1983: Ask Farnoosh: 529 Advice, College Saving Strategies and Can AI Provide Financial Advice?

Summary

Podcast Summary: So Money with Farnoosh Torabi

Episode 1983: Ask Farnoosh — 529 Advice, College Saving Strategies, and Can AI Provide Financial Advice?
Host: Farnoosh Torabi
Guest: Patricia Roberts, 529 College Savings Expert and Author
Date: May 15, 2026

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Episode Overview

This Ask Farnoosh Friday episode focuses on the challenges and strategies of saving for college, with deep insights on 529 plans, managing student loans, and evaluating the growing role of AI in personal finance. Farnoosh is joined by Patricia Roberts, author and 529 specialist, who answers listener mailbags and provides actionable, compassionate advice for families navigating college costs and long-term financial planning.

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Key Discussion Points & Insights

1. Current Financial News

(06:21 – 14:35)

• COVID-Era Tax Refunds:

  • A court recently ruled that taxpayers should not have been charged penalties or interest during the pandemic (Jan 20, 2022 – July 10, 2023).
  • Eligible taxpayers won’t receive an automatic refund; they must file Form 843 by July 10th, and submissions must be paper-mailed.
  • “These refunds will not be automatic. You're not going to get a check out of the blue.” — Farnoosh Torabi (07:05)

• Student Loan Defaults Skew Older:

  • Post-pandemic, the average student loan defaulter is nearly 40, with Gen X (aged 50–61) carrying the highest balances.
  • Many are in default for the first time, hinting at deeper economic trouble.
  • Wage and tax garnishments loom, though currently paused by the Education Department.
  • “I think that was kind of like the first generation that really got fed this bill of goods around student loans—take out the debt, no matter how much it is, because education…is your birthright.” — Farnoosh Torabi (10:33)

• AI as a Financial Advisor:

  • MIT/Stanford study tested large language models giving financial advice.
  • AI generally dispensed solid basic advice, sometimes comparable to a fiduciary, but:
    • Advice quality often depended on how well the user phrased the question.
    • People with greater financial literacy got better guidance.
    • Notable gender bias: identical profiles yielded different advice depending on gender labels, potentially creating 4–5% lifetime retirement wealth disparities.
  • “The better informed and more specific you are with your questions, then according to this study…the more useful the AI becomes.” — Farnoosh Torabi (14:01)
  • AI is best for definitions or concept explanations, not major life decisions.

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2. College Savings: 529 Strategies with Patricia Roberts

(15:04 – 54:20)

a. How Many 529 Accounts for Multiple Children?

(15:36 – 19:12)

• Each child should have their own 529 account, due to:
  • Different ages, timelines, and investment strategies.
  • Gifting simplicity for relatives.
  • Children’s unique dreams and goals.
  • Psychological benefits: kids seeing their name encourages engagement and ambition.
• “Each child should know that you are saving for them…Even with modest amounts of savings are more likely to attend and finish a degree program than those without.” — Patricia Roberts (17:56)

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

(23:37 – 26:14)

• Beneficiary flexibility: The account can be switched to other family members, including yourself.
• Up to $35,000 can be rolled into the beneficiary’s Roth IRA (with stipulations).
• If a child gets a scholarship, funds can be withdrawn without federal penalty (tax applies to earnings only).
• “If your child, for whatever reason, does not need those funds…you've got funds that you can use to upskill your career.” — Patricia Roberts (23:58)

c. Starting Late with 529: Is It Ever Too Late?

(26:14 – 29:56)

• “It’s really never too late—even if the child is nearing the end of high school…You still have some time.”
• Key tips:
  • Open the account and automate contributions.
  • Encourage family and friends to contribute.
  • Explore employer benefits and scholarship opportunities.
  • Adjust expectations: college costs vary widely, and “big name” schools aren’t always best.
• “Give yourself a break, get started, and get others involved is really what my tip is.” — Patricia Roberts (29:47)

d. Tackling College as Social Status (& ‘OOH’ Factor)

(29:56 – 33:45)

• Social pressure around prestigious schools leads parents to overextend financially.
• Early admissions can limit aid; parents should balance aspiration with financial realism.
• Consider transfer pathways, community colleges, or alternative investments.
• “After the ooh part at breakfast is over, you're going to have $400,000 owed and none of your friends have to pay that bill but you.” — Farnoosh Torabi (32:08)
• NYU example: start at community college, transfer, and still get the degree.

e. Federal vs. Private Student Loans: What’s Changing?

