More parents and grandparents are setting up savings accounts to cover college expenses for the next generation, according to a national report released today.
The report by the College Savings Plans Network (CSPN) shows total investment by American families in so-called “529 plans” has reached a record level of $227 billion. Michigan’s plans totaled $4.7 billion – also a record.
529 plans include prepaid college tuition plans, and tax deductible plans like Michigan’s Education Trust.
Robin Lott, Executive Director of the Michigan Education Trust, says plans these days have, on average, $18,000 set aside.
“Starting out the box we probably saw folks had an average account size of maybe $2,500-$3,000. But as they realized how important college is and how expensive it can be we’re starting to see them increase the amount they’re saving,” Lott said.
Lott says the tax benefits the plans offer have also played a role in the increase.
Nearly 31,000 pre-paid tuition and tax deductible savings accounts were opened in 2013; a 15% increase over 2012. Lott says there are more than 350,000 total plans set up in Michigan.
“We’re starting to see grandparents get more and more involved. So instead of buying those Xbox little toys or computer games they’re starting to put away in a college savings account,” Lott said.
While $18,000 may not be enough to cover all the costs of getting a degree these days, Lott says it’s still a lot considering all the debt college students are getting into.
“(Families) are not responsible for trying to save the whole thing but anything they can save to help towards helping reduce the amount of debt that child is going to take out is going to be so helpful in the end,” Lott said.
Michigan has three 529 plans, Michigan Education Trust, Michigan Education Savings Plan, and Michigan Education Savings Program. You can find more information through MET’s website.