Tag Archives: education

Why I Regret Starting a 529 Plan for My Kids

why-not-to-save-in-a-529-plan

Let’s be clear: I don’t regret saving for the kids’ future. I regret limiting that fund for college.

Like many young parents, Mark and I were anxious to start saving for college. A 529 plan was the no-brainer option at the time. The fund grows tax-free and as long as the money is used for a “qualified education expense”, the interest is never taxed. There can also be state tax deductions for contributions.

So, here’s why I regret saving in a 529: There are so many valuable and practical ways to learn outside of college that can’t be funded by a 529 without paying taxes and penalties on the interest.

Nineteen years ago (the year Hannah was born), college appeared to be the only and best way to have a career and wasn’t nearly as expensive. In 1996, 52% of Bachelor’s degree recipients carried student loans averaging $12,000 (which is the same amount I graduated from college with in 1990). Today, at least 71% of college graduates have student loans averaging $37,000.

In contrast to the 1990s, high school students can begin to teach themselves skills that add value to a fast-paced, global economy. College is required for some professions (academia, law, medicine) but isn’t for many others.

Apprenticeship programs, gap years, online certification programs, fellowships, world travel and small business opportunities are all valuable and practical alternatives to college that can’t be paid for with 529 funds without penalty.

[tweetthis display_mode=”box”]529s are a subsidy for institutions that are overcharging and under-delivering.[/tweetthis] They’re one form of university welfare. The other forms are private loans, grants and government-subsidized loans. Students aren’t really the beneficiaries of these forms of assistance when a degree doesn’t guarantee a job or skills that employers say are lacking in most college graduates. (Don’t believe me, read this book about the skills gap).

Hannah graduated from high school and has no plans to attend college. Instead, she’s participating in a program that matches highly motivated young people with a small business or startup willing to train them.

Praxis charges tuition but boasts a net-zero cost because the total payment is less than the guaranteed pay the participant receives from the business partner during the apprenticeship. In addition to skills training, Praxis offers one-on-one mentorship, weekly group discussions and guidance on personal and professional development projects. Every participant has a tangible body of work to show potential employers at the conclusion of the program. The Praxis model has been so effective that business partners now commit to a full-time offer with a minimum salary of $40,000 for participants. No college will guarantee that.

By the time her classmates graduate, Hannah will likely have saved as much or more than they have borrowed in the same time period. She’ll be earning as much or more and she’ll likely be living on her own. Compared to other 18-34-year-olds, who, for the first time ever, are living with parents more than any other living arrangement.

So, what to do with all that money we saved for college? We could transfer the 529 to one of Hannah’s siblings. We put that money aside for Hannah, though, and frankly, I’d rather see it go to photo equipment (Hannah’s business), studio space, even a car, than an over-priced college.

Even though she’ll pay taxes (at her rate) and a 10% penalty on the interest, we’ve decided to use the money in Hannah’s 529 plan to pay the tuition for Praxis. The interest and penalty combined don’t compare to the interest that most students will end up paying for the lifetime of the loans they’re taking.

I’m not so put-off by the taxes owed because if we had it in any other type of fund, we would have been paying taxes on the interest all along. The penalty stings a little since she’s using the money for a program that has a guaranteed ROI and is tens of thousands less than college would have been.

Hopefully, 529 rules will expand with growing opportunities in our rapidly-changing world that make more sense than college. Any changes will likely come too slowly to help my children.

I’m not sure what will happen when the college bubble finally pops. Likely, even those who opt out will be stuck holding the bag. University Provosts everywhere will continue to receive their bloated salaries or maybe they’ll run for the hills taking their golden parachutes with them.

Rethink opening that 529. There are other ways to save in a high-growth fund for a minor. You can still use that money for college but you’ll have other options.

Why I Advocate College For the Few

Photo Credit: Sonja Guina: Unsplash.com

I can only think of a few scenarios in which a traditional 4 year (usually more) college is a good idea for most 18-year-olds.

Scenario #1: A student earns a full athletic or academic scholarship to attend for all 4 years. Though, I think a person a few years out of high school is a better investment, for some reason, these type of scholarships are usually only awarded to kids right out of high school.

“What about a partial scholarship?” you ask.

ANSWER: Depends on how much the student has to pay or borrow.

Scenario #2: A student who has known her intended path from an early age and that path requires an undergraduate degree. I’m not going to argue with a kid who’s clearly destined to be a neurosurgeon, engineer, nurse, physical therapist, etc. Even in this case, I would encourage parents to help the student understand the impact of debt on her lifestyle (if she has to borrow) once the education is complete.

Scenario #3: Parent works at the university or college and tuition is free or insanely cheap. Even in this scenario, four years at a school could result in opportunity costs to the student depending on what he or she plans to do. But more likely, the kid has no idea what he wants to do, so this would be dumb to pass up.

Scenario #4: A 529 or other fund set aside for college will pay the tuition the student will owe. Even in this case, I believe the money is better spent when the student is more mature and experienced than most 18-year-olds but that’s just my opinion and I have no desire to tell other people what to do with their money.