(33:45 – 35:56)

• Traditionally, federal loans were best for flexibility and forgiveness.
• Upcoming changes (from July 2026): borrowing limits and discharge rules are shifting—families should compare options when their time to borrow comes.
• “No time to just be shooting from the hip. These are really significant dollar amounts.” — Patricia Roberts (35:44)

f. Complex Loan Situations: Parent PLUS Example

(36:23 – 40:08)

• Parent PLUS loans are legally the responsibility of the parent, not the child.
• Changes in plans (“SAVE” income-driven repayment) may soon be unavailable (ending 2028).
• For complex issues, consult loan servicers and reputable credit counseling.
• “If it really is a Parent PLUS loan, no matter how you stumbled upon it…the student is not responsible…” — Patricia Roberts (37:31)

g. How Much Should I Save Monthly for a Newborn’s 529?

(40:08 – 44:22)

• Use online calculators to estimate savings needs, adjust periodically, and automate contributions.
• As family expenses change (e.g., daycare ends), increase contributions.
• Invite family/friends to contribute instead of gifts.
• “Individuals who save from their paycheck save 75% more than those who first have the money pass through their hands.” — Patricia Roberts (43:39)

h. Choosing Between 529s and Alternatives (Brokerage, Roth IRA, Custodial)

(47:39 – 52:15)

• 529 advantages:
  • Tax benefits and state deductions.
  • Account owner (not child) remains in control.
  • Favorable treatment in financial aid (parental asset vs. child asset).
• Custodial accounts (UGMA/UTMA): child takes control at age of majority; assets more heavily weighted in aid formulas.
• Roth IRAs and brokerage accounts are flexible but have contribution and use restrictions.
• “No one way to save for higher education...you can diversify your approach.” — Patricia Roberts (48:28)

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Notable Quotes & Memorable Moments

• On Student Loan Culture:
  “Graduating with $150,000 in student loan debt…for a degree that doesn't really hold up in our economy, I feel like that's a crime, and it's not the borrower's crime.” — Farnoosh Torabi (11:28)

• On AI’s Shortcomings and Promise:
  “The advice varied based on gender labels attached to identical financial scenarios…these differences could compound into a 4 to 5% difference in retirement wealth over a lifetime. And PS: who lives longer? Women. So this is tragic.” — Farnoosh Torabi (14:00)

• Patricia’s Fundamental 529 Principle:
  “There’s no one way to save for higher education… Saving is a good thing, however you're doing it. But just make sure you understand the type of account, what implications it may have down the line.” — Patricia Roberts (50:18)

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Timestamps for Key Segments

• Current news headlines: 06:21 – 14:35
• Intro to College Savings and Patricia Roberts: 15:04 – 15:36
• 529s for multiple kids: 15:36 – 19:12
• What if the child doesn’t use 529 funds?: 23:37 – 26:14
• Starting late with 529s: 26:14 – 29:56
• College as a status symbol: 29:56 – 33:45
• Federal vs. private student loans: 33:45 – 35:56
• Parent PLUS loan scenario: 36:23 – 40:08
• How much to save for newborn's 529: 40:08 – 44:22
• 529s vs. other savings vehicles: 47:39 – 52:15

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Closing and Further Resources

Farnoosh wraps with a reminder of Patricia Roberts’s book, Route 529: A Parent’s Guide to Saving for College and Career Training with 529 Plans (Amazon). Patricia’s approach is rooted in lived experience, with practical guidance on fostering educational achievement and financial resilience for families at every stage.

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Summary prepared for listeners who want a deep dive into college planning, 529s, and the evolving landscape of personal finance — offering both practical steps and nuanced conversation.

Transcript

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So Money Episode 1983 Ask Farnoosh.

