So Money with Farnoosh Torabi

Episode 1875: Ask Farnoosh: How to Pay for College (Actually) + 529 Improvements

Air date: September 5, 2025
Guests: Patricia Robertson, author of Route 529

Episode Overview

In honor of College Savings Month, Farnoosh Torabi dedicates this Ask Farnoosh episode to tackling the complexities of saving, borrowing, and paying for higher education. She’s joined by Patricia Robertson, a leading expert on 529 college savings plans and author of the newly-updated Route 529. Together, they break down new legislative changes expanding 529 uses, explore the evolving value of college, and answer listener questions around when and how to save, student loans, and alternative options beyond 529s—all with practical, real-world advice.

Key Discussion Points and Insights

1. Recent Expansions to 529 Plans

(02:29-06:35)

• The “One Big Beautiful Bill”: Recent federal legislation (sometimes called “OB3” or HR1) expands what 529 accounts can cover, making them more versatile for families.

  • Now covers a broader range of post-secondary credentials beyond traditional college, including vocational, trade, and professional certifications.
  • K-12 use: Beginning 1/1/2026, up to $20,000/year (previously $10,000) can be used per child for K-12 tuition—includes tutoring, standardized test prep, dual enrollment fees, and certain educational support services.
  • Patricia: “Tutoring can be covered and… test prep… that can be a huge expense for families. I remember growing up in my very low-income family and I almost didn’t know how was I going to pay to take the SAT.” (07:40)

• Who Benefits Most?

  • Most families still primarily use 529s for college; few have large enough balances to cover K-12 tuition as well, but flexibility helps families with multiple education needs or grandparent contributors.
  • Ability to use funds for educational support broadens access and support to children with diverse needs.

2. Policy Shifts Reflecting Changing Attitudes Toward College

(10:27-12:14)

• Lawmakers expanding 529 uses signals awareness of the mounting costs and shifting value of traditional four-year college.

• 529 champions have advocated for broader use:

  • Patricia: “Not every child is interested necessarily in that traditional four-year degree… Knowing that so many other paths can be pursued I think is very satisfying.” (11:34)

• The flexibility now helps more families adapt to a rapidly changing job market, especially as fields evolve and upskilling is required.

3. Workforce Credentials and Career Flexibility

(12:14-14:13)

• 529s now support training for fields like dental hygiene, home inspection, truck driving, nursing, insurance, real estate, and more—including maintenance of professional licenses.
  • Farnoosh: “If you’re saving for college and then college is not really where you’re seeing the ROI… you do have the option now to use the 529s for things like vocational school, trade school, continuing ed for adults and career changers too…” (12:33)

4. Listener Mailbag: College Savings Questions Answered

How Many 529s for a Family?

(14:13-18:38)

• Separate accounts for each child are advised:
  • Different ages = different investment horizons.
  • More suitable for contributions from relatives and more personalized for each child’s goals.
  • Patricia: “Each child should know that you are saving for them… Seeing that account statement, their name on it, gives a child sort of a peek into their future.” (16:36)
  • Farnoosh: “If it’s one account, you have to pick a target date, right? …Each child has a different timeline to college and will require a different kind of investment strategy.” (17:48)

What If My Child Doesn’t Use the 529 Funds?

(21:59-24:37)

• Beneficiary changes are easy and flexible.
  • Can be switched to another family member or even the account owner in some cases.
  • Leftover funds can go toward additional family education needs, upskilling, or (with conditions) be rolled into the beneficiary’s Roth IRA (up to $35,000 if certain criteria met).
  • No time limit—can be saved for grandchildren’s education if unused.
  • Patricia: “Parents’ minds should be at ease in knowing there’s a lot of flexibility in these plans.” (24:27)

Is It Ever Too Late to Save in a 529? (Family with Four Kids, Oldest Age 14)

(24:37-28:20)

• Never too late to start saving, even if oldest child is in or near high school.
  • Open an account and begin contributing—even small, automated amounts add up.
  • Seek support from family, employers, or community.
  • Don’t stress over “elite” colleges and sticker prices—focus on fit, explore merit aid and scholarships, and discuss realistic expectations with your child.
  • Prioritize emergency savings and retirement over college savings if needed.
  • Patricia: “It’s never really too late to get started with savings… Don’t be hard on yourself that you haven’t gotten started. My God, four children.” (24:54)

Cultural and Social Pressures Around College Choices

(28:20-31:58)

• The social “status” of where a child goes to college can overshadow practical considerations.
  • Farnoosh: “After the ‘ooh’ part at breakfast is over, you’re gonna have $400,000 owed and none of your friends have to pay that bill but you.” (29:30)
  • Encourages flexibility: community college, transferring, and non-traditional routes can still lead to degrees from top schools, often at a fraction of the price.
  • Patricia: “I know one family… opted to do Borough of Manhattan Community College for two years and then transfer to NYU. She’s got the NYU degree.” (30:51)

Federal vs. Private Student Loans: Which to Choose?

