There was a point in time when the prevailing winds of wisdom blew everyone onto the path of a college education … get good grades in high school to get into the best college (i.e., most expensive) for the best job (i.e., highest pay) to buy stuff (i.e., biggest house, luxurioustest car), marry&breed, retire (maybe, hopefully), enter nursing home/hospice care (hope not but most likely), then die (on a mattress … everybody gotta have a dream), and convince the kids to repeat, recycle.
Well.
Times have changed.
When it comes to college, Mr. Edelman observes that $300K for the Ivy Leagues is about average, with one year of undergrad at Haaahvaaahhd? Currently NINETY THOUSAND DOLLARS yeh that nope.
So Mr. Edelman suggests saving for college should begin before the child is even born … that is, start a
$$$ fund to pay for a hypothetical child to attend the most aspirational institution.
Mr. Edelman also says to start saving if not before birth then shortly thereafter to the tune of a monthly nut around $600-$1500, right around the time the kid turns six … yeh that nope. Umm, childcare?
Alternatives? Which Mr. Edelman observes as “all bad” …
- Home equity loan – no, no, and no. Mom and Dad will end up living with Kid because still paying house note at 85. So just don’t.
- Student loans – no, no, and no. Wage garnishments have begun, and some young people have actually moved overseas to avoid student loan debts. So here’s some more just don’t.
- College Tuition Prepayment Plans (sounds like Klarna for college) – never heard of this, but apparently some schools and states will allow folks to prepay some college costs with the balance due promised when the kid matriculates … ginormous caveat? No guarantee the kid will want to go to that college, a state college, or any college AND refunds are limited AND AND the feds treat the difference between amounts paid under the plan and received to attend school as a capital gain and tax that sh!t. So all the never just don’t.
BUT despite the foregoing, Mr. Edelman recommends Section 529 plans to save for college, available in all 50 states, operated (generally, mostly) by mutual fund companies, that offer several benefits, including tax breaks (gains = tax-deferred / college withdrawals = tax-free), high contribution limit amounts, market-based returns on the investment, anyone (parents, grandparents, friends, boosters) can contribute to the plan, and many, many much more.
Nice idea, in theory.
Yeh nope. Love theKid but gonna warn off college. WAIT (dodges shoe) … hear this first.
College costs keep rising, whereas wages have been stagnant for decades. A college education simply lacks sufficient ROI – in the absence of a medical degree or employed in bio/mechanical science fields (and totes possible to waive into the bar) – such that seems way better to have the kid(s) attend the best elementary/middle/high schools, explore potential income industries safely, then let them figure out their career path from there.
If chosen field requires a BA, work and attend community college for two years then switch over to finish up. Delays entering the field for a few years BUT BUT greater adulting encourages a more thoughtful choice … none of this Masters in Latin-Greco-Roman bathing culture while working as a bartender seeking a real estate license.
Mr. Edelman succinctly summarizes the quandary (p.339) as thus:
There is no relationship between the cost of obtaining the degree
and the economic reward for having done so.
Schoolteachers, nurses, vet techs, arborists, physical/occupational therapists, etc., etc., ad infinitum, ad nauseum … better to work on an oil derrick or become an auto mechanic or join the military and simply earn a living.
Most importantly? Have a conversation with the kid, determine the goal, and explore approaches to achieving it. College is no longer a certain path to financial success, and it is nonsensical to sacrifice the future to debt without any guarantee on the return.
Choose wisely.