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You're listening to so Money with award winning money guru Farnoosh Torabi. Each day get a 30, 30 minute dose of financial inspiration from the world's top business minds, authors, influencers and from Farnoosh herself. Looking for ways to save on gas or double your double coupons. Sorry, you're in the wrong place. Seeking profound ways to live a richer, happier life. Welcome to SO money.

[Farnoosh Torabi]

Welcome to SO Money everybody. I'm Farnoosh Tarabi. It's Ask Farnoosh Friday.

We're gonna get into the headlines. We're gonna get into your money questions specifically around college savings. Later in the show, we're diving into all things college financial prep with Patricia Roberts. She is the author of Route 529, which has been updated. She's also an expert on college savings. She's gone through it herself personally, putting herself through school, paying off her law school debt, saving for her son's college education.

So we're actually gonna revisit this conversation

that we had with her in the fall where she shared so much of her knowledge regarding 529 college savings plans

as well as how to think about

student loans and so much more. Other news we're going to be talking about today.

Hey, you might be getting a Covid era tax refund.

There's also an interesting story about student loan defaults and who they're affecting the most, tying into our mailbag questions today and a new study out of MIT about whether AI can provide sound financial advice. And you may be surprised to hear what they learned. Before all of that, let me remind you what you might have missed on SO Money this week to encourage you to go back and take a listen. On Monday, we talked about the Power of Uncertainty. Journalist and author Simone Stolzoff has written a new book called how to not the Value of Uncertainty in a World that Demands Answers. And he says we're living through what the World Health Organization calls a poly crisis, where we have overlapping economic, political, technological and personal disruptions that are leaving many of us feeling anxious, untethered and really in search for answers. But, he argues, what if the goal isn't to eliminate uncertainty? What if the best skill we can develop is learning how to live with it, how to put aside our obsession with certainty, whether that's in our careers, our finances, our relationships, how all of that, all of that dependence on certainty may actually be making us more anxious? And then on Wednesday, Carrie Joy Grimes, founder of Work Money and the author of the new book the Joy of Money Stopped by Carrie. Joy is a former union organizer who spent years helping workers fight for better wages and benefits while also trying to untangle her own complicated relationship with money. So we talk about why so many women still avoid taking ownership of their finances, how to rebuild confidence after money mistakes. And we also talked about whether homeownership still make sense.

You can check those out if you haven't yet. All right.

Let's talk about some news headlines. So first, you might be owed a

tax refund from the COVID era.

I found this story widely reported that a court ruling found that Uncle Sam should not have charged penalties and interest during the pandemic. Of course, the government might appeal this decision, so it's tbd. But if this were to go through, millions of taxpayers, from the very well off to those who are living paycheck to paycheck, could be owed a chunk of change from the irs. It's not going to be simple to claim your money even if you have figured out if you are allowed a refund.

So this is the big caveat that's

in all the news stories, that these refunds will not be automatic. You're not going to get a check out of the blue.

Most of the taxpayers who qualify for

this will need to rush to file a special tax form by July 10th. So a little bit of the backstory on this. So back in November, a federal judge ruled in a case involving an individual that taxpayers didn't owe certain interest and penalties between January 20, 2022 and July 10, 2023, those prime Covid years, even if the IRS imposed them. So while Americans owed taxes, they couldn't be penalized if they didn't pay them by normal due dates.

And the ruling was based on the

law's relaxed deadlines for disaster victims and

Covid was a disaster. So the law has since been changed

to a similar recurrence.

But if you file taxes for those years, you may be able to ask

for a refund for certain payments during

this period and seek abatements of penalties

and interest assessed but not yet paid. This includes interest on tax underpayments, such as estimated taxes for the affected period. It includes interest on deficiencies that may have been determined during an audit during this period and possibly some interest that accrued during that period, regardless of when the liability occurred. So if you think you may qualify for this, you want to go and File IRS form 843. I'll link to that in our show notes. And here's the other thing. The form has to be submitted on paper.

[Patricia Roberts]

Oh my God.

[Farnoosh Torabi]

So be sure to get proof of mailing and keep it with a copy of what you submit. My goodness. But again, the government could appeal this, so we'll keep you posted.

Next the average student loan defaulter is

nearly 40 years old.

40.

