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Presentation on theme: "MICHIGAN’S 529 COLLEGE SAVINGS PROGRAMS 2008 ENROLLMENT."— Presentation transcript:


2 College Costs Today; What About Tomorrow? $118,955$41,675$9,578$32,097Harvard University $92,344$32,352$6,708$25,644Kalamazoo College $47,345$16,587$7,374$9,213University of Michigan $42,236$14,797$6,482 $6,159 Northern Michigan University Estimated SY 2023-2024* Total in SY 2006-2007 Room and Board Tuition and Fees *Estimating an annual 6% inflation factor per year for 18 years. Source: National Center of Education Statistics, IPEDS College Opportunities On-Line, 2006-2007 school year.

3 College: The Wise Investment The lifetime gap in earning potential between a high school diploma and a BA exceeds $1,000,000. Source: U.S. Census Bureau, 2004 as cited in The College Board, “Education Pays Update,” 2005. Assumes 35 years in work force.

4 Don’t Do It With Debt Loans…Your Last Resort, because Loans account for 54% of all financial aid according to the College Board Roughly 70% of the Class of 2000 took out educational loans Source: New York Times, “College Loans Rise,” January 28, 2003 The average undergraduate debt is $18,900, up 66% from 1997 Source: Nellie Mae, “College on Credit,” February 6, 2003` Savings…Your First Choice

5 Get Started with MET & MESP Set Your Goal Now What do you want to achieve? Learn how we can help you achieve it Use Our Web-Based Resources IPEDS/COOL College Cost Data Base College Cost Calculator Start NOW – Don’t Delay Earning interest beats paying interest

6 Michigan 529 Internal Revenue Code Section 529 States can establish Qualified Tuition Programs (QTP) Two Kinds: Prepaid and Savings/Investment Michigan has both! 1988 -- Michigan Education Trust (MET) – the nation’s first guaranteed tuition program 2000 -- Michigan Education Savings Program (MESP) – a top- rated savings/investment plan Why Use Michigan’s 529 plans Provides state and federal income tax benefits Minimizes potential debt Provides peace of mind

7 SIMILARITIES  Both are Section 529 qualified tuition programs  State income tax deductions  Earnings are tax exempt for qualified withdrawals  Low Cost, No Commissions  Transferable to immediate family members  Fund with after tax dollars  Contribute with payroll deduction, ACH or coupons  Can be used separately or together ($235,000 max.)  Recognized as owner’s asset for financial aid purposes  Rollovers accepted from other 529 programs Michigan Education Trust and Michigan Education Savings Program (MET) (MESP) Similarities and Differences MET  Prepay tuition with three contract options  Purchase credit hours, in semester increments, at today's prices for future use  Best benefit at Michigan public institutions for tuition and mandatory fees  Refund amounts payable to in-state private or out-of- state institutions  Purchase for Michigan children newborn to 12th grade  15 years to use or refund  Forget about tuition increases, you are locked in MESP  Investment savings account with seven investment options  Use at any "eligible educational institution"  Save for all qualified higher education expenses  Open an investment savings account with as little as $25  State matching grant available up to $200 for Michigan children newborn to 6 years  One change in investment strategy every twelve months  No age or time limit to use funds

8 MET & MESP Tax Benefits State income tax deduction MET - Total Contract Price MESP - $5,000 (s) or $10,000 (joint) Qualified withdrawals are state and federal income tax-exempt Treated as completed gifts for federal estate and gift tax purposes

9 Financial Aid Issues Effective July 2006 Equal treatment of MET & MESP Generally considered asset of account or contract owner Only 5.6% of value considered in FAFSA calculation Contact high school counselor or college financial aid office

10 Financial Overview as of August 31, 2007 MET Contracts Total 84,462 In Use 18,000 Paid in Full 29,000 Assets $997 M Annual Audit Actuarial Review MESP Accounts Total 185,073 Assets $1.76 B Match 29,033 Match Assets $5.7 M Annual Audit Treasury Review

11 Designed to allow parents, grandparents and others to prepay college tuition Tomorrow’s education at today’s cost Purchase credit hours Transfer of risk Funds pooled together for investment purposes Guarantees in-state tuition and mandatory fees at any Michigan public college/university Secured by the assets of the Trust The Basics

12 Full Benefits - in-state rate Limited Benefits - 105% WAT 105% Weighted Average Tuition = $8,349 UM-AA (23 cr.) – MSU, FSU, MTU (28 cr.)* Community College - in-district rate Contract constitutes a completed gift for benefit of a minor - age 18/h.s. graduate *As of Fall 2007 Contract Options

13 One beneficiary per contract Beneficiary must be Michigan resident Newborn to 12th grade Low fee program – 30 basis points

14 Lump Sum Monthly Purchase - Use Payroll Deduction, ACH, Coupons 1st monthly purchase due Feb. 25, May 25, or Sept. 25 No obligation to continue monthly purchases Early payoff discount Payment Options

15 Prepay by Semesters (1/2 years) Maximum 8 Semesters (4 years) per beneficiary See Price Charts on page 34 & 35 Flexibility Multiple contracts per beneficiary Mix contract options Now or later Flexible Purchase Options

