Traverse City Record-Eagle

Archive: Friday

February 26, 2010

Families invest for college with state plan

By CHRISTINE HOMAN

LANSING -- Hundreds of families saving for their children's college education are taking advantage of a new plan through the state Treasury Department.

The 529 Advisor College Savings Plan allows families to invest for college with the help of brokers, planners and financial advisers.

More than 400 people signed up between the time it opened late last year and mid-February.

"It promotes saving for college, and that is the important thing, that folks begin saving right away or as early as possible for their young children," said Terry Stanton, a Treasury representative.

Pamela Palermo, director of financial aid at Northwestern Michigan College in Traverse City, said she encourages students and their families to speak with financial planners or advisers.

The new program supplements two existing state college savings plans, the Michigan Education Trust and the Michigan Educational Savings Program. Since its creation in 1988, MET sold more than 91,000 plans, while MESP sold more than 215,000 plans since its creation in 2000.

The new plan is similar to MESP, but only is available through financial planners, financial advisers and brokers, while MESP only is available only directly from the state.

The new plan is designed to encourage families and financial planners to work together to create an appropriate investment portfolio.

Investors can chose from three options that consider risk and the child's age. Investors also can customize a plan to best meet their financial circumstances.

The 529 Advisor Plan allows contributors up to $10,000 in tax deductions for joint filers and $5,000 for single filers annually and provides other incentives such as tax-deferred growth and tax-free withdrawals.

Investments can be applied to higher education expenses at any eligible school in the country and some abroad.

In addition, student eligibility for financial aid is minimally affected by the plan since the money is considered an asset of the account owners -- typically not the students. Assets in students' names weigh more heavily in determining aid than parents' assets.

Michael Hansen, president of the Michigan Community College Association, said the plan might not be as beneficial to students attending community colleges, since costs there typically are lower.

Michael Boulus, executive director of the Presidents Council, State Universities of Michigan, said, "The benefits are clear. You're saving money today for somebody's future."

Christine Homan writes for Michigan State University's Capital News Service.

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