This is in the Wall Street Journal. This is all since the government ended its pandemic era payment pause, where now older student loan borrowers are falling behind. This is, to put it in context,

nearly two and a half years older

than the profile of a student loan defaulter before the pandemic. This is all according to research published by the Federal Reserve bank of New York this week, borrowers 50 and older are now higher risk, too, of default than younger borrowers. The average borrower who's in default is

more likely to live in the south,

although borrowers are defaulting across the country and most of the newly defaulted borrowers were not past due on their student loans before the pandemic. This is, in my view, one of

the big markers of economic decline when

you have folks defaulting on debt and of course, credit cards. That's usual business with credit cards. People default on their debts with revolving credit. But student loans is the next shoe to drop when you're looking for signs of a weakening economy. The data found that Gen X borrowers,

those ages 50 to 61, have the

highest average student loan balance of any age group. Many of them either reached college age as the modern federal student loan system was forming, or borrowed later, likely on behalf of their children, according to the Wall Street Journal. Now, the biggest consequence for defaulting, we know, is that you could have your wages garnished, your tax returns and Social Security garnished. The Education Department has delayed its garnishment plans, but that is still a looming threat. It kind of makes sense to me in some ways that the Gen Xers are the ones having a hard time

paying back the debt.

I think that was kind of like

the first generation that really got fed

this bill of goods around student loans, like, take out the debt, no matter how much it is. Because in education, first of all, it's

your birthright, and it is absolutely necessary

to be competitive in our economy.

And so people took out whatever they

had to take out blindly. I remember I'm kind of on the border of Gen X Elder millennial. I remember applying to colleges in high school, and my counselors, my teachers, all saying, like, whatever, you just take out the student loans.

Don't worry about the price tag.

And I'm so glad I did not listen to that advice, but many of my classmates did.

And since then, we've all gotten more

educated on the risks of doing this right, and how in some cases, it doesn't pay off. And there should be a limit to

how much you borrow.

Graduating with $150,000 in student loan debt, undergraduate debt for a degree that doesn't

really hold up in our economy, I feel like that's a crime, and it's

not the borrower's crime. There's other people involved, right, that encourage

you to do this and make this too accessible.

We need more laws to protect people

from taking out crazy debt.

Also, I'm looking at universities who are increasing their tuition year after year after year at much higher rates than inflation. It's a broken system. And then we're going to get into more of it later in the show. But one more headline before I bring on Patricia in USA Today. Half of Americans are now going to artificial intelligence for financial advice. But is it any good?

So there was a fascinating new study

out of MIT and Stanford that asked a very big question, Can AI actually give good financial advice? And the answer is kind of yes, but with some important caveats. So researchers, they tested large language models

like think ChatGPT, and it fed these

models thousands of fictional financial profiles across different ages, incomes, job situations, investment scenarios. And then they evaluated whether the AI's recommendations lined up with traditional, quote, unquote, life cycle financial planning principles.

Things like spending less when income is

low, building emergency savings, all the good stuff that we know, investing more aggressively when you're younger, diversification of your portfolio, et cetera.

So the good news is that the

AI would often give solid baseline advice.

For example, younger workers with limited savings

were typically told to build emergency funds, pay off their debt contribute to retirement accounts. And in many cases, the recommendations looked a lot like what a fiduciary financial planner might say. But here's where it gets complicated. The researchers found that the quality of AI advice depended heavily on how the users asked questions. In other words, the biggest limitation wasn't always the AI itself. It was the prompting. So people with higher financial literacy tended to ask more detailed and strategic questions, which then led to better outcomes, better recommendations.

And those with less financial knowledge often received weaker guidance.

So you know what I'm going to say next, right? This is a huge bias.

They also found that there was advice

that was different based on your gender. The advice varied based on gender labels attached to identical financial scenarios. Men and women sometimes received different investment recommendations even when all the financial facts were the same. The study estimates that these differences could compound into a 4 to 5% difference in retirement wealth over a lifetime. In PS, who lives longer? Women. So this is tragic.

The takeaway for all of us, you can use AI. It's a free country and it can

in some cases be a helpful financial assistant.

It can explain concepts, I think like

using AI to break down the difference between a Roth and a traditional ira.

You know, just like definitions of things

is fine, but of course AI can hallucinate.