16 Use Your MET Contract: At Out-of-State colleges and Michigan Independent colleges With partial scholarships To transfer among colleges Towards a graduate degree (AP credits) Within 15 years Portability

17 Refund Amounts for Fall 2007 Reason for not attending Mich. Public college: Michigan private college Weighted Average Tuition - $7,951 Out-of-state institution or full scholarship Average Tuition - $7,742 Death, disability, not attending or military Lowest Tuition - $6,159

18 Lowest tuition refund can be used at any certificate or degree granting institution that offers financial aid to their students Go to U.S. Dept. of Education Web site: Qualified Expenses*: tuition, fees, room, board, books, equipment required for enrollment *Earnings are taxed & 10% fed. excise tax on the earnings apply if not used for qualified higher ed expenses at a qualified institution. Qualified Institutions

19 2008 Contract Enrollment Period September 1, 2007 to August 31, 2008 Read the Contract, then Enroll at: Treasury Offices By Mail On line at Help Line: 1-800-MET-4-KID or (517) 335-4767 How to Enroll

20 The Basics Investment-based Total account balance can be used for qualified higher education expenses Use at any eligible institution of higher education in the US and abroad Managed by TIAA-CREF Tuition Financing, Inc., a subsidiary of TIAA-CREF, administered by the Michigan Department of Treasury (pursuant to contract and PA 161 of 2000)

21 Benefits Low fee program (45 basis points p.a.) Minimum contribution $25 at any time $15 through payroll deduction Use at qualified schools everywhere Account Owner Control Contribute by Check, ACH, Payroll Deduction

22 Family-Friendly Multiple accounts allowed for beneficiary Multiple contributors allowed for beneficiary No age or time restrictions on use No residency requirements

23 Investment Options Moderate Age-Based Allocation Option (Managed Allocation) Conservative Age-Based Allocation Option Aggressive Age-Based Allocation Option 100% Fixed Income Option Balanced Option Principal Plus Interest Option (Guaranteed Option) 100% Equity Option

24 Managing with MESP Set Your Goal Select option(s) based on Your Goal Read the Program Disclosure Booklet before investing Rebalancing Once per account per calendar year Upon change of beneficiary Does not create taxable event Maximum investment $235,000 per beneficiary (includes cash value of any MET contracts)

25 Using What You Saved Qualified Withdrawal Qualified Expense - Tuition, Room & Board, Books, Mandatory Fees, Supplies, & Equipment Qualified Institution of Higher Education - Accredited post-secondary institution eligible to provide federal financial aid Use at qualified schools throughout the US and abroad

26 Withdrawals Non-Qualified Withdrawals 10% federal excise tax on earnings portion of distribution, state and federal income taxes, state recovery of applicable state income tax deduction Special Cases: Scholarship, Disability, Death

27 State Matching Grant IF ELIGIBLE The State will match $1 for every $3 contributed Maximum $200 per beneficiary State determines eligibility and owns State Match Accounts REQUIRED -- when the MESP account is opened Beneficiary must be 6 years old or younger Beneficiary must reside in Michigan Household income of the beneficiary’s custodial parent(s) must be $80,000 (AGI) or less Available only the 1 st year the beneficiary is enrolled in the program Proceeds are invested in the TIAA-CREF Institutional Bond Fund, used for tuition only

28 How to Enroll in MESP By Mail Call for forms or download On-Line Secure on-line enrollment Use Our On-Line Resources College Cost Calculator

29 Other State 529 Programs Contributions to another State’s Section 529 program are Not entitled to the Michigan income tax deduction Not eligible for the State Matching Grant Do consider other plans if not Michigan resident May incur expenses not found in Michigan programs such as Annual Fees Broker’s commissions (front-end or deferred) Underlying mutual fund charges Higher annual management costs

30 MESP Disclosures The State of Michigan, its agencies, TIAA-CREF Tuition Financing, Inc., Teachers Insurance and Annuity Association of America and its affiliates do not insure any account or guarantee its principal or investment return, except for TIAA-CREF Life Insurance Company's guarantee to the MESP under the funding agreement for the Principal Plus Interest Option. Account value will fluctuate based upon a number of factors, including general market conditions. Contributions made to any of the three Managed Allocation options, or the100% Equity, Fixed Income, and Balanced Options do not guarantee principal or a minimum rate of return. Investment return might not exceed tuition inflation. Non Michigan residents or individuals with taxable income in another state should evaluate benefits & tax treatments of other state 529 options prior to investing in MESP Admission to any institution of higher education is not guaranteed by participation Consider the investment objectives, risks, charges and expenses carefully before investing in MESP. Please visit for a Disclosure Booklet containing this information. Read it The tax information herein is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding tax penalties. It was written to support the promotion of the MESP. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor. TIAA-CREF Individual & Institutional Services, LLC, distributor, member NASD, SIPC.

31 For More Information 800-MET-4-KID (517) 335-4767 8 AM to 5 PM 877-861-MESP 8 AM to 10 PM Be sure to read the MET Contract Enrollment Booklet and/or the MESP Program Disclosure Booklet before investing, which are available on-line or from the Programs at the numbers listed above.


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