Saving for college is a challenge, but state officials are encouraged by the popularity of the Michigan Education Trust’s new Pay-As-You-Go option.

Pay-As-You-Go, introduced a year ago, allows participants to open MET contracts by purchasing a minimum of one credit hour rather than semester increments.

This option lowers the initial cost of establishing an MET contract, which might prove a hurdle for some families, said Robin Lott, MET executive director.

Since the current MET enrollment session began Dec. 12, 2016, families have purchased 495 prepaid tuition contracts, a 60 percent increase from the same period in 2014-15.

“Clearly we’ve hit on a winning formula that has resulted in more families saving for college,” Lott said.

The Michigan Education Trust dates to 1988 when it was established under the administration of Gov. James Blanchard. It is one of a number of college savings plans available under Section 529 of the Internal Revenue Code.

Tax rules on 529 plans can be complex, so it pays to do research and explore all options. Here’s the basics for Pay-As-You-Go:

MET is a pre-paid tuition plan that allows participants to buy future college credits at today’s price. Parents, grandparents, or others can pre-purchase undergraduate tuition for a child residing in Michigan at any Michigan public university or college, including community colleges.

Michigan taxpayers are eligible for a state income tax deduction on contributions made to an MET contract, and contract earnings are tax-exempt when benefits are used for qualified higher education expenses.

Administered by the Michigan Department of Treasury, MET contracts are portable to out-of-state and Michigan private colleges and universities and may be transferred to other eligible family members and refundable if the student does not attend college.

Under the Pay-As-You-Go option, you must purchase a minimum of one credit hour in your plan of choice, although you can purchase any amount above the minimum. For example, the current initial cost of one community college credit hour is $109. You may continue to make payments at any time in minimum increments of $25.

By contrast, lump sum purchases are generally applied to a set number of semesters or years. If you are not purchasing a full four-year contract, MET officials recommend choosing the Pay-As-You-Go option.

More information about MET is available at www.SETwithMET.com or 1-800-MET-4-KID.

Information on the Michigan Education Savings Program, another option for college savings, is available at https://www.misaves.com/.

For information on Wisconsin college savings plans, go to http://529.wi.gov/.