So you want to always fact check it.

It's never the end.

All definitive answer and certainly should not

replace critical thinking or personalized human advice. Especially if you're about to do something major in your life like start investing for the first time, plan for retirement, buy a house. And remember, your results using AI will depend on the quality of your questions. The better informed and more specific you are with your questions then according to this study, at least the more useful the AI becomes.

Okay, now let's tackle your college savings costs. We've got Patricia Roberts on the other line.

This is a replay from our September conversation around this. September is actually college Savings Month, College planning month.

Patricia Roberts, by the way, is the author of Route 529.

She is a leading national expert on

college savings and 529 plans.

We begin here with a question about how many 529 plans should one person have or one family have if they have multiple kids?

Let's say you have two kids.

Should I have one 529 plan for the both of them or one for each?

What's Patricia's take on that?

Here's where we start.

[Patricia Roberts]

Yeah, it's a great question and it comes up a lot. I think parents instinct sometimes is to simplify by putting Everything in one account. You can certainly do that. But every account allows for only one account owner and one named beneficiary. So my strong advice always is to have a separate account for each child. And I say that for a number of reasons. First of all, unless they're multiples, and we know many families have twins or triplets or quadruplets, they have different dates of birth and different time horizons in terms of when they'll be needing that money for use. Let's set the K to 12 aside. We're assuming people are using it for college only. They're going to need that money at a different time. And many of the 529 plans, and in fact they're the most popular options that families pick are these age based or target date options. So you want to have, if you go into one of those investment options, you want to have one that's suited for the particular beneficiary that you have in mind for those funds. Another thing that I would say is I think it's extremely important to have separate accounts because I always encourage families to politely tell the loved ones to stop it with the stuffed animals and the toys and games and outfits that are quickly outgrown and instead consider even a modest contribution to the 529 account, you'll want to have separate accounts for those purposes because perhaps at one of the December holidays, someone's going to want to put something in each of the kids accounts. So you'll want to have separate accounts for that purpose as well. Also, children's aspirations may be different. I know you don't know this when yours are young, but as they grow and develop, you may realize you're saving for something very different for one child versus another. You can always switch those funds to a member of the family if you figure that out later on. And I think the most important reason I think one should have different accounts for each child, a account for each child is that each child should know that you are saving for them. I think these conversations are important and I think they're important in age appropriate ways. I know there's research that says children, even with modest amounts of savings are more likely to attend and finish a degree program than those without. Even children with less than $500 is what the research says. And I think seeing that account statement with their name on it gives a child sort of a peek into their future and what the possibilities are. So please don't couple it all together.

[Farnoosh Torabi]

If you're not the eldest, you just feel like you're getting seconds, whatever's left. And I think it's also important to remember that these 529 plans, they're investment accounts. They adjust for risk as you get closer to college. So if it's one account you have to pick a target date right? For maybe you do an average of the two ages, but if you're saving for one child with the intention that with whatever's left you'll have for the second child, maybe that second child can't take on the same amount of risk or needs more risk right in their portfolio because they are they have many more years ahead. So just keep that in mind too, that when you're the reason to have two accounts is because each child has a different timeline to college and will require a different kind of investment strategy.

[Patricia Roberts]

That is absolutely correct.

[Farnoosh Torabi]

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Another question is what if my child doesn't use the funds? We've addressed this. But another flexible component of the 529 is that you can change the beneficiary to not just another child but also another family member. It's pretty flexible.

[Patricia Roberts]

It sure is. And that family member, if you happen to be the account owner for your child, that family member can be you.

[Farnoosh Torabi]

Right.

[Patricia Roberts]

So let's not forget about you. As parents, we are always on the back burner. But if your child, for whatever reason does not need those funds, want those funds, you've got funds that you can use use to upskill your career. Now that there's all these expansions on 529, I think it's a great piece of advice to consider that or use

[Farnoosh Torabi]

it to catch up in retirement. Can you roll that into your own Roth ira?

[Patricia Roberts]

Cannot roll it into your own Roth ira. But that's a great question, Farnooch. You can roll it into the Roth IRA of that original beneficiary if the account has been open for at least 15 years and other requirements are met. But $35,000 can indeed be rolled into a Roth for the beneficiary on the 529 account. But it's got to be that same exact person. So you couldn't quickly change it to yourself because you wouldn't have had the 15 year period. But good thinking for a. I try.

