It was wonderful to see both Michigan State University and the University of Michigan basketball teams reach the Elite Eight. Although neither was crowned the NCAA champion, I thought both were teams we could be proud of.
Both have coaches that are great leaders and teachers, and it certainly
appeared that all the players were classy student athletes. So much so
that I feel compelled to talk about education.
I believe the best investment young persons can make is in themselves.
Improving one’s knowledge and marketability in a competitive world is
essential not only for getting ahead, but also for financial survival.
I recently came across some information from the financial firm John
Hancock that I thought was worth sharing. According to “The College
Board, Trends in College Pricing 2013,” four years of public, in-state
college costs an average of $75,000. That’s a lot, and based on
experience, I believe, it’s a bit low.
The John Hancock study also determined the source of the money that
funded college expenses. Student income and savings covered just 11
percent of the tab, while parent income and savings covered 27 percent.
Grants, scholarships, friends and relatives accounted for another 35
So, what was the source of the remaining 27 percent? Unfortunately, it
was borrowed. Parent borrowing accounted for 9 percent and student
borrowing an unbelievable 18 percent.
We’ve all read about students graduating with horrendous debt on their
shoulders. A whopping 26 percent of graduates leave college with debt
burdens ranging from $25, 000 to $100,000.
That’s why I want to remind all the parents and grandparents out there
that there’s something you can do. You can save for your grandchildren’s
education. And if you’re wondering how you can go about it, I’d like to
make a suggestion.
I believe one of the best ways to help provide for a grandchild’s
education is with a 529 college savings account. Simply stated, a 529
plan is a tax-advantaged investment vehicle established to encourage
saving for the higher education of a designated individual.
Funds grow tax-free as they accumulate, and if the multitude of
government guidelines is followed, the dollars earmarked for education
are withdrawn tax-free. There are numerous ways the dollars can be
invested, and as with any investment, there is an element of risk.
A small drawback is that 5.6 percent of the funds in a 529 plan count
against the federal formula for determining the amount of financial aid
available to the designee.
I say small because the grandparents can negate that factor. That’s
because if the account holder of a 529 program is a grandparent of the
student, the assets in the 529 plan are not counted against the amount
of financial aid.
In other words, grandma or grandpa control the assets and it does not
harm the grandchild’s ability to qualify for financial aid. What’s more,
if little Johnny or Jenny doesn’t attend college, or chooses to party
against your wishes during spring break, you are not obligated to pay
The best-case scenario is that you’ve helped a loved one compete in a
competitive world. And the worst case is that the investment comes back
to you. With some tax liability, of course. The bottom line is that you
are in control.