Comments on: Dave Ramsey on saving money for college

By: The Carnival of Twenty Something Finances: Spring Is In the Air Edition | IndependentBeginnings.com

Mon, 30 Mar 2009 14:19:13 +0000

[...] presents Dave Ramsey on saving money for college posted at Money in the Bible | Christian Personal Finance Blog, saying, “Dave says not to [...]

By: Pochax

Pochax — Tue, 24 Mar 2009 20:04:05 +0000

@Shan:
The 529 you are talking about is the Prepaid Plan where you buy “credits” at today’s dollars towards future education. They are typically bought within your home state to be used at an in-state public school, but some can be transferred to private or out-of-state public schools (must check each plan separately). However, they are not accepted at all universities/schools so you need to be careful as it will reduce the available options for college. I don’t have the problem of making only “7%” annually (actually if you guarantee that, i would jump at the chance!), but my problem with the prepaid 529s are the limited # of schools you can use them at. i remember myself looking at colleges, and i didn’t want to be limited.

I think most people use (and i would advocate as well) a 529 Savings Plan where it acts somewhat similar to a Roth IRA (after tax contribution grows tax-free) but can only be used for undergrad/grad education costs expenses. This can be used at ANY qualified school (not just in-state or the state administering your 529 plan).

i refer you to http://www.savingforcollege.com for more information. Good luck.

By: Shan

Shan — Mon, 23 Mar 2009 22:34:24 +0000

One thing I was surprised to read in one of Dave’s books was that he feels 529 plans are not worth it, especially for people who have no state income tax. His point was that college costs are increasing at 7% a year so if you are buying future college credits at today’s prices you are only making 7% on your money when it could make more elsewhere (with the exception being in the current economy!!!) .
I’m curious what other people think about that. I thought 529 plans were the best way to save for college from everything else I have heard.

By: Jason @ MyMoneyMinute

Jason @ MyMoneyMinute — Mon, 23 Mar 2009 20:47:32 +0000

@Pochax –
I like your idea of “hedging”, and I have to admit, the thought has crossed my mind about lying to my kids while saving up money and paying their school expenses off after graduation. But when I put myself in those shoes, I was glad my parents were up-front about their financial situation & the amounts they were able to contribute. I’d want the same done for my kids.

Ultimately, knowing all the cards on the table would do the greatest service to your children. I’d hate to see my child make a life choice based on faulty financial information.

By: Pochax

Pochax — Mon, 23 Mar 2009 20:32:46 +0000

i’m a big fan of “hedging” (planning for all different kinds of scenarios) when possible. i agree retirement comes first so, after God via tithing, the next 8-10% goes to retirement. i also believe in keeping $ available for other emergencies. outside of retirement accounts i plan to invest in a taxable investment account (that COULD be used for college, or not) and a 529 plan for each of my two children (ages 3 and 2) (that MUST be used for college/grad). i also intentionally plan for the 529 to only cover potential costs for a 4-year public school. the rest will have to be made up by scholarship and loans. my wife and i had different upbringings and she had to pay a lot for her own education, whereas my parents put it upon themselves to pay my college AND grad school. we are probably going to meet somewhere in the middle so that our kids have to either work or take loans for some (no full ride off us) but definitely not be left with $100k+ in debt from school alone. i’ve also toyed with the idea of telling my kids they are on their own to pay, but in secret save up for those costs and, as a graduation gift, pay it off for them. but i felt a little dishonest about that….what do you guys think?

By: Lee

Lee — Sat, 21 Mar 2009 22:03:25 +0000

We’ve told our son for several years now that he should keep his grades up, because he was going to have to pay for college with scholarships. He’s now in 11th grade and doing extremely well and actively searching for the right college for him. He took the ACT twice so that he could score higher for better scholarships…(made a 31!) Since we live on one income, it’s great to see him working hard to make sure he gets his college paid for, because we don’t want him in debt when he’s through with college, like so many of our generation did.

By: Jason @ MyMoneyMinute

Jason @ MyMoneyMinute — Sat, 21 Mar 2009 18:56:10 +0000

Unfortunately I went through college & grad school on a ton of student loans because (1) it was normal, (2) it was ‘good’ debt, and (3) signing loan papers for tens of thousands of dollars at a time made it seem like play money that wasn’t real.

Well now I’m paying back my loans — and believe me, I don’t get to pay it back in monopoly money! It may be ‘normal’, but I plan on saving for my kids’ college so long as they learn the value of a buck along the way.

By: Mike D.

Mike D. — Sat, 21 Mar 2009 17:22:32 +0000

Ok, for the most part I’m a Dave fan, but this is one category I think he’s really missing an important point. Dave pushes local state public institutions a lot, but doesn’t mention that they often don’t have a lot of money to give to students. I personally went to a private school that gave me money to go there. The University of Maine (I’m from Maine) hardly gave me any money. It cost less out of pocket for me to go to a private college, even though the price was higher, just because they gave me a bunch of money. Don’t count out private schools people, apply to a bunch and see what you get back for financial aid. I’m afraid Dave might turn people away from applying for private schools just because they think it’s too expensive