[Farnoosh Torabi]

I'm trying. Squeezing that retirement money out of anything.

[Patricia Roberts]

Absolutely. There are other things you can do too. You can certainly save the money. There's no time limit on five to nines. Save it until that child realizes that now they do want to pursue education. You can save it for your child's children someday. If the reason you don't need the funds is because your child received a scholarship or attendance at a military academy and doesn't need the money, you can always take the money out without federal penalty because you didn't need it for the intended purpose. You will pay tax on the earnings portion of the withdrawal only. But there'll never be a penalty in the case of scholarship receipt and God forbid, death or disability of the child. And then the last thing you can always do is get at your money. It belongs to you. You can take a non qualified withdrawal. What you'll be paying there is the federal and state tax on the earnings of the withdrawal and a 10% federal penalty. That's the Penalty that is waived in

[Farnoosh Torabi]

the case of like an IRA or if you did an early withdrawal or a 401k? Essentially.

[Patricia Roberts]

Absolutely. But I think parents minds should be at ease in knowing there's a lot of flexibility in these plans and plenty of different things you can do if one child does not need the funds.

[Farnoosh Torabi]

Yeah, let's get to the mailbag. We have a question here. Let's talk about this family with four kids. Let's say they all do want to go to college and they don't have anything saved yet. If anyone ever asked you, is it too late for me to save in a 529, what would you say?

[Patricia Roberts]

I would say it's never too early to get started. And I feel in most cases it's really never too late. Even if the child is nearing, say the end of high school or the middle of high school, you still have some time. And also they may be pursuing a degree that's two or four years long. You'll still have time within that period to get started. Now, we don't know the ages of the younger children. You say the oldest is 14. But surely there's more time even for those younger children as well. I would say don't be hard on yourself that you haven't gotten started. My God, four children. And keeping that all afloat is quite a thing. But congratulations on asking the question and taking your head out of the sand because it is likely that one or all of those four children are going to want or need to pursue some form of higher education. And it's never really too late to get started with savings. Now, what can you do? A lot on your plate. You're not sure where the money could come from. A couple of suggestions. First of all, get the account opened and begin contributing what you can. And if you can do it, contribute on an automated basis. People tend to save more. I would seek the support of others. I mentioned the fact that friends and family can contribute to these accounts. Why not raise your hand over Thanksgiving dinner when somebody's saying what do the kids want this year? And tell them you really don't need anything else. So get friends and family involved. I think that can be helpful to you. Employers now increasingly are starting to realize that employees need help with this. I would see if your employer, if you're employed or your partner is employed, see if you can get somebody to contribute as well to those. And then the other thing I would do, as you're worrying about all of this, is to remember college comes at many different costs. If you are thinking of traditional college. There are high quality schools that cost less than some of these big names and sometimes those lesser known schools will give larger amounts of merit aid to a student that they really want. So don't be so worried about the big ticket prices you're seeing. Know that your child can perhaps pursue something less expensive. Also know that they don't need to necessarily go away to school or they can go to the state school. Farnooche talks about this all the time. It was Penn State. We are where she went instead of going to the big name out of state school. That was her father's insistence and her acceptance of it, which led to a brighter outcome for her. So I think of anything you can to start putting your mind at ease. Get the account opened. Realize it doesn't have to be the big ticket. Start talking to your child though. You can't wait till the very last minute to say we really don't want money for this. Start talking to them. Perhaps they can work and contribute. And the other thing you should remember is that they also can work while they're going to school. Your priority needs to be emergency savings for the family. Your retirement needs to be a notch above all of this. And it's great that you want to focus on, but you've got to let them know that they need to be aware of what's happening as well. Perhaps they can start looking for scholarships at a young age if they have a particular skill set to see where they might find some money for that. There's plenty you can do. It feels late, but give yourself a break, get started and get others involved is really what my tip is.

