Bill may help higher education costs

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A bill aimed to help pay for higher education passed unanimously last month in both the Senate and the House.
Senate Bill 599, which will go into effect early next year, will create the Michigan Education Savings Program Act and establish the new savings program within the Department of Treasury, said department spokesperson Stephanie Vankoezering.
She said the bill will allow individuals to contribute money to education savings accounts, with the proceeds used to pay qualified higher-education expenses, including tuitions, fees, books and supplies as well as room and board in some instances.
“A person could establish one or more education savings accounts for one or more designated beneficiaries. An account can be started with a $25 contribution and total contributions can’t exceed $125,000 in a single year,” Vankoezering said.
She said the bill would amend the Income Tax Act to allow a taxpayer to deduct contributions made to an education savings account, not to exceed $5,000 for a single return, or $10,000 for a joint return in a single tax year.
“Interest earned on those contributions also can be deducted from state income taxes, according to the bill,” she said.
Vankoezering said when a student is ready to use the money, the Department of Treasury will forward it directly to the school.
“People can use the accounts for any post-high school expense, including four-year colleges, community colleges, technical schools or postgraduate education … the school may be in or out of Michigan,” she said.
Vankoezering said people who decide to withdraw the money and not use it for education will be assessed a 10-percent penalty.
This bill is beneficial to many parents, she said, especially those who have large families and are concerned about paying the high costs of higher education for their children.
“The foundation of a successful career often hinges on the ability of an individual to obtain a college degree or some kind of advanced technical training, so it is imperative for today’s youngsters that parents be given every opportunity and a range of options to save for children’s advanced education.
“This bill proposes an ideal program for people to save money to further the education of their children, or grandchildren for that matter,” she said.
Vankoezering said since this education savings account could be opened for a minimal amount and contributors could dedicate any amount they wished, up to the maximum, at any time, “This would allow great flexibility, and encourage poor, middle and upper-income citizens to contribute to an account.”
The key advantage of this education savings account, Vankoezering said, is that interest earned in that account would be exempt from state taxation, which allows parents or other contributors to maximize the full value of their investments, and further encourage the use of such accounts.
“Without a limit on the income of people who could contribute to an education savings account, the bill would favor upper-income individuals, who would deposit the most into an account and, consequently, receive the greatest tax break. “Furthermore, the $125,000 cap on the amount that could be contributed to a beneficiary’s account also would favor those could afford to deposit large sums,” she said.
Gretchen Gates, Mount Pleasant senior, said the bill is a positive step.
“Although CMU’s tuition is not very high compared with other universities, there are still lots of students, as far as I have known, who cannot afford that money,” she said.
Gates said if parents can put aside a little money into an education savings account once in awhile, then they won’t need to worry about their child’s higher-education expenses.
“Because the money is already there when they need it.
“I think this bill can help more people go to the college and reduce student debt burdens,” Gates said.
Yangjie Cheng, Mount Pleasant graduate student, said he felt very encouraged to hear about the bill.
“It is a good idea to set up a college savings account as a means of helping families deal with the high costs of obtaining a post-secondary education, which is increasingly seen as a necessity,” he said.