Scenario #5: (I know, 5 is technically more than a “few”). Generally, there are some kids I know who are “this close” to figuring out what they want to do after high school, their parents desire and can afford to send them to college and they don’t have unique skills or interests that are marketable-yet. So, I would agree that college in this scenario is probably a better idea than bouncing around the minimum wage world. Though a gap-year plan or a Praxis year might be more productive in this situation.

FOR MY OWN CHILDREN, I can’t think of any other reason to TAKE ON CONSIDERABLE DEBT to go to college-especially right out of high school. Here are my reasons:

An expensive college is not the place to “figure out” what you want to do. It’s like buying a Corvette to learn how to drive. Except the Corvette is cheaper and you’ll probably actually learn to drive, so the car is the better investment. This doesn’t mean my kids will be buying a car to learn how to drive, clearly that’s stupid. So is going to college to figure out what you want to do and borrowing to do it. Life and work experience will be a much better teacher.
My children have had jobs but I still wouldn’t want them to choose a career with the limited experience they have had.In Hannah’s case, she’s had a variety of jobs and a variety of skills and interests. No way do I want to force her to “pick” which one of those to “major” in to fit into a box. Instead, I subscribe to the idea of developing many areas of interest (multipotentialities), cultivating a “Portfolio Lifestyle” (it worked for DaVinci) and agree that creating multiple streams of income is a better option than a job, which has the perception of offering security but really doesn’t.
Most people aren’t happy with their career choice. Figures vary from 13% job satisfaction to around 20% among American workers, neither of which is very high.
Anecdotally, this is also true for people in my age group. Many people my age tell me they can’t believe they wasted 25 years of their life doing what they do. Teachers, lawyers, accountants, mortgage brokers (well, that’s understandable) it doesn’t matter.
My sample is small, to be sure, but the most professionally content people I know are my friends who didn’t go to college and either started their own business or worked predictable hours for a good company. Also, the doctors I know are pretty engaged and content with their career choice.
This begs the question, why are we expecting 18-year-olds to choose then go into debt for a path that might make them miserable? Doesn’t it make more sense to explore options and opportunities outside the confines of an over-priced institution?
I would advocate work, hate some jobs, love other jobs, learn about people, travel, be lazy, get tired of your lazy self and living with your parents and take action, whatever that action has to be. That makes more sense to me.
There are so many legitimate, sensible alternatives to an expensive, traditional four-year degree that are just as likely, if not more, to lead to satisfying work. Vocational education, community college, online programs, college overseas, entrepreneurial and apprenticeship opportunities are just a few examples. These options simply didn’t exist when I graduated from high school and are attractive based on cost (low or none) and outcomes (experience and marketable skill procurement).

I know people think my views about college are weird and maybe they’ll prove me right if my kids still live with us when they’re 30. Thing is, I know plenty of college graduates approaching their 30s who still live with their parents.

Education Revolution!

Welcome to Day 16 of write31days. Over the hump, so to speak. For this installment of 31 days of Great Ted talks, I have to bring Sir Ken Robinson back for an encore.

Though this presentation isn’t as popular as the first, it is just as poignant and urgent.

Robinson argues that we should revolutionize our model of education rather than reform it (which he views as “simply improving a broken model”).

This isn’t about “privatizing”. I believe public education is already privatized (public money going to huge corporations that control everything in the form of textbooks, testing, testing prep, “technology”, supplies, constant assessment of students, evaluating teachers, food service, “health” initiatives and all manner of “consulting” costs and “studies” before any program, facility or change is implemented).

Recorded around 2010, the exponential infiltration of new technologies affecting nearly every industry and disrupting linearly-oriented institutions make Robinson’s argument even more relevant and urgent. The idea that there’s one linear path to “success” and anyone who takes it will be secure is laughable and irresponsible today-yet that’s how schools prepare students for the world.

Adopting Robinson’s suggestion would allow teachers to teach in the way they are wired and most gifted, instead of conforming to a standardized format. Maybe it’s impossible but worth trying.

Every High School Student Should Learn Statistics

When a MATHEMATICIAN argues that statistics should be taught to high school students before calculus, how can’t we listen? Yet, the pinnacle of mathematics is calculus, a subject that’s important to students who will go on to study mathematics, engineering and the sciences but it doesn’t really apply to daily life.

On the other hand, probablility and statistics if everywhere and can be fun!

Arthur Benjamin argues that our world has moved from an analog to a digital age and statistics drives it (GOOGLE ALGORITHM ANYONE?). In fact, one reason Amazon has become so huge and successful was Jeff Bezos’ foresight in collecting consumer data.

It’s unbelievable that this TED talk was recorded in 2009 and there’s no evidence that stats has taken a front seat in high school curricula. In fact, it’s largely regarded as a “lower level” math.

Wouldn’t you love to know the probability that a guy named Arthur would wind up an academic?

Wanted: Cyber Grandma!

