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Hey, Dave. How are you doing today? I'm
doing great, Nick. How are you?
I am doing well. Thank you for asking,
sir.
I know we usually go into a little
bit about what the weather is doing today,
but not even worth because we have a
special guess,
We're gonna skip right over. And Know everybody's
gonna be real bummed about missing out on
our weather conclusion our little chat. Yeah.
I digress. Because today, we have Diane Brewer,
who is the director of the Michigan education
trust and oversees the
05:29
savings plans along with Michigan Education Trust. And
so we have a bunch of questions for
her. But before we do that, Diane, would
you like to introduce yourself to the listeners
and tell us a little bit about yourselves?
Thank you. I'm Diane Brewer. I'm Mig. Executive
director for the Michigan Education Trust, and that's
the state's prepaid 05:29
college savings plan. And I've been here
starting my 20 first year
this year.
So I came in basically as a presenter
and Outreach
specialists
helping make payments to out state schools
and just helping parents
grandparents and their students
get to college and pay for with this
little student debt or no student debt. Yeah.
Great.
I love it. And actually, that brings up
a good question I have. Sounds like you've
been there from, like, the ground up, When
did the 05:29
plan. When do that? Start. I don't even
know. I feel like that's some knowledge I
should have. But... Yeah. That's okay. The met
program
actually pre dates... Start 05:29
statue.
That was the first prepaid
program in the nation, So the premise is
that you're offering credit hours at today's price
for use in the future. So when you're
buying credit hours,
for a newborn, you know that it's going
to be 18 years of tuition increases before
that trial goes to college. Yeah. And, you
know, they've got 15 years from high school
graduation to use that. So maybe there's a
gap year or... For or military service, you
know. Sure. When they Are ready to go
to college then, the trust makes up the
difference
because college has gone up those years. It's
not the
liability of the purchaser to make up the
difference. It's the trust that's making up the
difference. And that's how you're saving
by pre planning on college tuition. And those
jumps says I'm sure you're aware are very
low. Large these days in terms of yeah.
I hope that tuition is going up every
year. So
We know it goes up.
Yeah.
Yeah Yes. Large So I think 1 of
the big burning questions that we always get
from listeners is kind of how do you
take the met? Program that you just talked
about. And then the Michigan
education savings plan, which is the, you know,
05:29
version and how do you
differentiate between those 2? How do you
suggest that parents decide which route to go?
Yeah. And we here that a lot ourselves
too. And So here within the Department of
Treasury, when we say Michigan Education Trust, we
also
oversee.
Me space. So Met, and Me
are what we call direct sold. So there's
no commission structure. There is a program, Michigan
Advisor plan that does have a commission structure,
but what I can address today is the
differences
between Met
an Me.
Perfect. And how an individual would make up
their mind. And first,
I would say,
this can be used together
Yeah. Perfect world because we're always asked this
question. Because Meta is specific to tuition. The
only exception really is scholarship. Or you can
use that money for other
instances.
And Me is very broad. It could be
used for to
and room board and books and lab fees
and all those other things that come along
with college experience.
So in a perfect world a student would
have some tuition locked in with Met,
and then there would be an Vs account.
However, that doesn't fit everybody's.
Budget that doesn't fit everybody's
desire for how much and what they can
do for their student.
So
They're perfectly open and free to, make a
choice
depending on what's going to work best for
them.
So with Med, in both of these plans,
because they're both are 05:20 nines, so we'll
hear them a lot people say. You know,
I don't know about Matt. I want that
05:29. Well, we're both 05:20 nines, which means
we both have the same tax advantages nhs.
You Okay.
The thing about 05:29
college savings vehicles
is the tax savings.
So...
As a Michigan resident using a Michigan program,
you get a schedule 1 deduction for monies
that you put in.
On the programs.
And with methods the full contract value
with Me,
there are caps as to what you can
claim each year or an individual is 5000
or for couples filing jointly, it's 10000.
And that's every year that you're contributing to
the program now, you can put in more,
but what you can claim
is that 5 or 10000 dollar
deduction. And then federally,
all 05:29
programs
have the advantage
of not being taxed on earnings
as these accounts are growing.
In the end endgame, when these are used
for qualified higher education expenses, you're not taxed
either
on the earnings.
