Elaina Saber is a junior English major and columnist for the Daily Kent Stater. Contact her at [email protected]
As the job market becomes more competitive than ever, it is now an absolute necessity to obtain a college degree in order to secure a career. The issue, however, lies in the matter of funding.
The epidemic of student loan debt is nothing new. Now, 37 million Americans have student loans, and the national debt resulting from student loans surpasses one trillion dollars this year.
I understand that taking out loans may be the only option available for students who come from low-income families. But, increasingly more often, I see students who come from middle- and upper middle-class families who still pay for a majority of their college education with student loans. Their parents may help them pay for a portion of their tuition, room and board fees, but the rest of the costs are left to them in the form of loans, collecting interest until they are completely paid off.
The price of attending college is daunting, to say the least, but if everyone knows it is expensive, including parents, why would you not do everything in your power as a parent to begin saving for your child’s college education from the time they’re born?
I had never heard of a 529 plan before attending college, which is defined as a “tax-advantaged investment vehicle … designed to encourage saving for the future higher education expenses of a designated beneficiary.” There are two different types of 529 plans: prepaid plans, which allow a person to purchase tuition credits at present rates to be used for the future; and savings plans, which grow based on the market performance of the investments, or mutual funds, put into them.
As of June 2012, there are almost 11 million 529 plans in the U.S. After the economic recession began in 2008, however, new contributions to 529 plans dropped by 66 percent and were slow in regaining popularity because many people wanted more flexibility with their money instead of investing it into a plan that was only to be used for their child’s education.
Of course, 529 plans are not for everyone and have their disadvantages. Although they are exempt from federal income tax, parents must be somewhat aggressive in their investing, because unlike retirement funds that accumulate over several decades, parents only have 18 years at most to invest in their child’s education before tuition must be paid.
But isn’t the investment of that money over time better than putting it off until you get your first bill from the Bursar’s Office? According to a mid-year review of 529 plan activity, the average 529 account size reached an all-time high of $16,298 as of June 2012. That’s certainly enough to cover at least a year of tuition at Kent State.
529 plans may not be for everyone, but investing for your child’s education in some form can help offset the costs in student loans that they will have to take out. It’s a small price to pay in exchange for selling your soul — or your child’s soul — to the federal government.