Who Benefits From 529’s

Yesterday, we had a nice debate about 529’s.  The open question in the end was who benefits from these college savings accounts. The New York Times said that 80 percent of the tax benefits of 529’s go to families that earn more than $150,000. Megan McArdle said that 70% of the accounts are held by families who make less than $150,000 a year. I pointed to our own case of an anemic 529 and wondered how many of these accounts have silly amounts of money. So, who benefits from this policy? Higher income or middle-income families?

The Chronicle of Higher Ed thoughtfully answered these questions for me this morning.

What percentage of American households own a 529 account? The answer = 3 percent.

529 - 3%

Not many households have one, in other words.

Of that 3 percent, how many are middle income and how many are wealthy? 34.8 percent earn between 100 and 150K  per year. 22.6 percent earn between 150 to 200K. 100K to 200K might indeed be middle income, if one lives in the Northeast and bought a home after the real estate boom. So, the majority of 529s are owned by the non-super rich.

529 -- income


But as I pointed out in the comment section, the real question is how much money is in those accounts. Turns out not much. Only those in the top 5 percent of family income have enough money in those accounts to really pay for college.

529 -- totals

As the Chronicle points out, the average amount of money in those 529 is not quite 20K. Those in the 3rd quartile of family income only have about $8K in their accounts.

Still, let’s stick with the 20K number for argument sake. How far does 20K get you in paying for one child’s college education? Let’s just assume the kid finishes in four years, which most kids don’t do.

Tuition, Room and Board, Fees 

Georgetown University — $258,160

Sarah Lawrence College — $267,520

University of Virginia — $108,504 (in state) $225,248 (out of state)

University of Delaware — $106,040 (in state) $179,440 (out of state)

The College of New Jersey — $123,572 (in state) $166,024 (out of state)

My next question is whether or not 20K makes a difference. Do colleges first take that 20K and then figure out any merit or other grants? Or do they give out grants first? A middle income family with a nice grant package from a college could put that 20K to good use. It might mean that the kid wouldn’t have to take out any student loans. However, do colleges regard those accounts as their personal property?


SL 648

A TV show about Bruce Jenner’s transformation? I’m totally gonna watch that.

Andrew Sullivan is done.

Holocaust Memorial website.

Vintage hippie pictures.

Siblings with autism have different varieties of autism. Different broken genes. The implication is that autism may not be inherited and that autism isn’t one thing. It isn’t merely one broken gene, rather it’s a bunch of different mutant genes creating lots of different kinds of autism.

What the 1% earn in each state.

The 529 Short Lived Debate

President Obama briefly, very briefly, suggested ending 529 plans, which are tax-free college savings accounts. The savings from ending those plans would fund his free community college proposal. He had to back down, because Republicans said that ending 529 was a direct hit on the middle class.

Economists can’t agree on the definition of the middle class. America’s median income is $53,046 per year. Depending on the economist, a middle class family can make between $35,000 to $100,000 per year.

According to the New York Times, even in the highest end of the middle class — a $100,000 per year income — few are able to put $14,000 aside annually in 529 accounts for their kids. 80 percent of the tax benefit of 529’s go to families that earn more than $150,000. 70 percent of the benefits go to families that earn more than $200,000. [edited for clarification]

In contrast, Obama’s community college plan was aimed at lower earning families.

Do we need to seriously rethink access to higher education?

UPDATE: Note that I have edited this post somewhat. I still would like to know the average yearly income of families that have fully funded 529s for two children.

A Failed Storm

The politicians and the weather forecasters were DE-LIGHTED yesterday, because disasters are good for business. “We’re gonna get THREE feet of storm. Lost of power. In 20 degree weather. There’s going to be frozen bodies and crashes and let’s talk about this endlessly during this four-hour press coverage. And make sure you get my good side.”

By 10 pm, it was clear that the storm was going to hit further North and just scratch New York City and the suburbs. This morning, the politicians and weather forecasters are in full butt-covering mode.

Steve and I are trying to work with the boys about. It’s not as challenging as it used to be, but there is still some parenting involved. I have to yell at Jonah to study for midterms, and we need to get Ian outside for a sled ride.

With all these people at home, it’s too distracting to do some proper writing. So, I’m defining “work” very loosely. Work involves shopping for a new light fixture for the entrance way, and for a round coffee table for the living room. Work includes rearranging the knickknacks on the fireplace mantle. It probably also involves playing with photographs in Lightroom.  (I downloaded Lightroom a couple of weeks ago. It’s a HUGE improvement over PhotoShop Elements.) If there’s time in this very serious day, I need to figure out how to get the mothball smell out of an inherited set of bedroom dressers.

Storm Food

Something about a blizzard just screams “Cocktail Party!!”

Here in the New York City area, we’re bracing for a three foot of snow blizzard. So, at 7:45 am, I was at the supermarket stocking up on fancy cheeses, bagel chips, and wine.

