Friday, June 07, 2013

College in 2028: Can You Save Enough?

Carrie Schwab Pomerantz

Dear Carrie, I have a 3-year old daughter who I hope will go to college one day. Given the increasing costs, what's the best way for me to save? I've opened a 529 plan, but is there anything else I can do? --A Reader

Dear Reader, The first thing you can do is to give yourself credit for starting to save so early. While saving for a child's college education is an enormous challenge, making it a priority when it's so far away can be the first big hurdle. So you're off to a good start.

As someone who believes in the power of tax-advantaged growth, I'd say having a 529 account is one of the best things you can do. Not only does your money grow tax-deferred, but withdrawals for qualified education expenses are also tax-free. Let's talk about ways to maximize these benefits before we get into other ways to save.

--For now, make sure you're investing aggressively enough

Most 529 plans offer a variety of investing options, from conservative (meaning bonds and other relatively safe investments) to aggressive (meaning the stock market). As a general guideline, the longer the time until college, the more aggressively you can invest, giving yourself more potential for growth. Of course, with that potential for growth comes more volatility, so you would have to be able to accept that risk and be willing to stay the course in spite of market ups and downs.

As college gets closer, it's appropriate to gradually shift your investments out of the stock market. Some 529 plans have an option that will do this automatically. But if not, it will be up to you to manage the investments over time.

Looking at numbers, let's say you save $5,000 a year toward college for the next 15 years. With an average 6 percent hypothetical annual return, you'd have about $125,000. If you could increase that savings to $10,000 a year, you'd have $250,000 -- enough to cover the projected cost of four years at an in-state public university in 15 years.

--Put your contributions on automatic

A 529 account is only as effective as the savings you put in it, so if you haven't already, set up automatic monthly contributions to the account. Choose the maximum amount you can comfortably handle and consider it one of your nondiscretionary expenses. If it comes out of your checking account automatically, you won't have to give it another thought. And should your income increase, think about increasing the monthly contribution.

--Direct gifts or unexpected money to the 529

When your daughter gets a monetary gift, put at least a part of it in her 529. In fact, you might suggest to family and friends that money towards college is the best gift of all.

Likewise, direct any other unexpected gifts, inheritances, even bonuses, toward college savings. One caveat is that you don't shortchange your retirement savings in the process.

--Consider an Education Savings Account (ESA)

An ESA is another tax-advantaged savings account that could work as a supplement to your 529. It's only available to couples making less than $220,000 a year ($110,000 for singles), but if you qualify, an ESA has the advantage of being available for qualified elementary and secondary school expenses, as well as for college. The contribution limit is $2,000 a year and you make all the investment decisions. You might consider it as a way to diversify your college savings.

--Get your daughter involved when she's old enough

Your daughter is only three now, but soon enough she'll be in a position to contribute to her own college savings account. As she gets older, get her into the savings habit. Once she's able to get a part-time job, have her put a percentage of her earnings toward her education. To help her learn, you could open a custodial account. The money in the account would become hers at 18 or 21 depending on your state, but in the meantime, you'd be managing it and could include your daughter in making financial decisions. That way you can have the added bonus of teaching your daughter how to handle her money.

--Think creatively

Remember, too, that there are other ways to pay for college. Loans, grants, scholarships -- these are all possibilities. And who knows what your daughter's talents and interests will be? As you watch her grow and develop, you can help direct her on a path that will maximize her future opportunities.


House Panel Questions Obama's Plan to Reorganize Science Education

Democrats and Republicans on the House of Representatives science committee agreed yesterday that the federal government needs to take a more coordinated approach to improving science education. But that's about the only aspect of the Obama administration's proposed reorganization of 226 programs at a dozen agencies that they liked.

The hearing was the first public vetting of a plan to reshuffle the government's current $3 billion investment in STEM (science, technology, engineering, and mathematics) education. The proposal, part of the president's 2014 budget request to Congress, would cut the total number of federal programs by half and concentrate resources at three agencies—the Department of Education for elementary and secondary school programs, the National Science Foundation (NSF) for undergraduate and graduate programs, and the Smithsonian Institution for informal and public science activities.

Legislators pressed the administration's witnesses on how programs were selected for the chopping block, whether the lead agencies were capable of taking on new responsibilities, and if the outside community was part of the process. By and large, they weren't happy with the answers from presidential science adviser John Holdren, who was joined by NSF's Joan Ferrini-Mundy, and NASA's Leland Melvin, co-chairs of an interagency STEM committee staffed by Holdren's Office of Science and Technology Policy. Last week, that committee issued a long-delayed strategic plan for federal STEM education that lays out long-term goals to measure success in each of the four priority areas.

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Unlike most hearings at which the Republican-led House examines an initiative from the Democratic White House, the legislators' comments and questions were refreshingly nonpartisan. Unfortunately for the administration, however, that comity resulted in a steady stream of skepticism flowing from both sides of the aisle. Members were particularly worried about the fate of informal science education programs at agencies—including NASA, the National Institutes of Health (NIH), the Department of Energy (DOE), and the National Oceanic and Atmospheric Administration—whose STEM education budgets would be trimmed under the president's plan.

