Rob and I might never save another dollar for our kid's college fund. Are we crazy? Before you judge, check out our reasons.
It's likely college will be free in 15 years
In America, K-12 schools are free for people of all income brackets, but soon I believe that all public schools will be free. To me, the political winds indicate that America is moving towards a modest form of socialism. Right now, nobody is campaigning to extend public education up to the collegiate level, but I think it's just a matter of time before some candidate makes public colleges part of their primary campaign promises. If that happens, I see no way that it could fail. People love schools because schools stand for education and education stands for egalitarianism.
I think it's a pretty safe bet that by the time my kids are college aged that they will be able to attend college for free.
I want to support my children rather than my adults
One of my primary goals of parenting is to raise my children to be good adults. I want them to move from dependence to independence to codependence (or intimacy), and I want them to be independent by about 18 years old.
I'm not saying that we'll kick our kids out of the house the day they turn 18, but I do want them to have the skills that they need to make a career by that age. Some people think this is a bad goal, but I believe that the specific value of a college degree is overblown for many people. Unless my kid wants to specialize in a technical field where a college degree is a minimum credential, I don't believe that college will aid them in their career.
However, career ready kids don't just happen. To have a career, you need to have skills. You need to create value for other people, you need to know how to market yourself, you need to have some level of proficiency. These are things that kids and teens can learn, but it requires upfront investments of time and money.
We don't have unlimited time or money, but this is my theory. We can save $200-$300 per kid per month in a 529 plan, and then if our kids go to college, they can use it (if college isn't free by then). We could alternatively spend $200-$300 per month helping our kids develop their passions. If we do a good job helping them develop their passions and hone their skillsets, they are likely to be career ready.
The second option sounds like a lot more fun, and it sounds like an option that will serve our kids no matter what.
The college price bubble will burst
Student loans are in an unsustainable bubble, and the loan bubble is supporting an unsustainable rise in the sticker price of college. 40% of college educated millennials are earning less than $40K per year, and the average student loan debt is $25K. Plenty of millennials won't be able to pay off their loans for the forseeable future.
The government is great about pretending that problems don't exist, but private lenders are not going to lend to poor credit risk students, and the costs of college aren't going to continue to rise without lenders.
Additionally, online college programs already exist, and people can obtain degrees for less than a quarter of the cost of public in state tuition. The only thing getting in the way of the proliferation of these low cost programs is snobbery. Seriously, online education is great. About 90% of the useful information that I know came from the internet. If college isn't free, and my kids need further education, I'll definitely push them towards online schools that they can pay for themselves.
If all else fails, getting rich never hurt anyone
Maybe I'm wrong about free schools, and maybe I'm wrong about the college price bubble bursting, and maybe I'll fail to teach my kids useful skills. Even if all that comes to pass, the advantages associated with investing in a 529 are not worthwhile.
529 contributions are after tax contributions, and they need to be used in about 18-22 years. We shouldn't aggressively invest if we're going to use all the money in 18-22 years (no 4% withdrawal rule here), so we're probably better off growing wealth outside of a 529 plan. We can do things like buy rental houses, or invest in after tax accounts or in our own businesses.
At the end of the day, if we do manage to get rich, we can pay for college from cashflow or by drawing down some savings.
I'm a wife, a mom, an employee, and a personal finance nerd who is devoted to spreadsheeting my way through life.