One of the first things we did when our children were born was contribute to a state-sponsored 529 college savings plan for each of them. Saving for their education is, for us, as much of an emotional investment as a financial one.
As we’ve tracked the growing balance in their accounts over the years, we let our minds wander about what colleges they’ll attend — and how much they’ll love it when their parents visit them on campus. We do pause when we look at the cost of college, and read about the burden of debt many students now bear. But we figure we’re planning for at least part of that expense.
We both want our children to attend the best college possible, of course. I lean toward a smallish, liberal arts institution — like some of the colleges that participate in the Private College 529 Plan, the subject of a article I wrote for the Your Money section. (Unlike most 529 plans, which work on a traditional savings and investment model, the private plan lets you prepay future tuition at a group of private colleges, at today’s rates.)
My husband, though, is less certain that a private undergraduate degree is the route to success, especially as costs skyrocket. He reasons that we both graduated from a big public university, and we’ve managed to have (mostly) successful careers and (generally) interesting lives.
The truth, of course, is that at some point our children will weigh in with their preferences — and as parents, we have dwindling influence over decisions made by our offspring, as they near adulthood. Parents can advise and cajole, but in the end the student will probably find a way to go where he or she wants to go.
The private college plan lets you prepay tuition at more than 270 private institutions – some quite prestigious and selective, like Princeton and the Massachusetts Institute of Technology — at current rates. It holds appeal for parents who, like me, have a certain image of what college should be: one-on-one interaction with brilliant yet accessible faculty, late-night debates with bright classmates. I got some of that at a big state university — along with plenty of mass lecture halls and a Darwinian approach to student retention. My husband argues that that’s exactly the point: A big public university teaches you how to make your own way. But I also saw students drown in that sink-or-swim environment. So a more contained campus has appeal for me.
The catch with the Private College 529 plan is that your child has to gain acceptance to a participating institution. It’s true that less selective colleges participate, but it’s the headliners that grab parents’ attention. And when your children are babies, you don’t know — if you’re honest with yourself — what kind of students they’ll be as teenagers.
That’s why, despite the greater savings to be had by contributing early, it’s a leap for many families to buy into a private, prepaid plan when their children are young. One option to consider, though, is to use the plan as a sort of hedge, when your child is older and you have a better sense of what kind of college might suit him or her. (You have to save some funds in other ways anyway, since the private plan doesn’t cover costs like room and board.) Then, you can shift some funds into the plan and use it to fend off a few years of tuition increases. And if your child opts for a state university instead, you haven’t bet the farm on a specific college experience that, in the end, wasn’t right for your child.
How are you saving for your child’s education? Would you consider the Private College 529 plan?
Article source: http://bucks.blogs.nytimes.com/2013/03/27/an-emotional-investment-in-saving-for-college/?partner=rss&emc=rss