You would be taxed on the earnings if
you pull the money out for other expenses
or the child didn't go to college at
that point,
It's based on the earnings only because these
05:29 plans are already after tax dollars. You've
already paid taxes on what you've put in.
So fees there would just be on the
earnings.
The way I would put it to a
client, I think, and it it'd be interested
in your take on this is that with
the Me,
your department is taking the investment risk.
Yes. Right. The the client knows their outcome,
kind of like a... A pension plan or
or some other product like that where you're
paying today's dollars for future tuition. You don't
have to worry about whether The market is
up, the market is down. You just know
that you have certain amounts of tuition covered
where the Me, you're taking on some investment
risk. But you're gaining some flexibility.
Exactly. Good. I like the idea of working
of using them together.
Haven't done that, very often. I've had some
clients with some of each, but usually, they
were independent decisions done at different times. And
we've spoken with Very purchasers who have started
Me,
knowing that as their Me grows, then they
would lock in some credit hours. They might
build it out to the point where they've
got a semester worth of tuition and roll
it over because rollover are acceptable
between 05:29 programs.
So they can be used that way too.
So the Me
program,
I believe there's several different options as far
as, like, how much tuition you wanna purchase
and how to pay for that. Is that
correct? Yes. There's 3 different options for the
plans that we offer, and then there's different
options on the pricing. Structure.
So we have 2 university level programs,
a full limited university
level program
and then we have a community college program.
So first, you decide which program you wanted.
Maybe you live in an area, you've got
us... Strong community college or child's a little
bit older, maybe they're in middle school, and
you... And they've got a particular leaning and
you think this is gonna be great. We're
going to go to the local community college.
So you can lock in the in district
tuition with the contract, or maybe you don't
know, but you want them to go to
universe
or maybe there's a legacy legacy,
and you want them to go to the
same place you want to. So you know
that... Well, this is 1 of the more
expensive schools in the state. I want the
full benefits of program, I want them to
be completely covered if I buy 30 credits,
I wanna know of I've got 30 credits.
The difference with the limited benefits program
is that for most of the colleges it
will pay based on what you buy 30
for 30. And I use 30 because that's
usually what it takes for a year
But knowing that, the pricing is a little
bit less,
and there are some schools
with higher cost than others.
We look at it and go well, if
the school is over a hundred and 5
percent of the weighted average with a limited
benefits program. We have to pro down.
What we can actually cover. You may have
purchased 30 credit hours thinking,
I went to Ferris, my wife went to
Ferris, my child old is going to go
to fairs. They're even talking about going to
fairs because this happened in my family.
Everybody was going to go to fairs. And
then in the end, you know, as a
senior and in a high we're like, hey,
U of them has this great program. It's
just what I want, and that's where I'm
going. Well, you of them then because of
the price structure with the limited benefits
we would cover
27
out of 30 and the student we'll get
the rest. So you still get a good
benefit. But it's another option for someone who
you know, believes in that kind of a
structure going, yeah, Well... And we can, you
know, kind coach people on ways to make
up for that.
Obviously, if you have a 4 year met
and you're in that situation. If you pay
those 3 credit hours when they're freshman,
going come a lot less than paying it
when they run out as a senior.
Yeah. That surprises a lot of people with
the
jumps.
Yeah. Yeah. Because there's different fee structures for
junior and Seniors. Yeah. And is plus the
annual tuition increases because those don't stop.
Because you're in college.
So, you know, we'll help people mitigate as
much as we can. But those are the
3 different options, You would say, well, yes,
I won't met of which plan do I
want. And then beyond that, there's... How am
I going to pay which pricing option, what
I like. When that started, it was all
lump sum. It was 1 year, 2 year,
3 year or 4 year. And as
times have progressed as tuition have gone up
as there's more 05:29 programs now to bounce
ideas off,
and see what working for people.
It wasn't maybe after just the first year,
people said, well, I'd like to do this,
but I need a monthly purchase plan.
So there's a monthly purchase plan. And for,
about the last 8 years,
people have been saying,
I need a lower entry point. So now
there is pay as you go.
And that's working out very nicely like,
the obligation there is that you open the
contract by purchasing 1 credit hour.
