529 Day -Debt & Robots- A College Graduate's Challenge

We are sending you our annual college savings 529 newsletter on 5/30 (instead of 5/29) out of respect for Memorial Day. The Hamilton Investment Group donated $1,000 to Iraq & Afghanistan Veterans of America this weekend in honor of Americans killed serving our country.   

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In summary:

  • Student loan debt currently at $1.44 trillion and growing

  • The Class of 2016 college graduate has on average $37k in student loan debt

  • College tuition is outpacing general inflation at 5%

  • Student loan debt is delaying borrowers life decisions

  • 529B plans remains a top choice for college savings

Today 5/29, is National 529 College Savings Plan Day.  A day to focus on college planning to give our kids and grandkids a better start in life.  The 529 College Savings Plan is one of the best ways to save for college due to it features and benefits.  They can be set up for kids, grandkids, nieces, nephews and make for great holiday and birthday gifts.  I suggest that most birthday and holiday gifts for our six year old son Cole is a contribution to his college plan.  After all, this will be his greatest need in the future.  

That being said, let’s address the impact that student loan debt is having on the 44 million Americans that owe $1.44 TRILLION dollars in student loan debt. 

Student loan debt is having a significant impact on a graduates’ life decisions, reducing economic growth, and adding strain to households both young and old.  The percentage of older Americans in their 40s, 50s, and even 60s carrying student debt is higher than ever before.  

The average Class of 2016 graduate leaves college with $37K in student loans.  The average payment for these graduates is $300/month.  As mentioned, this debt is having an impact on major lifestyles decisions for young adults. 

Source: Mark Kantrowitz | WSJ.com

Source: Mark Kantrowitz | WSJ.com

Borrowers are delaying life decisions such as leaving parents home, starting families, and home ownership, according to “Life Delayed”- American Student Assistance Survey: 

            29% are delaying marriage

            43% are putting off starting a family

            75% say student loans have impacted their ability to buy a home

            73% are putting off saving for retirement or making investments 

Without student loans, that $300/month could be used to start saving for retirement sooner.  $300/month for 10 years growing at 7% and another 20 years growth for retirement could mean an extra $200K for retirement.


The Future of Education

Don't give up on a college because of its sticker price!  A college degree is essential for our children.  In the future our kids will be competing with not only other qualified graduates from all over the world but robots that are disrupting most career paths today.  Robots, machine learning, and artificial intelligence are increasingly replacing human jobs in areas such as:  warehouse workers, taxi drivers, cashiers, bank tellers, travel agents, printing, bookstores, etc.  The choice of degree students pursue will play a big role in job security and success.  Some of the best majors for the future will be Information Technology, Computer Science, Medical technology-Biology/Chemistry, Nursing, Robotics.  Check out the video link below of a robot building a house!

Best Careers For the Future

This Robot Could Build Much of Your Next House

Video- This Robot Can Build a House


What Does College Cost & How Much Should We Save?

Using our planning software for projections (6% inflation rate and growth at 6%): 

4 Year in State Public School: 

  • Today it costs $25K/year for a total cost of $105K

  • In 18 years, it will be $70K/year for a total cost of $310K

  • Savings needed if born today is $550/month 

Private College 

  • Today it costs $50K/year for a total cost of $210K

  • In 18 years, it will be $140K for a total of $615K

  • Savings needed if born today is $1,100/month

Return On Investment

College graduates, on average, earned 56% more than high school grads in 2015, according to the Economic Policy Institute. That is the largest such gap in EPI's figures dating to 1973.  College graduates also have a much lower unemployment rate and are at less risk of losing their job during recessions.

Business Insider Sept. 2016 -Highest Paying College Majors Mid-Career Pay

Business Insider Sept. 2016 -Highest Paying College Majors Mid-Career Pay

  1. Petroleum Engineering             $172K

  2. Systems Engineering                $121K

  3. Chemical Engineering              $119K

  4. Nuclear Engineering                 $116K

  5. Computer Science                     $116K

  6. Electrical & Computer Eng       $114K

  7. Computer Engineering              $113K

  8. Mining Engineering                  $107K

  9. Aerospace                                  $106K

  10. Physician Asst                           $103K  


Benefits of 529 College Savings Plan 

  • Earnings grow tax-deferred.

  • Tax-free withdrawals when used for qualified higher education expenses.

  • Anyone can contribute to a 529 plan and there are no income limitations.

  • The IRS allows you to give no more than $14,000 a year to another person without a federal gift tax, but you can contribute up to $70,000 to a 529 plan in one year. A special tax law allows you to aggregate five years of the allowable $14,000 annual gift-tax exclusion to jump-start a 529 plan.

  • The account owner maintains control over the assets for the life of the account.

  • You can change beneficiaries to another "family member" of the original beneficiary. Thus, if your child gets a scholarship or decides not attend college, you can name another beneficiary.

  • The assets leave your estate for estate tax purposes, but you maintain control

  • The assets of one 529 plan can be transferred tax-free to another 529 plan of another beneficiary, as long as the new beneficiary is a "family member".  "Family members" include, the beneficiary's spouse, son, daughter, grandchild, niece, nephew and first cousin. 

Investors should carefully consider the investment objectives, risks, charges and expenses associated with 529 plans before investing. This and other information about 529 plans is available in the issuer's official statement and should be read carefully before investing. Investors should consult a tax advisor about any state tax consequences of an investment in a 529 plan.

The gift of a college education is the most rewarding gift a child can receive. 

Let us know if we can address any questions or run individualized projections for your family.  For additional information please checkwww.savingforcollege.com

Other Informative Articles:

In 18 Years A College Education Could Cost $500K

More Baby Boomers Drowning In Student Loan Debt

Scary Facts About Student Loans

Long Term Impact of Student Loans

Student Debt Crisis

Student Debt Prompts Millenials to Move Back Home

Student Loan Debt Survey

Thanks

Jerry

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