GROSSE POINTE, Mich. - Jon and Sally Dean signed up for Michigan's prepaid college tuition plan when their daughter Alexandra was age 2.
The couple spent around $6,500 for each year of prepaid tuition — around $26,000 total — and made sure they paid the bill off long before their daughter stepped foot into Grosse Pointe North High School.
"It just became a bill we had every year for 10 years," said Dean, 45, who lives in Grosse Pointe Woods.
"It's non-negotiable. We paid for it. We needed to do it."
The Dean family treated the expense a lot like a mortgage — something that took priority before any talk about the prospect of big vacations or luxury cars. It's a commitment that paid off.
Alexandra Dean graduates in June and heads to Michigan State University in the fall with four years of tuition already covered. The MET contract does not cover room and board. The family plans to piece together the cost of room and board, books and other expense with scholarships, jobs and other savings.
Tuesday is 529 Day, time for one of those made-up holidays called the National 529 College Savings Plan Day. Time to talk, again, about why many parents aren't saving enough for college or why many just feel too overwhelmed to save at all.
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, according to a new survey to be released Tuesday by the Michigan Education Trust.
The first-of-its-kind survey indicated that about 54% of the state's parents are saving for college — with 60% saving in Oakland County, 56% in Wayne County and 51% in Macomb County.
But that's lower than the 56% of parents who expect their child to attend college who have started saving, according to Sallie Mae's "How America Saves for College 2018 report. About 47% nationwide have created a plan for how to pay for college.
"Families in Michigan indicate that they value higher education and are willing to make sacrifices to send their children to a higher education institution," said Robin R. Lott, executive director for the Michigan Education Trust, the Michigan Education Savings Program and the MI 529 Advisor Plan.
"Our challenge has been to encourage families just to get started."
So you didn't start saving for college when your child was age 2? Nothing wrong with starting at kindergarten graduation where the list for potential gifts is seemingly endless. I found a "Straight Outta Kindergarten" black T-shirt selling for $15 on Amazon.
Another red T-shirt for kindergarten grads, priced around $17, has its own cute checklist:
"Learn to Walk," check.
"Graduate Kindergarten," check.
And finally "World Domination." That box has yet to be checked. Maybe it can be a kid's goal for the summer?
All of us — aunts, parents, grandparents — buy clever stuff each and every year for the kids in our lives. So really, what's stopping people from putting $25 or $50 toward a 529 plan?
The MET survey indicated about half of those who were saving started when their oldest child was 3 years old or younger. About 8 in 10 started saving by the time their oldest child was age 10.
Jon and Sally Dean, who are both in education, started early because they knew they wanted their two children to go to college.
They couldn't afford the cost of two MET contracts at the same time, so they started saving smaller amounts of money in the Michigan Education Savings Program, which is a 529 savings plan, for their son Noah, now 14.
This year, the couple won another $3,000 of future college tuition in the Michigan Education Trust's monthly sweepstakes drawing — a special event for 2018 to celebrate MET's 30th anniversary. That prepaid contract will be used to help Noah.
Another force influenced their savings plan: Jon's mother.
Jon Dean recalls how his mother bought one of the first Michigan Education Trust contracts for his younger sister back in 1988. The contract helped his sister Elizabeth attend Wayne State University. So the idea made sense.
June Dean, 78, who lives in Harper Woods, said she bought the MET contract after her husband passed away, using some insurance money.
"I had a hard time going to college myself because my parents didn't plan on it," she said.
June Dean, who taught in the Detroit Public Schools system and at Oakland Community College, said she was able to work while going through college when tuition was more reasonable.
"Now, I think it's hard to put yourself through school without some kind of help," she said. "It's really hard now. The costs are ridiculous."
Here are a few more reasons to give 529 plans a second look:
529 plans can be simpler than you'd think
Anyone can get overwhelmed with options when there are more than 89 plans being offered across 49 states and the District of Columbia, according to Savingforcollege.com, a site that reviews the various plans.
Only 29% of parents saving for college use 529 plans, according to Sallie Mae's latest "How America Saves for College" study.
