State education trust program grows

August 28, 2011
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Enrollment in the Michigan Education Trust, a state program that helps parents save for their children’s college education, rose by 39 percent this year. At the same time, the data shows that more than 10,370 students who were in MET attended a public college or university in 2010.

Robin Lott, MET executive director since 1997, told the Business Journal last week that enrollment in the program rose for a variety of reasons. One was MET switched last year from having its traditional single flat enrollment fee to offering parents and grandparents a lower fee if they purchased a contract before a pre-set deadline.

The economy and constant tuition increases also brought more people into the program, especially in the metro Detroit area. According to MET, tuition has risen by an average of 7 percent annually since the program started in 1988. Another reason was MET changed marketing firms by joining DBA in Rochester, which resulted in a better outcome that cost the program less.

“They cut our line item for marketing by 40 percent, so we had to do more with less,” said Lott, who has been with the program for 23 years. “The toughest job is to encourage people to save. But we had a 39 percent increase in MET enrollment this year.”

Since MET’s first enrollment in 1988, more than 93,000 contracts had been purchased through last September. In the 2010 school year, 8,442 students with a MET contract attended a public college or university in the state, while another 1,937 went to a community college in Michigan. Grand Valley State University captured 583 of those MET students, Western Michigan University had 734 attend, and Ferris State University enrolled 309. Grand Rapids Community College had 106, while Muskegon Community College had 23.

MET gives parents and grandparents a chance to purchase a contract that pre-pays tuition and related academic fees at institutions of higher education through three options, as it’s a Section 529 qualified tuition program. Contract payments are deductible from state income tax returns and earnings are tax exempt for qualified withdrawals. The agreements also are transferable to immediate family members and have a 15-year life to be used at state colleges and universities, private colleges in Michigan and out-of-state institutions.

“MET also can be used for graduate work or can be refunded,” said Lott.

Lott explained that a MET contract fully covers tuition at public colleges in Michigan, regardless of how much tuition has risen over the length of a contract, which can be for as long as 15 years. If a MET student decides to attend a private college in the state with a higher tuition than a public university, then a parent would only have to pay the difference between the tuitions. If a MET student moves out of Michigan and attends a public university as an in-state student, and tuition is lower there than here, Lott said MET would pay the tuition cost and refund the difference to the purchaser of the contract.

But Lott also pointed out that tuition and fees typically account for only 53 percent of a college education’s total cost. That’s where the Michigan Education Savings Program comes in. MESP is another Section 529 program, but it pays for more than tuition and related academic fees; it can also cover things like room and board.

Lott, who also serves as the MEAP Contract Compliance Director, said the savings program is the investment component of MET. It offers seven investment options that range across a risk spectrum and, like MET, contributions to it are deductible at the state level, and qualified withdrawals are also tax exempt.

MESP was started in 2000 and, as of last year, had 105,000 account owners. The program, which is run by the state Treasury and TIAA-CREF, has a single asset-based fee that was reduced last October for the third time in its short history. The fee was dropped from 0.45 percent to 0.35 percent per year.

“MESP continues to strive to be a low-cost 529 college savings plan so more of our investors’ funds can go toward their college savings goals and less toward administrative costs,” said Pamela McNulty, MESP director, in a statement.

Lott said the state income-tax deductions associated with MET and MEAP have escaped the budget ax so far, while many other deductions and credits have been chopped for 2012. As of last Sept. 30, the MET investment fund had a balance of $876 million, a figure that surely has changed since then with the upheavals that have occurred on Wall Street this year. Lott said MET invests in mutual funds and does not directly own equity shares.

Lott will learn where the fund balance stands at the end of next month. “We never go back to existing customers for more payments,” she said if the fund loses value.

A parent or grandparent can buy a 15-year MET contract for as low as $13 a month, and as much as $235,000 can be invested for a student in both MET and MEAP. For further information on MET, go to For more information on MEAP, go to

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