In honor of April as National Financial Literacy Month, the Michigan Department of Treasury is reminding Michiganders about the importance of saving for college and using a 529 plan as a way 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.
“Financial Literacy Month is a great time for parents, grandparents and others to begin thinking about how they can reduce potential student loan debt based on the overall cost of higher education,” said Robin Lott, executive director of the state of Michigan’s 529 plans. “Each of our plans provide an excellent avenue for savings, depending upon each student’s goals.”
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 learn more about 529 plans, go to SavewithMI529.com. For more information about saving for college, contact MI Student Aid at firstname.lastname@example.org, 1-888-4-GRANTS or @mistudentaid on Facebook, Twitter, Instagram and Snapchat.
MI Student Aid Information Hotline: 888-447-2687