WHEN OUR KIDS applied to colleges, the smallest detail of each campus visit mattered a lot. If our daughter admired the student leading our tour, the school skyrocketed in her estimation. If the class our son attended to “get a feel for the place” turned out to be a test period, Grandpa’s alma mater was forever struck from consideration.
In economic terms, the college decision features asymmetric information. Colleges know a lot about us from our detailed personal and financial applications.
WE PUT OUR TWO KIDS through college using 529 plans—and I estimate the accounts easily added 10% to the value of our college savings, compared to what we would have accumulated if we’d invested through a regular taxable account. Yet only 37% of families use 529s to help pay for college, according to a 2021 survey by Sallie Mae.
Like an IRA, a 529 plan gives you a tax break for saving for a specific goal—but,
WE HAVE A PROBLEM: We may have saved too much for our daughter’s college education.
My wife and I started contributing aggressively to our daughter’s 529 college savings account as soon as she was born. For the first two years, we invested the full amount of the annual gift-tax exclusion, which was then $14,000. Now, the exclusion is at $16,000, but lately we haven’t been saving as much as we used to. The reason: Our early aggressive saving,
INVESTING FOR education costs has never been more popular, as evidenced by recent Morningstar data. The research company found that 2021 was a record-breaking year for assets in 529 college savings plans. At almost $500 billion, total investments are up nearly fourfold over the past decade.
A big reason is the tax advantages—investments grow tax-free if they’re used for qualifying education expenses—plus 529 accounts are treated relatively leniently under the college financial-aid formulas. You can learn more about the accounts from other authors who have real life experience saving through 529 plans.
AT THE BEGINNING of 2022, I wrote about our resolution to go back to grad school. The short update: Jiab and I are indeed doing it. We’re enrolled in the Master of Arts in Interdisciplinary Studies program at the University of Texas at Dallas.
We scrambled to get the application paperwork done before classes started Jan. 18. Neither of us had applied to school for ourselves since the introduction of online registration, but we found it fairly easy.
THE NATIONAL STUDENT Clearinghouse Research Center recently published a report on postsecondary enrollment for fall 2021, including enrollment at community colleges, undergraduate institutions and graduate schools.
If you’re a believer in postsecondary education, the headline numbers weren’t encouraging. Enrollment fell by 2.7%, or 476,100 students. Over the two years since the start of the pandemic, it’s declined by 5.1%, or 937,500 students.
While the report offers no reasons for these declines, my view is that colleges are struggling to justify their value proposition to students and their families,
NOT ALL DEBT IS created equal—and that’s especially true when it comes to student loans.
For the vast majority of debt, we can calculate the ongoing monthly payment if we know the interest rate, number of payment periods, current balance and if the payment is due at the beginning or end of the period. But for federal student loans, we may need to know one more variable: the borrower’s discretionary income.
With federal student loans,
OVER CHRISTMAS, I got the sort of question I love to answer. My daughter’s thoughtful boyfriend had set aside some money for his niece’s college education. What was the best way to invest it?
I said that we’d paid for much of our children’s education with money invested in 529 college savings plans. The investment gains went untaxed because we’d spent the money on tuition, room and board. On top of that, our 529 contributions were deductible against our state-income tax in Pennsylvania,
MOST FOLKS DON’T teach and write about a topic until after they’ve earned a degree in the subject. Owing to my career path, and the nebulous nature of my specialty, I’ve done the opposite—with the next step coming in 2022.
I went to law school just after college because—frankly—I had no better plan. I enjoyed being a lawyer, but I knew it wasn’t my passion, so I went into teaching. I loved it. I taught various humanities,
IS A DEGREE FROM an elite school the golden ticket? I recently read Jeffrey Selingo’s excellent book Who Gets In and Why—and came away with some fascinating insights.
Selingo says experience and skills often trump where someone went to college. Each year, 1.8 million students graduate from four-year colleges, with 54,000 leaving with a degree from an elite institution. Simple math confirms employers must fill jobs with more than just graduates from elite schools.
A FEW WEEKS BACK, Jonathan Clements wrote an article reminding readers that they, too, likely made financial missteps in their younger days. His article was in response to comments by HumbleDollar readers about the perceived lack of financial discipline shown by those currently in their late teens and early 20s.
Before my recent career change, I would’ve had the same opinion as many readers. With my new job teaching accounting to undergraduates,
WHAT’S THE REAL PRICE? In September, I wrote about the potential tab for sending our first child to college in 2025. The four-year cost was estimated at anywhere from $65,000 to $430,000, depending on the college chosen.
This wild disparity led me to conclude that college financial planning was like saving to buy a car—when you don’t know if you’ll drive off the lot in a Honda or a Lamborghini.
Since then, I’ve tried to put a sharper pencil to college costs.
IF I WERE STARTING my career all over again, I don’t know how well I’d fare in today’s economy. By contrast, if my dad were alive, he wouldn’t have any trouble finding work. He was good with his hands and could fix anything. He was a machinist by trade, but he could’ve easily been an electrician, plumber or carpenter.
All the disasters we’ve endured during the past few years have created an explosion in skilled,
IT’S BEEN A MONTH since I dropped off my twins at college, one east, one west. Each has a debit card for an account with the credit union here in our hometown. One has downloaded the credit union’s mobile app. Both are already developing their own ideas and strategies for managing college life on a shoestring budget.
I got them their debit cards some time ago. I also opened a teen account for their brother,
DRIVE TO HOSPITAL. Cut the umbilical cord. Figure out names. Open a 529.
While the primary focus upon our two babies’ births was bonding, I had another item to check off: I opened a 529 college savings account for each one within a month of their births.
It’s paid off handsomely. Through automatic monthly contributions—plus stellar market performance over the past decade—they’ve amassed sizable balances for higher education. One child now is in high school,