MET earns poor grade in rating of state programs

Although the Michigan Education Trust program received much praise when it blazed trails for prepaid tuition plans 11 years ago, a recent report card raises questions about the contract's usefulness.

MET allows future tuition to be purchased for Michigan residents for use at a state public educational institution. MET Director Robin Lott said the program locks in "tomorrow's tuition at today's cost."

Despite the promising aspects, the program received a C-, the lowest grade given, in the February issue of Kiplinger's Personal Finance Magazine.

While other states' programs permit students to use the full value of the contract even if they decide to attend college out of state, MET participants do not receive the full amount of their contract if they choose an out-of-state school.

LSA sophomore Becky Diener, whose parents purchased a four year contract in 1989, said although she applied to out-of-state schools, her parents' MET investment modified her college search.

"I didn't feel limited, but it definitely was a thought when choosing colleges," Diener said.

Diener said the program wouldn't have been effective if she had left the state.

"We're glad we did it, but it would have been bad if I didn't go to Michigan," she said.

According to Kiplinger's article, MET also lags behind competitors because of its impact on financial aid.

Unlike other plans, prepaid programs like MET are considered to be a reserve that subtracts from the amount of financial aid a student can receive, said Kiplinger Senior Associate Editor and author of the article Kristin Davis.

"This program is a prepaid resource and can reduce aid, dollar for dollar," Davis said.

MET also does not permit purchasers to account for books or room and board - only tuition and fees can be pre-paid.

But Lott said MET has many benefits, including a tax deduction for the total contract price the year it is purchased and offers peace of mind to parents.

Karl and Elizabeth Diener, who purchased their daughter Becky's contract in its debut year, said that while the plan is not perfect, it did provide money for their daughter "no matter what happened to us."

The Dieners said they paid $8,200 for an education that would have cost $25,000. But the program did not allow them to account for room and board.

"If that was available I would have done that too," Becky's father said. "Room and board is just as much" as tuition costs.

Lott said MET may eventually allow for more coverage than just tuition, but that was considered from day one and will "depend on legislation."

The low grade is not shaking confidence in the MET program.

"I'm taking it as a joke, quite frankly," Lott said.

Lott said Kiplinger's assessment does not concern her because none of the 19 prepaid programs - such as in Illinois, Colorado or Virginia - received an A.

"The person that did this survey did not like prepaid programs. It's crazy," Lott said.

Lott contends that it was misleading to compare MET, a prepaid tuition program, with savings programs available in other states.

"Its like comparing apples to oranges," Lott said.

But Davis said the comparison is accurate.

"Our perspective was where consumers should put money," Davis said. "If a consumer has the choice to buy an apple in one state and an orange in another, why can't we compare them?"

Lott said she would like to have seen the Kiplinger article "based on how well the plan is being received by public and how well it meets the needs of the students."

Lott said more than 200,000 individuals have bought prepaid tuition plans in Florida and Michigan alone.

"The people in these programs are smart people. I don't think over 200,000 people would make a bad choice," she said.

Iowa state Treasurer Michael Fitzgerald, whose office oversees the College Savings Iowa program - which received one of the two A+'s given - agreed that the people in the other programs are not misguided.

"If you're saving for college you're doing a good job," Fitzgerald said.

Fitzgerald said when he was considering what kind of program to suggest for Iowans, he found that the plan that places the money in Vanguard LifeStrategy Portfolios made more sense.

"Michigan's perspective is to help students go to Michigan schools. If that's the goal, it's a much better plan," Fitzgerald said.

"We want students to go to University of Iowa, but we don't want to build up state schools, we want to help families," he said.

02-02-99