And after you purchase at 1 credit hour,
you can make deposits at will, minimum 25
dollars. So you have to keep in mind,
credit you know, what are the current
credit hour costs? If I put in a
hundred dollars, Yes, I'm buying fractions of credits,
but those can add up,
and and it's a great gifting opportunity
let cram and grandpa grandparents aunts and uncle
uncles know,
basically, all they need to know is contract
number. They don't see any information they can
go online and they'll they'll see them the
name of the student. They'll go, yes. I'm
giving money to the right student, you know,
and make a gift toward the 05:29
net in
Me has a gifting program too. I yeah.
I remember when I started
my daughter's
Me back in maybe 2003.
It... Everything was still paper back then. And
I remember that the monthly statements actually had
deposit slips that you could give to grandparents
aunts and uncles And I remember talking to
clients back then because it was fairly common
for grandparents to buy savings bonds for.
Yes.
To
do do take the give
give grandparents those deposit slips instead of
having them buy savings bonds for birthdays
Anyway, I kinda missed those paper coupons. Well,
we could probably work in and get you
feel.
I I think you can download a form
for that but those
Well, I'll tell you, Diane, what I don't
miss is having to make tuition payments and
say for college anymore. I'm beyond that now.
Congratulations. Thanks. Which is the help of the
Michigan Education savings plan. So I'm curious.
Obviously,
not everybody goes to College and Michigan to
which I always say, if you aren't looking
hard enough out of Michigan like, every
we have such great schools. I don't know
why people leave is what I'm trying to
say fun. They do. And I know that's
a worry for parents of, like, what happens
if my kid goes out of state.
Mom, and there are some provisions. Right? That.
Correct? Definitely. A wonderful question and we hear
that a lot. But since day 1, there's
always been a provision. It's really a formula.
What we do is we calculate
what we would have been sending to a
Michigan public university
on behalf of your child. So different contracts
will have slightly different formulas. But let's say
you've got a full benefits
contract and your student decides to go out
of. State, We would look at the average
tuition of the Michigan Public universities
in the year that your student presents their
paperwork to us. You know, 15 years down
the road or 18 whenever it was purchased
for them. When they tell us they're going
out of state, we look at the average
tuition,
per year. We look at the number of
years or the number of credit hours in
some cases and
multiply those 2 figures, and we divide it
out by 4
payout over 4 years. So we've always been
able to accommodate those students reasonably who are
going out of state? Is it going to
cover their full tuition, like order in Michigan,
probably not. Right.
There was a time
where there were some schools where we'd actually
be sending leftover over money back because I've
been paying bills for students for, you know,
more years ago. And
you know, Florida Kentucky, Georgia, They had good
schools, but they had a lot of public
funding and their tuition just weren't that high.
So
They go to school. We'd pay the bill.
And the end of this summer, we'd send
the money back to the... What we call
the refund does and they usually the purchaser.
On. Like, but that's not so much the
case
anymore. But there's always been those provisions for
not only outer state schools, but we have
another formula for in state, private
institutions. So if they're going to do a
k College or university of Detroit,
Davenport, we can also make payments to those
institutions.
Do you work for Michigan State University?
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When when we're dealing with clients on the
planning end.
Usually the objections focus around, well, what if
what if this happens? What if my son
doesn't go to college. What if my daughter
gets a scholarship,
Yeah, it seems to me that the evolution
of these plans in general has been to
eliminate and reduce those
objections.
Yeah. We've always always had a provision for
scholarship.
That's a beautiful place to be
because the scholarship.
We've got options, especially if it's a full
tuition scholarship
because you can transfer those benefits to another
child.
You can cash it out, and then you've
got the money for the room in the
board and the books or whatever you would
like to do with it. Partial scholarships, we
usually work with the school.
So that the student gets their full
partial scholarship and all of their met money.
In that instance, we'll let them pass left
meant money into room and board and those
other expenses.
So there's always been those options, and there's
always been a provision for the instance when
your child says I'm not going to... You
can get the money back based on tuition
increases over the years, you're entitled to your
earnings.
But that's when your earnings will be subject
to income tax at your tax rate plus
a 10 percent equity fee for
simply cashing it out and not using it
for education. So
my understanding is some recent
legislation even made a little bit more flex.
As far as move money into roth Ira
so you can start saving for retirement. Yes.
That is currently under works. And we don't
know all the details yet. And we're still
deep dependent on all of the federal
regulations. But what we know is that the
opportunity to Exists now to take leftover over
05:29
monies and roll them into a Roth Ira
for the beneficiary. For the
student, not for the purchaser owner. And we
know that the account
the 05:29
account had to have been in existence for
15 years.