[Farnoosh Torabi]

As a parent who lives in a suburb of New York and maybe this is an east coast thing, but I think it's a lot of parents, no matter where you live, there is. And this is a big thing to get over because. Because where your child goes to college, it's like a social status thing. I will be the first to say that I was at breakfast this morning with my friend who was sending her daughter to a school in Canada, a wonderful school, but there was another mother at the table who was like my kids go to Duke and Tulane and oh. And everybody went oh. And it was like a moment and we all felt it and we aspire to the ooh a lot of the times. And we will sacrifice our retirements to get our kids into those hundred thousand dollar a year schools which who knows what they'll be by the time you have a kid who's maybe five or Six years old now.

I don't even want to know.

That's sometimes the biggest hurdle. And this is like such a wild thing. It recurs in a lot of my conversations with, with families, especially those who are about to send their kids off to school. Well, they've worked so hard. They have their heart set on this school. It's $100,000 a year. They want to apply early because now colleges are getting smart and they're accepting more and more kids early. And those kids are not relatively getting any aid because they know you are. We're your number one choice. You're coming whether you get eight or not. And so it creates just this challenge that can be avoided by simply getting it in your head that after the ooh part at breakfast is over, you're going to 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. I'm not saying I don't want to crush anyone's college dreams. Like, I hope everybody gets to go to the college of their dreams. But realize, realize that what you're really after is a degree. And you can go and start at a different school that's more affordable and then transfer to that dream school and still finish at that dream school, paying half the price overall and getting the degree. Or you can go there for grad school, which might be a lot more affordable than undergrad, depending on how long you're in grad school. But all I'm saying is be flexible, be open minded, and don't get caught up in the social influence of it all.

[Patricia Roberts]

That's great.

[Farnoosh Torabi]

I'll get off my soapbox. I'll get off my soapbox.

[Patricia Roberts]

Great. It's great. I know parents that have felt this way, and I know one family where the daughter got into incredible schools and they opted in the end to do borough of Manhattan Community College for two years and have her live at home and commute there. And that was next to nothing. And then transfer to nyu. She's got the NYU degree.

[Verizon Advertiser]

Exactly.

[Farnoosh Torabi]

You get the degree. I mean, there are extreme thoughts on college right now. Don't even pay for it. Give your kid the $400,000 if you have it and start investing that for their future or give them some of that money to start a business. I think it all depends on your kid. Obviously, this isn't healthy advice for everyone to follow, but I think increasingly parents are open to these alternatives and that's a real existential crisis for universities. Right? Like how are we going to make ourselves competitive and convince parents to con Some parents will always pay it like it doesn't matter. But I think more and more people are realizing the math needs to math.

[Patricia Roberts]

That's right. And if they could see into the future and the stress that they're avoiding or the stress that they would encounter by having that debt, I think they'd make very different.

[Farnoosh Torabi]

Absolutely. Another question from the audience. Federal versus private loans. This is of the 529 world now. And if you're comfortable answering this, Patricia would love your thoughts on the smarter move. The smart money always went for the federal options first because we know that they're typically more flexible when it comes to repayment. They're typically cheaper when it comes to their interest rate. But the world is changing. The financial institutions are getting a little savvier. What do you think?

[Patricia Roberts]

Yeah, exactly what you just said. The answer previously had almost always been yes and it may still be yes. But with recent changes in federal law that go into effect in 2026, I think it's worth re examining. So if you're someone who's going to be borrowing after I think it's July 2026, I think you need to take a more careful look and I'll tell you why, or at least some of the reasons why the limits on what can be borrowed are changing for both graduate students and for parents. I think undergrad is staying the same. But your ability to borrow from a federal perspective is going to change. So that's something you'll want to keep in mind. I do believe they're still likely to be more favorable in terms of discharge upon God forbid, again, death or permanent disability. I'm not sure that private loans ever really can get discharged. Maybe under some circumstances they are. But because of these changes and just the changing landscape, I suspect that private loans, while typically have been more expensive, may be more competitive. And I think some of these reasons why people went with federal may change a little bit coming changes. So I say while I don't have a definitive answer for you, I say take a good look when your time comes to borrow. You should be comparing everything when you go to decide which one to attend. You got to be lifting the hood on all of this. This is no time to just be shooting from the hip. These are really significant dollar amounts as you said, farnooch. And people really need to think about what they're doing.