"I believed that it was important to look at what the federal government has been doing [in STEM education] and how we can improve our efforts," said the top Democrat on the panel, Representative Eddie Bernice Johnson of Texas, in her opening statement. "But I have serious concerns with the budget proposal itself. To be blunt, it seems to me it was not very well thought out. … NASA seems to have taken the biggest hit, and this doesn't make any sense to me."

Twenty minutes into the 2.5-hour hearing, which was interrupted by two floor votes, Republican Representative Randy Hultgren of Illinois shared similar sentiments. "Normally, I support efforts to reduce duplicative programs," said Hultgren, who has championed basic science at DOE's national laboratories. "But this reorganization seems rushed and poorly planned. The president's proposal seems to be taking a number of successful initiatives being done by high-quality groups at the local level and running a majority of them through a federal bureaucracy in Washington."

Several legislators said that constituent groups have flooded their offices with calls and e-mails objecting to the administration's plan. They are especially upset by the proposed 33% cut in NASA's $150 million STEM education budget, a 30% reduction in DOE programs, and termination of the government's only health science education program as part of the dismantling of NIH's Office of Science Education.

Lawmakers repeatedly asked Holdren how the White House chose which programs to eliminate or consolidate. He acknowledged that agencies did not submit a list of sacrificial lambs: "Ordinarily, if you ask people if they'd like any of their programs to be cut, they'll say no," Holdren told Representative Donna Edwards (D-MD), who wondered why NASA hadn't been asked for its advice.

His answers also made clear that an impartial, outside assessment of a program's successes and failures wasn't the determining factor. "We had to take into account the inefficiency of trying to run rigorous evaluations on very small programs," Holdren told Representative Larry Bucshon (R-IN), chairman of the committee's research panel. "This is one of the reasons we wanted to consolidate, to improve our capacity to evaluate."

Instead, Holdren said programs that fit into one of the administration's four priority areas—"improving K-12 instruction, reforming undergrad programs around evidence based practices, streamlining the graduate fellowship process, and amplifying engagement activities"—received top billing in the new lineup. Vocational education and job training skills were not a major focus of the reorganization, Holdren told legislators, although he said such efforts remain a top administration priority. And programs to attract more minorities and women into STEM-related careers were left untouched in this initial reshuffling, Holdren explained. "To the extent that those programs need a closer look," Holdren told Representative Suzanne Bonamici (D-OR), "that will be done in collaboration with the institutions that provide those programs."

The committee's chairman, Representative Lamar Smith (R-TX), added his voice to those questioning the plan. "I hope our witnesses can tell us what was wrong with the programs the administration wants to cut or consolidate," he said. And he wondered why the administration submitted a budget plan to reorganize STEM education programs 6 weeks before releasing its strategic vision for how to improve STEM education. Even so, Smith complemented Holdren on the bottom line in the president's 2014 budget request. "I am glad to see that the overall funding for STEM education is increased by 6%. That's a good sign," Smith said.


The British school that children WANT to go to: Academy bans all homework - but pupils have to stay until 5pm for extra study time

It is the scourge of schoolchildren up and down the country.

Classes can often be heard letting out a collective groan when the teacher mentions homework,  ruining plans for a night watching films or playing out with friends.

However, this will not be a concern for pupils attending a pioneering new secondary school in Norfolk -  because it has decided to ban all homework.

Instead, the 1100 children who will attend the Jane Austen Academy in Norwich will do longer days at school.

The mixed free school for 11-18-year-olds - which will specialise in English and the humanities - is set to open in September 2014.

The school yesterday unveiled its prospective principal, Claire Heald, who said that city children would do extra study at school as part of the extended day, which could last until about 5pm.

She said: 'Rather than setting homework that pupils could go home and struggle with at home, and where there may be limited access to computers, they will do that as independent study in the day.

'We are saying that when they go home they should enjoy quality family time.

'There will not be any traditional homework - and that has been really well received by parents who respect the fact that family time will be family time.'

But Ms Heald said the school would still expect youngsters to study at home ahead of crucial exams.

She's ready to create a new dramatic template in the UK after French president Francois Hollande called for the end of homework in primary schools last October.

The French leader insisted independent learning at school would enhance equality because kids who get help with homework from parents have a huge head start.

The exciting initiative has already sparked keen interest from other headteachers in Norfolk.

Peter Devonish, headteacher of Neatherd High School in Dereham, said: 'My initial thought is that it's really compelling. 'It sounds like a really good idea.

'Having the children on site a bit longer to consolidate their learning is a really good idea.  'The children can finish work and they can have their time with the family.'

But he warned: 'I have got two stumbling blocks.  'One is our rurality and getting children home at that time, and the other is changing staff contracts so they can be here until 5.30pm.

Mr Devonish said they set pupils project-based homework, such as looking at an energy efficient house, which allowed them to combine independent study with working with their parents.

Craig Morrison, principal of King's Lynn Academy, agreed that the whole prickly issue of homework should be looked at.

Mr Morrison said: 'I can understand why people want to experiment with this because it is one I would not say anybody can say they have got definitively right over the years.

'And if they are starting a new school then it gives them the chance to try out new things.'  He added: 'A large problem with homework, which we have tackled, has been that not enough is done with it.

'With homework, a lot of effort can go into it, so it's about celebrating what children do rather than processing it in terms of marking it and handing it back.'


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