It was funny to see what areas of the supermarket were cleared out. Milk, eggs and bread, of course. The meat aisles were empty. You could guess what people were planning on cooking based on the empty zones — taco kits, fresh salsa, prewashed lettuce, soups. I grabbed the last tub of ricotta, because I’ll make a baked ziti tonight – Italian comfort food.

I filled the car tank and bought batteries. After we lost power for two weeks after Hurricane Sandy, I started paying attention to these things.

Jonah and I are recovering from the flu. We caught it in time and got Tamiflu, so our symptoms aren’t terrible. Just kinda sluggish. I’ll drag some wood in the house for the fireplace after I take a break for a bit.

What do you buy before a storm?

Question of the Day — Sick Leave

Jonah has a 102 degree fever. He timed this illness perfectly to land right in the beginning of midterms. Poor kid is now looking at a long string of make up exams next week.

We’ve got a 10:00 appointment with the pediatrician, who is going to judge me for not getting him a flu shot this fall.

I’m bracing myself for a “Return to Sender” phone call from Ian’s school.

We can handle these crises, because I’m here. My paying gigs don’t really pay me, so the world isn’t going to fall in, if I don’t submit an article today.

Others have a crappier time dealing with these crises.

Steve has no paid sick days and no personal days. The official rules are that doctors’ appointments and illnesses count as a vacation day, though nice supervisors overlook a lot.

Question of the Day: If you have a proper paying job, how many paid sick days do you get?

Putting Privilege in Perspective

We’re a very privileged group here on Apt. 11D. Sometimes we have to sit back and acknowledge that. Even those of us with modest incomes are rich in other ways.

Half of all Kentucky’s school children are not prepared for Kindergarten. What does that mean exactly? Well, at Kindergarten Intake, kids are asked their name and age, to recite the alphabet and count to 30. They also evaluated in terms of physical well-being, language, cognitive skills, self-help and social-emotional skills.

In some schools, only 14 percent of the incoming Kindergarteners can pass that test.

“We have six different languages represented in this year’s kindergarten class,” said principal Zac Eckels. “A lot of students that come to us who have never had the formalized structure that we have in a school building. We have kids from refugee camps, they were at a camp two weeks prior to coming here.”

In addition, some students come to kindergarten not knowing how to hold a pencil or have never seen a book before. Some are still wearing diapers, Eckels said.

Will Childcare Policy Lead to Another Mommy War?

When Obama started talking about childcare during the State of the Union last night, the social conservatives on my twittered started grumbling. If Obama was going to hand out money to families with two working parents, would he also give money to families where one parent cares for the children on his/her own? Why was he giving preferences to one form of family over another?

Here’s a sample.

Reform Community Colleges First

You would think that I would be the type of person who is extremely “rah-rah” about Obama’s community college plan. Instead, I’m “meh.”

Yes, community colleges are a fantastic resource for people that were given the short end of the stick in their local public schools. It gives people a chance to find a respectable career in a technical field or to build academic skills to let them jump into the four year college system. Community colleges are places for untraditional students. They are places for second chances. I love all that.

I sometimes check out the course offers at our local community college, because I can see Ian getting a degree as a sound engineer or in computer repair or electronics. He would be great at that stuff.

David Brooks makes good points in his column today.

The problem is that getting students to enroll is neither hard nor important. The important task is to help students graduate. Community college drop out rates now hover somewhere between 66 percent and 80 percent.

Spending $60 billion over 10 years to make community college free will do little to reduce that. In the first place, community college is already free for most poor and working-class students who qualify for Pell grants and other aid. In 2012, 38 percent of community-college students had their tuition covered entirely by grant aid and an additional 33 percent had fees of less than $1,000.

The Obama plan would largely be a subsidy for the middle- and upper-middle-class students who are now paying tuition and who could afford to pay it in the years ahead.

Brooks says that that $60K would be better spent on living expenses for students (tuition costs are small in comparison), guidance counselors and mentors, and child care.

Louisa also points out in the comment section from a previous post that this program would mostly subsidize administrators in DC and wouldn’t help the $2,500 per class adjuncts who teach those classes or improve conditions for students at these schools.

Does More Money Matter in Education

One of the hottest debates  in education policy has been the matter of money. Does giving more money to low performing schools improve performance?

For a long time, researchers said no. Research by Eric Hanushek and others pointed to no improvement in test scores for poor schools that received more state education funds.

The Washington Post reports on a new study says that while there may not be immediate test results from added funding, there were long term benefits. “A new study on those who went to school during the school-finance cases a few decades ago found that those who attended districts that were affected by the rulings were more likely to stay in school through high school and college and are making more money today.”

However the authors  of the study said that how the money is spent makes a big difference. They found that when the greatest impact was found when funding was used to raise teachers’ salaries, reduce class sizes or lengthen the school year.

Tangent — Meanwhile, I’m working on something on the Common Core this morning. I just  want to throw out a link to an excellent article in Mother Jones on the politics of the Common Core.