Schooled Reporting on education

Getting serious about saving for college

Education | Funds in 529 education plans reach all-time high
by Leigh Jones
Posted 10/17/18, 04:16 pm

Americans are funneling money into 529 college savings accounts at record rates.

Total investments in the funds grew to $328.9 billion as of June 30, according to the College Savings Plans Network (CSPN). Perhaps bolstered by the stock market’s seemingly endless climb during the first half of the year, assets grew by $9.8 billion in just six months. The average account now tops $24,000, more than double the average from 10 years ago.

And more families are getting in on the savings strategy, with about 300,000 opening new accounts so far this year.

Jim DiUlio, who heads CSPN, attributed the growth to families getting more serious about saving for college amid universal fears about debt.

“This is an efficient way to save, and you have cash on hand here when you start college, or at least have part of it paid for,” he said. “It eliminates the need to have loans and have to pay money back with interest, which is obviously going to cost you a whole lot more.”

The 529 savings plans allow investments to grow tax-free, as long as families eventually use the money for education purposes. Last year’s tax code overhaul expanded 529 accounts to cover K-12 private schooling, as well. But DiUlio said it’s still too early to tell whether that expansion is driving increased interest in the accounts.

Homeschooling advocates want to see 529s expanded again to include curriculum and other expenses. Republican lawmakers in the U.S. House of Representatives included that expansion in a bill dubbed Tax Reform 2.0, which passed late last month. But most political watchers don’t expect that provision to survive in the Senate, where Democrats don’t share much enthusiasm for homeschooling or anything labeled “tax-free.”

Even without further expansion, 529s are causing concern in some quarters. In a report released last week, an analyst with The Pew Charitable Trusts warned the government could soon start feeling the pinch of all those pennies being saved. Phillip Oliff estimated the federal government lost out on $2 billion in tax revenue to 529 plans in 2017. Citing Treasury Department estimates, Oliff noted that by 2027, that lost revenue could double, to $4.1 billion.

“This spending through the tax code has historically been a small part of the total federal support for higher education, but the costs related to 529 plans have grown in recent years along with participation,” he wrote.

State governments also could take a hit. Thirty-three states and the District of Columbia provide income tax deductions for contributions to 529 plans. While Oliff warned lawmakers should keep a close eye on lost revenue projections, DiUlio isn’t worried about increased scrutiny. He noted that college savings plans should be considered part of a state’s economic development efforts.

“This is good public policy,” he said. “You want to have a good educated population and people trained for the jobs of tomorrow. So it’s an investment.”

YouTube/Chicago Humanities Festival YouTube/Chicago Humanities Festival University of Michigan professor John Cheney-Lippold

Anti-Semitism debate roils University of Michigan

The University of Michigan moved to quell an international uproar last week sparked by a controversial campaign to boycott Israel. School administrators sanctioned recently tenured professor John Cheney-Lippold after he refused to write a recommendation letter for a student who wanted to spend a semester studying in Tel Aviv. Cheney-Lippold cited his own participation in the Boycott, Divestment, and Sanctions (BDS) movement, a pro-Palestinian campaign to boycott Israel, as justification for the denial. Amid the uproar over the Cheney-Lippold incident, another student reported a similar denial from a graduate student assistant. In a letter chastising Cheney-Lippold, university administrators warned they would not tolerate similar refusals in the future: “You are not to use student requests for recommendations as a platform to discuss your personal political beliefs.”

The controversy brought the university plenty of unwanted attention: 60 Jewish or pro-Israel groups urged the school to fire Cheney-Lippold. Several also suggested the U.S. Department of Education should investigate, which could create a much bigger problem for the university. Kenneth Marcus, who heads the department’s Office of Civil Rights, views the BDS movement as anti-Semitic discrimination. Supporters of the BDS movement call it a civil rights issue.

Cheney-Lippold’s case could take that argument to the U.S. Supreme Court. A pro-Palestinian lawyer representing the professor suggests the university violated his free speech rights by compelling him to support something he disagrees with. —L.J.

Associated Press/Photo by Carolyn Kaster Associated Press/Photo by Carolyn Kaster Education Secretary Betsy DeVos

DeVos loses for-profit college loan fight

The Trump administration’s long battle against an Obama-era policy providing complete loan forgiveness to for-profit college students ended Tuesday. Last week, the U.S. Department of Education said it would not fight a court order overturning Education Secretary Betsy DeVos’ decision to put the policy on hold. It plans instead to focus on rewriting those rules. But taking a new policy through the approval process will take a while.

In the meantime, taxpayers will be on the hook for at least $400 million in debt relief. The Obama administration already spent $550 million to pay off the first round of claims filed by defrauded students. Under President Barack Obama’s policy, all students who attended for-profit colleges that closed their doors before the students graduated can get their loans forgiven. DeVos argued the government should evaluate whether the students got any benefit from their coursework and adjust the compensation accordingly. —L.J.

Application honor system

Prospective college students can self-report their entrance exam test scores to a growing number of universities. Last week, Yale and Quinnipiac universities became the latest schools to adopt a test score honor system for their application processes. The change is designed to make it easier for low-income students to apply without having to pay the SAT or ACT administrators to send official results.

While the new policies save money now, they could end up making the tests more expensive. If the testing companies lose this revenue stream, what are the chances they will raise testing costs to make up the difference? —L.J.

Touchdown

Don’t miss this great story from Wichita, Kan., about a homeschool football team that’s undefeated so far this season. That makes the Wichita Homeschool Warriors one of the state’s top programs. —L.J.

Leigh Jones

Leigh lives in Houston with her husband and daughter. She is the news editor for The World and Everything in It and reports on education for WORLD Digital.

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Comments

  • Paul B. Taylor's picture
    Paul B. Taylor
    Posted: Mon, 10/22/2018 04:24 am

    Because of the terrible increase in the price of a college education, we should question whether such an education is really that valuable.  Consider the real cost per class at a college or university, and then address what you have been taught and what you have learned from that class.  I think that the amount that  students pay per class is far more than what such classes should reallly be worth when we think about what the students have actually learned.  Therefore, learning a trade might be more of an intelligent option than a college education.  I have seen that those who have mastered a trade can make as much or even more throughout their lives than the college educated, especially those who start their own small businesses. 

  • DONNA KING
    Posted: Mon, 10/22/2018 02:47 pm

    Just listened to a great podcast about alternative to the ever rising costs of college. I would love to see WORLD report on some of these alternatives. Here is the podcast link: https://www.artofmanliness.com/articles/podcast-449-faster-and-cheaper-a...

     

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