LANSING, Mich.—Advanced tuition payment accounts and other college savings funds established for a child beneficiary would be protected from creditors under legislation introduced by state Sen. Mike Green.
“The ability of a child to afford college shouldn’t be punished because someone else’s financial situation changes,” said Green, R-Mayville. “This legislation will protect college funds set aside for a child against liens, court judgments and other court actions initiated by a creditor, at a time when a lot of folks are struggling to make ends meet.”
In most cases the funds are already given protection in bankruptcy proceedings under federal law. Twenty-five states currently provide protections for college savings accounts.
Senate Bill 895 would shield trusts, funds, accounts and advanced tuition payment contracts established under the Michigan Education Trust (MET) Act, the Michigan Education Savings Program Act, or sections 529 and 530 of the Internal Revenue Code of 1986.
Green said that providing protections for college savings will not enable the sponsors to use the accounts as shelters from the consequences of irresponsible financial decisions.
“It’s already illegal to use an account for fraudulent purposes like that,” said Green. “And with restrictions on how much can be contributed annually to these accounts and what the funds can be spent on, they’re not vehicles that somebody can use to hide assets.
“On the other hand, imagine a bill collector being able to raid an account that a sponsor set up during a student’s infancy. Fifteen years or so pass and the child starts weighing options for college. If the sponsor has fallen on hard times and has some bad debts, those college savings are fair game. My legislation will put an end to that practice.”
SB 895 will be referred to the Senate Judiciary Committee for consideration.