About six months ago

I reached a milestone in my daughter’s 529 plan. Excited about reaching five figures for my oldest child, I decided to tweet about the accomplishment, so others could share in my excitement. As expected, many were positive about me reaching the milestone. That is, except for one. It turns out, one individual commented that I should do some additional homework because having that kind of money in the college savings plan was only going to hurt me and my daughter in the long run.

Not being a stranger to the pros and cons of having money saved, I was aware of the potential ramifications of growing the assets in this type of an account. None the less, the comment caught me a bit off guard. It isn’t until now that I’ve been able to bring my thoughts together in a meaningful way on this comment.

The truth is

that when my daughter is old enough to attend college, her 529 plan assets will have to be included in her financial aid applications. If I can continue to save at the same rate for her from now until she begins her higher education adventure, we will have access to approximately $35,000. Is this enough to cover everything? No, it’s not. It will however lessen the burden to cover the difference owed when she reaches that point. So, when the powers that be review her financial status and state of need, we likely will not be receiving much, if any, assistance for her tuition. In one sense, that’s a bit of a bummer. My perspective is a little different though. 

The average student graduating with a four-year degree today is leaving college with a student loan balance of $29,800 (see here for more). I can’t help but wonder how many of these students did NOT have parents saving for their education in a 529 plan. On one hand, perhaps that helped them when they filled out their financial aid application. On the other hand, if many of these students did not have a 529 plan, it would appear that whatever financial aid they received wasn’t enough to cover their expenses. This notion is substantiated with the seemingly endless articles about the levels of student load debt increasing over the past several years.

For me

the question becomes, are we really doing our children any favors by not saving in a 529 plan so that they may qualify for more financial aid? It didn’t take me long to come to an answer. No. Absolutely not. If not saving in a 529 was the best strategy to obtain more financial aid to reduce the burden of higher education, we wouldn’t be facing ridiculous student loan debt figures. I believe the burden should fall more on the shoulders of parents and families.

Being financially responsible and disciplined for twenty years should be a bigger part of the answer to reducing student loan debt. Personally. I would rather foot the bill for my daughter’s higher education after saving for two decades than not save in hopes she qualifies for a portion of the sizable tuition bill. That to me, is a more sustainable model to reducing long term debt.

Please do not misunderstand me and my perspective. People do stand to benefit from financial assistance to obtain higher education. I fully support a model that benefits those in need. I also believe in a mindset that encourages life long financial responsibility and saving. Like many things financially speaking, saving for college is more about choices and accountability. Until we grasp that as a society, we’re bound to suffer the same financial hardships that so many are facing today.

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