And the smaller rules are still to be
clarified, but, It's a,
you know, it's a it's a very exciting
option. Yes. It's it's always fun that
you know, Congress can pass these rules and
make these broad
proclamation, and then they live leave it up
to folks like you to work out the
details after the fact. Right? Yeah. Yes. And
that and that's what's going on. You, we've
belong to, as a 05:29, we belong to
the college savings pro program that. Savings plan
network, which is part of Nas, the National
Treasures
association for the State Forge,
and they're doing a lot of work,
to clean up the details so we can
be able to tell people, you know, exactly
how this is going to work. We're not
quite there yet, but we're getting there Another
great option. It sounds like so I think
that's gonna be super helpful for people. We
another, you know, another reason,
another reason off the list of
objections to savings for college is the way
I look at it, It's probably not going
to actually be relevant for most of our
clients. But if it's another thing that
makes it psychologically
easier for a parent or grandparent to put
money aside for college. I'm all for it.
As our way here. We're, you know, accommodating
the federal initiative
to accommodate
trade schools and apprenticeship. We've got a bit
of a hurdle here in Michigan about the
tax free status,
which we're currently working on. There's some,
you know, going to be some legislation. That
will maybe loosen that up,
people have always been able to, and you
wouldn't probably realize it unless you called in
and talk to us, but people we've always
been able to... At least work out a
refund for someone who says,
what we saw most often when I started
paying bills was, c
programs.
And then
Emt programs
and,
electrician through community colleges
and sometimes
that individual having that refund
and then themselves certifying as to,
you know, what was a qualified
spence and what was. And so we've always
been able to accommodate, but now with this
broader federal language,
we've got more room, but we have to
clear the hurdle of making a tax free.
And that's what we're working on. Good. Awesome.
Good.
That's important stuff.
Most important programs right now for sure. Yeah.
Yeah. Good.
So I'm curious, Diane, in your 20 years
of experience. I'm sure you've seen a lot
have you seen, are there common mistakes or
misunderstandings that you see people make when it
comes to these programs?
1 mistake is that
what we see is people that feel like
they've waited too long and it's not going
to make a difference.
And that's simply not true because anything you
can put in in save something you're not
going to have to come up with right
in the road. We see people concerned about
how having a 05:29,
they're at Me
how it's going to impact their financial aid
eligibility. Well, my child isn't going to be
able to get, you know, the pull Mh.
Free money if I've saved up too much
money.
And that's
05:20 nine's are actually the
the least offensive.
Yes. Yeah. To what contributes to the family
income.
It's, like, 5.56
percent
somewhere around there it might be off I
think you're... I think you've put right on.
Yeah. You mean, whereas if the student was
account was set up for the student in
their name, it's 20 percent. And if you
pull money out of your
04:01 k or your Ira rates, it's 50
percent. Yeah. That... So it really
is a good place to be. So that's
something that
is helpful when people understand that. And for
met,
we've always fought... While you can't use it
out stay.
Ego here. It changes form. Those are the
most common. Mh. It it's interesting to me
that that provision has been around. Forever because
I had I had actually thought Diane that
that was a change in the last 10
or 15 years.
I'm married. So so I was a victim
of that miss forever reception myself there for
a while. Most of our students do stay
in state. You know, there's a this percentage
is quite small that go out state, but
we do have... We've worked with over 2500
different other state
institutions in a few outside the country. If
they are eligible,
to accept federal aid under the Department of
Education in their degree granting, we can pay
out of countries calls too. And we've done
that on a few seconds.
So we talked about some of the mistakes,
Diane, but I'm sure you've seen your share
of 6 assess stories do you have any
that you can share with us? Oh,
we have people coming forward on a regular
basis and what we started... Seeing about 10
years ago was,
the
generational aspect
of people coming to a
My child needs a met contract. My parents
or my grandparents put me through college with
Met and I must.
Do this for my child.
And so I was looking through a a
few of them this morning.
