Michigan 529 Plan Rules And College Savings Options

Michigan has a 529 plan called the Michigan Education Savings Program (MESP) that can help you save for college. Michigan also has a 529 Able Plan as well.

If you live in Michigan, these might be good options for you to save for college. 

These programs are designed to help make college more affordable - so that you can get the education you need. By saving for college early on, you can make paying for college easier down the road.

If you're not quite sure how 529 plans work, check out this starter guide to What Is a 529 Plan?

There is also a specific order of operations to save for college that we recommend families follow. These programs are specific to the State of Michigan. Each state has different rules when it comes to 529 plan savings. Here are the Michigan 529 plan rules.

Average Cost Of College In Michigan

When saving for college in Michigan, it's important to take into consideration the cost of attendance in the state. If you choose to go to an out-of-state school, you need to look at the average cost of attendance in that state.

There are 167 colleges and universities in the State of Michigan.

The total average cost of college (Cost of Attendance) in Michigan for in-state residents is $20,556 for 2023. This includes tuition, room and board, books and supplies, and other expenses.  

For just tuition alone, the average undergraduate tuition for in-state residents is $9,138 for 2023. The cost of tuition in Michigan has been rising at about 8% per year.

Michigan's flagship college is also one of the worst offenders for charging an out-of-state premium on tuition.

See how this compares to the average cost of college here. Keep in mind the average student loan debt by graduating class here.

Explore the data here.

Michigan 529 Plan Tax Information

Tax savings is one of the big benefits of using a 529 plan to save for college. On a federal-level, there is no tax savings for contributions, but qualified distributions are tax-free. 

Here are the special tax benefits and considerations for using a 529 plan in Michigan.

Contributions

Michigan offers a state tax deduction for contributions to a 529 plan of up to $5,000 for single filers and $10,000 for married filing jointly tax filers.

Minimum: $25

Maximum: Accepts contributions until all account balances for the same beneficiary reach $500,000.

Rollovers

Rollovers into the state plan are allowed but not able to receive a state tax deduction.

Qualified Distributions

Qualified distributions from a Michigan and non-Michigan 529 plan are tax-free.

K-12 Education

Michigan does not conform with Federal law in regard to using a 529 plan for K-12 tuition. See this guide: Using a 529 Plan For Elementary and High School Private Education. 

Student Loans

Michigan does not conform with Federal law for using a 529 plan for student loans.

Rollover To Roth IRA

Michigan does not allow the rollover to a Roth IRA up to $35,000. Learn more about the 529 plan to Roth IRA rollover here.

Non-Qualified Distributions Taxes, Penalties, Recapture

A non-qualified withdrawal from a Michigan 529 is subject to recapture of prior tax deductions.

Michigan 529 College Savings Plan Options

Michigan has several 529 plan options - one consumer plan and one plan that is sold by financial advisors (we're big advocates of doing-it-yourself, you don't need to pay a financial advisor for this). They also have a pre-paid tuition program.

Michigan Education Savings Program (MESP)

The Michigan Education Savings Program (MESP) is the name of Michigan's 529 Plan. This plan offers a variety of investment options, including age-based portfolios that become more conservative as the child approaches college, and static investment fund options.

The funds offered include Vanguard and TIAA.

Fees:

There is a program management fee of 0.02%.

The underlying funds all charge expense ratios from 0.02% to 0.14% depending on the investment option.

Who Should Use It:

We recommend that Michigan residents use the Michigan MESP plan due to the tax benefits, low fees, and plan investment options.

We recommend that out-of-state residents utilize other plans.

Michigan Education Trust

The Michigan Education Trust is a prepaid tuition program that allows you to purchase a variety of plans, from community college to university tuition and fees. 

Michigan 529 Able Plan Options

529A Able accounts are accounts designed to help those with disabilities escape poverty and save for themselves. Learn more about 529A Able Plans here. 

MiABLE

The MiABLE is a 529A plan open to all residents in Michigan.

This plan allows contributions of up to $18,000 per year from all sources.

It does have a minimum initial contribution amount of $25 per account. The minimum subsequent contribution amount is $25.

The plan does have an account maintenance fee of $45 annually, assessed at $11.25 per quarter. It also has a program management fee of 0.50%.

You can open an MiABLE Plan here.

Other Programs To Save For College

A 529 plan is one way to save for college. Remember, we have a full guide on our approach to college savings here - and it helps you find other options.

If you're looking for ways to boost your college savings, check this out:

Backer

Backer is one of our favorite ways to save for college because they make gifting for college so easy. You can setup an account, link your 529 plan (in most states), and get a unique URL that you can share with friends and family to save for your children's college.

Plus, they have Backer Bucks, which allow you to earn rewards and rebates for the shopping you already do - directly deposited into your children's 529 plan.

Check out Backer here >>

Upromise

Upromise is another awesome tool to help you save for college because they have a lot of ways that you can earn money for your 529 plan. You can get rebates and rewards, and you can get cash back into your child's 529 plan by using the Upromise credit card.

Check out Upromise here >>