Transcript Saving for College in Michigan

MICHIGAN’S 529 COLLEGE
SAVINGS PROGRAMS
2008 ENROLLMENT
College Costs Today;
What About Tomorrow?
Tuition and
Fees
Room and
Board
Total in SY
2006-2007
Estimated SY
2023-2024*
Northern Michigan
University
$6,159
$6,482
$14,797
$42,236
University of
Michigan
$9,213
$7,374
$16,587
$47,345
Kalamazoo
College
$25,644
$6,708
$32,352
$92,344
Harvard
University
$32,097
$9,578
$41,675
$118,955
*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.
College: The Wise Investment
The lifetime gap in earning potential
between a high school diploma and a
BA exceeds $1,000,000.
$95,700
$79,400
$59,500
$49,900
$30,800 $37,600
High School Associate
Bachelor's
Master's
Doctorate Professional
Source: U.S. Census Bureau, 2004 as cited in The College Board,
“Education Pays Update,” 2005. Assumes 35 years in work force.
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
 The average undergraduate debt is $18,900,
up 66% from 1997
Savings…Your First Choice
Source: New York Times, “College Loans Rise,” January 28, 2003
Source: Nellie Mae, “College on Credit,” February 6, 2003`
Get Started with MET & MESP
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Set Your Goal Now
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Use Our Web-Based Resources
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What do you want to achieve?
Learn how we can help you achieve it
IPEDS/COOL College Cost Data Base
College Cost Calculator
www.michigan.gov/mistudentaid
Start NOW – Don’t Delay
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Earning interest beats paying interest
Michigan 529
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Internal Revenue Code Section 529
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Michigan has both!
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States can establish Qualified Tuition Programs (QTP)
Two Kinds: Prepaid and Savings/Investment
1988 -- Michigan Education Trust (MET) – the nation’s first
guaranteed tuition program
2000 -- Michigan Education Savings Program (MESP) – a toprated savings/investment plan
Why Use Michigan’s 529 plans
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Provides state and federal income tax benefits
Minimizes potential debt
Provides peace of mind
Michigan Education Trust and Michigan Education Savings Program
(MET)
(MESP)
Similarities and Differences
SIMILARITIES
MET
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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-ofstate institutions
Purchase for Michigan
children newborn to 12th
grade
15 years to use or refund
Forget about tuition
increases, you are locked in
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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
MESP
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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
MET & MESP Tax Benefits
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State income tax deduction
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MET - Total Contract Price
MESP - $5,000 (s) or $10,000 (joint)
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Qualified withdrawals are state and
federal income tax-exempt
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Treated as completed gifts for federal
estate and gift tax purposes
Financial Aid Issues
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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
Financial Overview
as of August 31, 2007
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MET Contracts
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Total
84,462
In Use
18,000
Paid in Full 29,000
Assets
$997 M
Annual Audit
Actuarial Review
MESP Accounts
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Total 185,073
Assets $1.76 B
Match 29,033
Match Assets $5.7 M
Annual Audit
Treasury Review
The Basics
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Designed to allow parents, grandparents and
others to prepay college tuition
Tomorrow’s education at today’s cost
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Transfer of risk
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Purchase credit hours
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
Contract Options
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Full Benefits - in-state rate
Limited Benefits - 105% WAT
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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
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One beneficiary per contract
Beneficiary must be Michigan resident
Newborn to 12th grade
Low fee program – 30 basis points
Payment Options
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Lump Sum
Monthly Purchase - Use Payroll
Deduction, ACH, Coupons
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1st monthly purchase due Feb. 25, May 25,
or Sept. 25
No obligation to continue monthly
purchases
Early payoff discount
Flexible Purchase Options
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Prepay by Semesters (1/2 years)
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Maximum 8 Semesters (4 years) per
beneficiary
See Price Charts on page 34 & 35
Flexibility
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Multiple contracts per beneficiary
Mix contract options
Now or later
Portability
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Use Your MET Contract:
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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
Refund Amounts for Fall 2007
Reason for not attending Mich. Public college:
 Michigan private college
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Out-of-state institution or full scholarship
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Weighted Average Tuition - $7,951
Average Tuition - $7,742
Death, disability, not attending or military
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Lowest Tuition - $6,159
Qualified Institutions
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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:
www.ed.gov
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.
How to Enroll
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2008 Contract Enrollment Period
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Read the Contract, then Enroll at:
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September 1, 2007 to August 31, 2008
Treasury Offices
By Mail
On line at www.SETwithMET.com
Help Line: 1-800-MET-4-KID or
(517) 335-4767
The Basics
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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)
Benefits
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Low fee program (45 basis points p.a.)
Minimum contribution $25 at any time
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$15 through payroll deduction
Use at qualified schools everywhere
Account Owner Control
Contribute by Check, ACH, Payroll
Deduction
Family-Friendly
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Multiple accounts allowed for
beneficiary
Multiple contributors allowed for
beneficiary
No age or time restrictions on use
No residency requirements
Investment Options
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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
Managing with MESP
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Set Your Goal
Select option(s) based on Your Goal
Read the Program Disclosure Booklet before
investing
Rebalancing
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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)
Using What You Saved
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Qualified Withdrawal
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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
Withdrawals
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Non-Qualified Withdrawals
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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
State Matching Grant
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IF ELIGIBLE
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REQUIRED -- when the MESP account is opened
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The State will match $1 for every $3 contributed
Maximum $200 per beneficiary
State determines eligibility and owns State Match
Accounts
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 1st year the beneficiary is enrolled in the
program
Proceeds are invested in the TIAA-CREF Institutional Bond
Fund, used for tuition only
How to Enroll in MESP
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By Mail
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On-Line
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Call for forms or download
Secure on-line enrollment
Use Our On-Line Resources
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College Cost Calculator
Other State 529 Programs
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Contributions to another State’s Section 529
program are
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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
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Annual Fees
Broker’s commissions (front-end or deferred)
Underlying mutual fund charges
Higher annual management costs
MESP Disclosures
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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.
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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
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Admission to any institution of higher education is not guaranteed by participation
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Consider the investment objectives, risks, charges and expenses carefully before investing
in MESP. Please visit www.misaves.com for a Disclosure Booklet containing this
information. Read it carefully.
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.
For More Information
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www.SETwithMET.com
800-MET-4-KID
(517) 335-4767
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8 AM to 5 PM
www.misaves.com
877-861-MESP
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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.