And just as an example,
we had heard couple years ago from a
young man, and he was telling us that
his parents
got him a met a when he was
in middle school, and they told him about
it. Now, this is a another thing we
hear, you know, some parents tell their children
about it and use it as incentive. And
others want to surprise them with it. But
in
his case, they told him about it, and
he just kind of shrugged it off,
you know? Yeah Yeah. Okay. You know what's
that? Yeah. Okay. That's nice. Thanks mom and
Dad. Well, when he was of college age,
He went to Grand Rapids community college for
2 years,
and he enjoyed it. He did well, happened
to meet his wife there. And then they
both went on to
G u to Grand Valley State University.
They both got their degrees.
And
got married after then and what they noticed
was that he had
a lot less college debt, practically no college
debt as opposed to his wife who didn't
have him at. But they're both very successful,
and he has a business now north of
Grand Rapids and his wife works and manufacturing.
And when he had
contacted us, they have a 2 year old
at that point. So it's isn't it's been
a couple years, but they were determined that
he was going to come out like his
dad did with the relatively low college death.
And so that's just 1 of the many
success stories
will hear in a year.
Sometimes people will
when they think about saving for college shelf,
they'll think all or nothing
and
something is better than nothing. So Yeah. You've
got a situation to go in and just
do a lump sum 4 year met contract.
Maybe you do 1 year met. If you've
got children,
If you're gonna be in the situation where
they're close together and you're going to have
2 or maybe even 3 in college at
the same time.
Having a year or 2 of met, for
each of them can make a big difference
because you can
manipulate when you're going to use that to
help out.
Right. In my lifetime, I've dealt with at
least
3 parents of triplets.
Half, man.
And, you know, they're always
very, very happy in taking a a deep
of breath, you know, because they'll come, all
they have to say is, how do I
activate this?
We
no problem. You can do that online now.
It used to be a paper form.
So there's just all kinds of success stories
and ways to look at this. And ways
to look at 05:29 as a tool
to do what you want to do for
your children and for your grandchildren. I love
it. I love that part. It's interesting
so my kids have
Mu plans, and
I have a son who's 12 now.
We have conversations, about I kinda wanted to
use it as a way to, like, teach
him how saving and investing works. And so
we have conversations around it. Well,
as a 10 year old, you know, he
looks at those numbers and he goes, why
can I have that now? I wanna buy
a fishing.
And we have those conversations around, well, future
cohen will be real ups if we spend
all your college money on fishing rights.
And so I kinda use it as a
great way to teach my kids about, like,
saving and investing and how important it is.
So it's just
interesting how people look at that.
So I think we just figured out who
our next podcast guest is gonna be.
Oh, I'm sure he would love it.
Cool.
I'm curious.
With your experience, what do you think the
future holds for college savings plans? You think
there'll be more changes or
more importance put on it? Well, certainly, we're
striving for more importance to be put on
it
because whether it's...
A trade a community college, a degree or
an advanced degree.
The workforce needs
educated
individuals to do
so many
different functions. So
this is a way to help. And yes,
we have to stress the importance
of knowing what opportunities are out there to
help.
I think 05:20 nine's are going to continue
to be flexible
as the face of
education changes
as other
options come available,
as the federal government gives us a greater,
scope,
we're going to adapt to those and make
the most of them. Make the most of
it for
You know, our citizens are children,
everybody.
Absolutely love it. Well, this has been
fantastic, Diana. I could sit here and listen
you tell us stories. All day long.
I could. I do have some work to
do, but no. I appreciate you joining us
is there, what would you tour our listeners?
What would you say is the best way
to get more information about these programs? 1
way is to visit our website, and it's
set with met dot com,
or you can go to.
Mi saves
dot com. And there you'll find
the logos for all 3 programs, and you
could read up on met
me s p and even get some more
direction on Map.
So great sources of information there. They'll give
you
ways to set up 1 on 1 meetings
with met staff with Me staff and talk
more about the programs and you know, how
you get started because course I actually done
mine these days. Yeah. Yeah. Yes. It's very
easy. Yes. You Very cool. I didn't realize
you had so many
resources where you can actually meet with people
too. I think that's fantastic. So... And I
have both of those websites booked bookmark. I
will tell you. So I'm a frequent visitor.
But
Well, with that, Dave Diane, and it has
been applied, diane. Thank you so much for
joining us, and we appreciate all that you.
Thank you for having. Thanks me. I appreciate
it. Diane. It, fun.
Gather around and follow the kitchen table finance
podcast to learn about money and simple ways
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