Of the parents not using 529 plans, most say they're don't know enough about 529 plans, some never heard of them. Others maintain they do not have enough money to invest in them.
If you live in Michigan, savers get a tax break on their state income taxes for putting money into in any of three Michigan 529 plans — the Michigan Education Savings Program, the prepaid tuition program called the Michigan Education Trust and the MI 529 Advisor Plan.
And you can get into the savings plan for as little as $25.
The Michigan education savings plan and the advisor plan are investment-based plans, where you make some choices. Savings can be used for tuition and room and board but the value will depend on your underlying investments.
The prepaid tuition plan has a price for each contract based on today's rates and the money will be paid out when the young person is in college. The return reflects rising tuition prices, as well as the school you end up attending. The plan would work best, with the biggest payout, if the student attends one of Michigan's biggest public universities.
If the student goes out of state, he or she would receive less money for tuition than if attending one of Michigan's big universities.
The cost of a four-year contract has gone up considerably, along with college tuition costs, in more than a decade. A full-benefits, lump-sum contract now costs $71,280.The monthly payment plan would cost $1,704 a month. Those prices are set through Sept. 30.
Plenty of other lower-cost options that don't cover as much exist, including one-year contracts. The MET plan now even has a more manageable option priced as low as $111 a credit hour called "pay-as-you-go." The MET current enrollment period runs through Sept. 30. One can call MET at 800-638-4543.
The MET plan continues to have its own sweepstakes this year — where you might win some college savings.
To mark its 30th anniversary, the Michigan Education Trust has had a contest going to award a total of $30,000 to 10 families in 2018. Enter at MET4College.com. Thesweepstakes is open to Michigan residents 18 and older who will have children ages 0-17 as of Sept. 30, 2018. No purchase is necessary. All entries must be received by 11:59 p.m. eastern on Sept. 17.
To enter by mail, send a postcard with the your complete name, address and phone number and mail it to: “How We MET” Sweepstakes,” c/o Güd Marketing, 1223 Turner St., Suite 101, Lansing, MI 48906.
Limit one entry per person. All eligible entrants will be added to the next month's drawing.
Going forward, MET still will randomly award $3,000 pay-as-you-go prepaid tuition contracts in June, July, August and September. Two winners will be picked in September because it is College Savings Month and the end of the MET contract year
529 plans aren't a silver bullet
Believe me I know, the high cost of even going to a state university makes most parents feel overwhelmed about saving for college.
All you can do, though, is start saving sometime. For me, putting money into a 529 savings plan shortly after my son was born took away any temptation to spend that money on something else.
I also paid $6,083 for a MET one-year full benefits contract for my then 5-year-old son in 2003; and another $7,085 for a second one-year full benefits contract in 2004.
My son will use his MET to cover his junior year at Michigan State in the fall. We don't have the tuition bill yet but the expectation is that undergraduate tuition and fees will exceed $15,400.
One advantage of both the MET and the college savings plan is the tax-favored status. When 529 funds are used for qualified purposes, savers do not pay any federal income tax on investment gains (no capital gains tax, ordinary income tax, or Medicare surtax).
One drawback: It's still expensive to go to college.
For a student going to a public college, costs can be about $20,000 a year or higher. The average published in-state cost for college tuition, fees, plus room and board, hit $20,770 for the 2017-18 academic year, according to the College Board.
Total investments by U.S. families in 529 plans reached a record $319.1 billion in 2017, up 16% from 2016, according to the College Savings Plan Network, a nonprofit and affiliate of the National Association of State Treasurers.
About 13.3 million 529 accounts exist across the country with the average account size hitting a record $24,057 as of December 2017, according to the network.
Even parents who are savers expect their college funds to cover only 30% of their child's total education costs, according the Michigan Education Trust survey.
Other sources: scholarships, money out of the parent's income at the time the child is enrolled in college, federal or state financial aid or grants and student loans. Many college students, of course, also work to cover some expenses.
Contact Susan Tompor: email@example.com or 313-222-8876. Follow Susan on Twitter @Tompor.
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