By CHRISTINE HOMAN
Capital News Service
LANSING- Hundreds of families saving for their children’s college education are taking advantage of a new plan offered by the Treasury Department.
The 529 Advisor College Savings Plan allows families to invest for college with the help of brokers, planners and financial advisors.
Between the time it opened late last year and mid-February 439 people signed up.
“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, press secretary for the Treasury.
Pamela Palermo, director of financial aid at Northwestern Michigan College, agreed that planning and saving for college are important and said she encourages students and their families to speak with financial planners or advisors.
The new program supplements the two existing state college savings plans, the Michigan Education Trust (MET) and the Michigan Educational Savings Program (MESP). Since its creation in 1988, MET has sold more than 91,000 plans. MESP has sold more than 215,000 plans since its creation in 2000.
The new plan is similar to MESP, but is available only through financial planners, financial advisors and brokers, while MESP 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 and can . Investors can also customize a plan to best meet their financial circumstances.
The program is a result of efforts by TIAA-CREF Tuition Financing Inc. and Allianz Global Investors Distributors and is administered through the Treasury.
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.
Under the program, the investments can be applied to higher education expenses at any eligible school in the country and even 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 who are typically not the students. Assests in student’s name weigh more heavily in determining aid than parents assets.
Michael Hansen, president of the Michigan Community College Association, said encouraging saving for college is good, but the plan might not be as beneficial to students attending community colleges.
“The issue from our perspective is that community college tuition tends to be low enough where these large savings programs are certainly useful, but probably more directed toward people that are having to pay $10,000 a year rather than $2,500 a year,” said Hansen
Palermo, Stanton and Hansen said the plan should encourage families to save and that they see no drastic problems with the program.
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.”