What happens when you put the internet in a hole in the wall of a slum? Find out in this Ted™Talk by education scientist, Sugata Mitra.

There’s so much here that I’m going to let this one speak for itself. Applications for cyber grandma’s will be accepted right here at the conclusion of the talk. (wink wink)

If you’re interested in how self-organized learning can be integrated into any classroom (Good luck with that), you might be interested in the Kindle short “Beyond the Hole in the Wall” where Mitra provides step-by-step instructions.

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Why You Should Join the Doodle Revolution!

Remember all those scribbles in the margins of your notes and homework when you were in school? Well it turns out, your brain was doing what it does best….helping you solve problems.

In this TED™Talk, Sunni Brown, author of “The Doodle Revolution“,* explains how doodling is really deep thinking in disguise, it’s universal across all time and cultures and can be harnessed to unlock innovative thinking and complex problem-solving.

*I’m a serious book junkie and I own this one, too. Although you can probably find this one in your library system, this is a reference that you’ll want to return to. Brown goes through several methods of learning how to use doodling in different settings (even on creative teams at work). It’s entertaining, thorough and well-organized.

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Sir Ken Robinson

In case you haven’t seen one of the most-watched TED talks of all time, I’m kicking off my own 31 Day 2015 Series with the one and only, Sir Ken Robinson.

Sit back and treat yourself to 10 minutes of entertaining and inspiring commentary from a global thought leader in education. (If nothing else, enjoy the British accent).

If you’re a reader, his books are as engaging as his presentation. He gives solid anecdotes to support his points and draws from stories about people both famous and not.

I read “The Element: How Finding Your Passion Changes Everything” and “Out of Our Minds: Learning to Be Creative“. You should be able to find both in your library system.

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DIY Slipcover Sneak Peak

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Nothing like a room makeover to get you motivated to do something you’ve been meaning to get around to for 2 years! I posted photos of my heinous basement a couple of years ago (scroll down to the “TV” room with the couch. See that brown couch?….here’s another photo of half of it:

Kind of “Madmenly” Don’t You Think?

I actually think the shape of this couch is pretty cool, even the brown chenille upholstery but it’s just a little too tired and I’m not cool enough to pull it off “as is”.

I picked it up at a consignment store a few years ago for $50 after the whiff test and the sit test. Our basement has narrow openings and I thought this would work since it came in 2 pieces and it’s mid-century self is small. I don’t know why the furniture was so short/small just a generation ago but it was. Both pieces are still sturdy and obviously came right out of an estate where they were likely covered in vinyl slipcovers for the previous 40 years…works for me.

I wasn’t sure whether I would eventually reupholster or slipcover it. I decided I didn’t want to tear into it and I love the relaxed look of a custom slipcover so I decided to try my first one.

After 18 years of intending to do something in the semi-finished basement room, we finally decided to have it done. I wish we could DIY but neither of us has the time or expertise to tackle it. The contractor who remodeled the kitchen over at the duplex is fixing it up for us. (I really promise to do a post about that project).

Now was the time to start those slipcovers (remember, this couch has 2 halves).

I’m going for a relaxed but fitted cover around the body and I’ll recover the foam cushion separately. I have some experience with those as you can see here and here, so it shouldn’t take too long.

Here’s a photo of my progress…

About half way through the first piece.

I’m only putting piping on the top of the slipcover part and around the edges of the cushions. It adds a more finished look and isn’t too hard to insert on these straight lines.

I plan to post a tutorial. Basically, I’m pinning 2 seams together inside-out, sewing, pinning another 2 seams together, sewing and just putting the puzzle together and figuring it out as I go along. So far, this method is working well. Mark’s helping a little with ironing and sewing and is more excited than anyone for the changes.

Sew Easy an 11 year old can do it.

I’ll post a more detailed tutorial (and maybe a video) when I put the cover for the other part of the couch together. I need to see how this one goes together first and the second one should go even smoother.

Since I’m linking up over at Elizabeth Foss’ series “Needle and thREAD”, I’ll mention that I’m rereading a book that doesn’t necessarily advocate homeschooling but it might be the single most influential book in convincing me that homeschooling was a great option.

In a “A Mind At a Time“, Dr. Mel Levine describes and demonstrates how people are wired differently so that they learn and process information differently. He’s so thoughtful and articulate and just makes a great case for accommodating strengths and strengthening weaknesses. He has clinical experience as a pediatrician, taught pediatric medicine at the University of North Carolina and has studied learning and development throughout his career.

I’m always fascinated by how the mind works and this book gives great anecdotal examples. When I first read it, I wasn’t even considering homeschooling but appreciated it as a great parenting resource to understand the differences among my children and to understand my own strengths and weaknesses. Because he writes about real patients in his practice, the book isn’t dry at all. Much of it reads like a series of stories to demonstrate his ideas and conclusions.

Go check out Elizabeth’s post and the comments to see what others are sewing and reading by clicking on the button below.

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Being Home

Encouragement to help you make the most of being home