expect their savings to cover only 30 percent of their child’s total college education costs, the survey found. Other primary sources of paying for college expenses, in the order most cited, were scholarships, parent income at the time the child is enrolled in college, federal or state financial aid or grants, and children’s student loans.
Furthermore, awareness of 529 college savings plans such as MET also varies by region, with South-central and Southeast Michigan having greatest familiarity with them at around 50 percent, followed by the Saginaw Bay region at 41 percent, West Michigan at 36 percent and Northern Michigan at 25 percent.
Additional findings from the MET survey include:
- Of those who are saving, half started when their oldest child was between 0 and 3 years old, and 8 in 10 had started saving by the time their oldest child was 10.
- Also among savers, 55 percent are using a traditional bank savings account to accumulate college savings.
- The leading reason for not saving for college is not having enough money, which was cited by 6 in 10 of nonsavers.
- Among nonsavers, 57 percent say they feel “overwhelmed” about saving for college, compared with 37 percent of savers.
- Relatively few parents believe they will not need college savings (5 percent) or that financial aid or scholarships will be enough to cover costs (11 percent).
“MET’s survey findings track those from a recent Michigan Association of State Universities poll showing Michigan parents place a high value on obtaining a college degree that can lead to a better-paying job and more rewarding career,” said Bob Murphy, director of university relations and policy for the Michigan Association of State Universities. “But the results also make clear that government, at both the federal and state levels, needs to encourage savings and assisting parents, grandparents, friends and businesses in helping students meet their higher education goals.”
Beyond teaming with the Michigan Association of State Universities, MET is staging several events throughout its 30th anniversary year to highlight the importance of saving for college. For example, its “How We MET” campaign features the stories of families whom MET over the years has helped achieve their college dreams. Also, MET this year will award a total of $30,000 worth of prepaid tuition to 10 Michigan families through its How We MET Sweepstakes drawings.
“Trying to set money aside for a student’s college fund is an important concern for every busy parent,” said Rep. Singh, who was joined during the news conference by his wife, Kerry Ebersole, and infant son, Remy, to promote the new MESP account they opened after his birth last year.
“One of the best aspects of Michigan’s 529 plans, aside from their affordability and tax advantages, is the fact that anyone can contribute money to them – including other family members and friends,” said Rep. Singh, who added the couple is now exploring the option of opening a MET account that combines the benefits of both programs.
MET, MESP and MI 529 Advisor Plan (MAP), Michigan’s three Section 529 college savings programs, offer Michigan taxpayers a state income tax deduction on contributions and potential tax-free growth on earnings if account proceeds are used to pay for qualified higher education expenses. More information about MET is available at SETwithMET.com or 800-MET-4-KID (800-638-4543).