(32:07-34:45)

• Traditionally, federal loans are more flexible and have lower rates/discharge benefits.
• Upcoming changes (post-2026) may restrict federal loan amounts for parents/graduate students, making some private loans more competitive.
  • Always compare options closely at borrowing time; circumstances may differ.
  • Patricia: “While I don’t have a definitive answer for you, I say take a good look when your time comes to borrow… These are really significant dollar amounts.” (33:55)

Parent PLUS Loan Dilemma (Listener: Tori)

(34:46-39:12)

• Key: If the loan is in the parent’s name, only the parent is legally responsible—even if taken out for the child.
  • Parent PLUS Loans may be eligible for discharge upon the parent’s death.
  • SAVE program and refinancing options may change; consult a loan servicer or nonprofit financial counselor for up-to-date options.
  • Patricia: "If it really is a Parent PLUS loan, no matter how you stumbled upon it... the amount is not certain... your husband would even be responsible." (35:54)

How Much to Save for a Newborn’s 529?

(39:12-44:31)

• Use 529 calculators to set a target based on schooling aspirations (public/private; in-state/out-of-state; full/partial funding).

• Automate contributions—direct from paycheck if possible, to save more efficiently over time.

• Include loved ones in contributions instead of gifts.

  • Patricia: “Individuals who save from their paycheck save 75% more than those who first have the money pass through their hands.” (41:35)

• Farnoosh shares: Started with $500/month, raised to $1,000/month as tuition expectations grew and financial situation evolved.

• Consider that college sticker price is often higher than real out-of-pocket cost due to aid and scholarships.

• Patricia: “Once that account’s open... you can always change the contribution amount over time... Try to do some sort of estimate about what you envision for the future and back into what those monthly costs would be.” (41:08)

When Might a 529 Not Be the Best Choice?

(46:03-50:38)

• No single “right” way to save for college: 529s, brokerage, custodial (UGMA/UTMA), or Roth IRAs can all play roles.
• 529 pros: State/federal tax benefits, parental control, protected from child’s creditors, advantage in financial aid calculations, savings “earmarked” for education (behavioral finance win).
• Brokerage or custodial accounts pros/cons:
  • Useful for flexibility; funds not limited to education, but less tax-advantaged and counts more against financial aid eligibility.
  • Money in UGMA/UTMA accounts is controlled by the child at majority (often 18 or 21).
• Roth IRAs: Good as a hybrid/flexible tool for those with earned income.
  • Patricia: “529 really puts you in a lane. And some people like the guardrails of it. I did. I knew that money was for this and I wasn’t touching it for anything else.” (49:22)

Notable Quotes & Memorable Moments

• “The math isn’t mathing right now, if you ask me.”
  — Farnoosh Torabi, on questioning the value of college in the context of soaring costs (04:17)

• “Each child should know that you are saving for them… Even children with less than $500 [in savings] are more likely to attend and finish a degree program than those without.”
  — Patricia Robertson (16:36)

• “After the ‘ooh’ part at breakfast is over, you’re gonna have $400,000 owed and none of your friends have to pay that bill but you. So just be smart about this. This has to be an investment.”
  — Farnoosh Torabi (29:30)

• “You can save for higher education with multiple approaches. There’s no right or wrong way. 529s, brokerage, custodial account, Roth IRA—even a little of all of it.”
  — Patricia Robertson (46:46)

• “The custodial accounts… the risk [is] that money becoming their money as young as 16 in some states… when you have something that is earmarked for something, you just accept that and it’s a boundary you don’t cross. You are more likely to be successful hitting that savings target.”
  — Farnoosh Torabi (50:38)

Timestamps for Important Segments

• 02:29 - Farnoosh introduces College Savings Month, welcomes Patricia Robertson
• 05:04 - Breaking down the “One Big Beautiful Bill” and 529 expansion
• 07:09 - Real-world discussion: who actually uses 529s for K-12?
• 10:27 - Political landscape and why lawmakers are supporting flexibility
• 12:14 - 529s for workforce credentials and adult career change
• 14:13 - Listener mailbag: How many 529s per family?
• 21:59 - What to do if a child doesn’t use 529 funds
• 24:37 - Is it too late to start saving? Advice for parents with no college fund yet
• 28:20 - The social stigma and peer pressure around college choices
• 32:07 - Deciding between federal and private student loans
• 34:46 - Navigating Parent PLUS loan issues (Listener: Tori)
• 39:12 - How much should you save: 529 for newborns?
• 46:03 - When to consider brokerage or Roth IRA instead of (or in addition to) a 529

Closing

Farnoosh and Patricia wrap up reflecting on the evolving landscape of education funding, emphasizing flexibility, the importance of honest family discussions, and the value of starting somewhere, regardless of how late or modest. Patricia shares details about her updated book, Route 529, a practical resource for parents navigating these choices.

Additional Resources

• Route 529 (Patricia Robertson’s book): Available on Amazon, updated for 2025
• 529 Plan Calculators: Typically available on each state’s 529 plan website
• studentaid.gov: Latest federal student loan information

Bottom Line:
529 plans are now more versatile than ever, reflecting a shifting educational landscape and offering families more ways to fund a child’s future—whatever path they take. There’s no one-size-fits-all approach, but starting early, staying flexible, being realistic about costs (and social pressures), and knowing your options for alternatives are the keys to college savings success.