[Farnoosh Torabi]

Yeah, I agree. I can't imagine if they start to change those discharge laws and in this administration I think they Want to privatize everything. They haven't been very sympathetic with borrowers. And I think that question maybe there was a hint of knowing that there's been some clamping down on these people who had their loans on pause for a while and now they're due again and. Yeah.

[Patricia Roberts]

All right.

[Farnoosh Torabi]

We have a question from Tori. A bit detailed, but I know you can handle it. She says. Noosh, My husband and I recently discovered a Parent plus loan that his dad took out for him totaling about $69,000 at 7% interest. At first, the balance showed a $2,600 due amount, but after a forbearance was approved because we didn't know about this, so it was automatically requested and approved, the account reset to $360 a month. The loan is in his dad's name, so it would be discharged if he passes away. So we can afford the 360amonth, she says, but we're torn. Should we just stay on this plan? Should we consolidate to access the Save program or refinance into my husband's name if the rate drops? This is a very specific situation, and I feel bad that no one seems to be helping her with this, other than maybe they did negotiate to get to 360amonth, but not next steps. No one's here to give her some next steps. What would you do?

[Patricia Roberts]

Wow. Oh, there's a lot here to unpack. The first thing I would do is remind her that if that indeed is a Parent plus loan taken out by her husband's father, unless her husband has somehow in some other way, legally assumed responsibility for it, he's not responsible. The student is not responsible for a Parent plus loan. Now there's something more going on here because he's acting like he is. Right? Or it's sounding like he's wanting to be helpful. Right.

[Farnoosh Torabi]

Maybe he feels obligated. It could be.

[Patricia Roberts]

I don't know those details, but I wouldn't. I feel remiss by not mentioning that if it really is a Parent plus loan, no matter how you stumbled upon it or what, the amount is not certain unless there's something else going on here that her husband would even be responsible, but commend him and her for wanting to help in some way. The other thing is she mentions something about potentially going into the Save plan. S A V E is the acronym I saw in the recent federal legislation that's going to be eliminated in 2028. So I point that out as well. If that's something that you're foreshadowing. Or thinking might be desirable to pursue. Just know it might not be there. I think the best bet there's so much intricacy to this question and I think there's things that you and I maybe don't even know here, Farnooche, is to suggest that your listener or your audience member certainly talk to the loan servicing company about options. I do research on that. Studentaid.gov has current information on what's happening with student loans, particularly federal loans. And there's also some nonprofit credit counseling, student loan counseling entities that may be able to help. I know that most states have a financial services arm where you can ask questions about things like student loans, but I'd get a third party's opinion because I don't think either you or I, Farnoosh, can give a definitive answer here other than what we've said, which is to take a more careful look at it and figure out what would happen. I think she is correct if it is indeed a Parent plus loan for which the father in law is solely responsible and if a federal Parent plus would be discharged upon his death. But that's certainly not something anyone's counting

[Farnoosh Torabi]

on or wanting to happen and they recently discovered it.

[Patricia Roberts]

Don't know.

[Farnoosh Torabi]

I don't get it. But I appreciate the question. I want you, Tori. Here's what we're really telling you is look out for you and your. You got to look out for yourselves, right? And if this is not something that you have to pay back, maybe there's. Maybe who you have to talk to is your father in law and together y' all can work it out. If your husband didn't know this was being taken out for him, I feel bad that he's being stuck with the bill all of a sudden. Surprise. So good luck, Tori. Let us know what ends up happening. A question here, Patricia, about newborns and 529s. Now I think it's if you've been listening to the show audience, I opened a 529 for Evan before he was born. I was pregnant and maybe I was pushing my luck there, but I was like, you know what? What? I kind of want to take advantage of this. This is cool. I'm like the nerd in me was like, what? I can do this before he's born. I'm going to do it and get a head start. If I can get a head start on savings, I will. And that has that account, by the way, has grown to six figures since he was born and we were contributing $500 a month up until recently. We increased it to a thousand dollars a month because I just felt like the pace of tuition was rising faster than my rate of return on the this 529, sadly. So we did one for his sister as well when she was born. Taking your advice to have one for each child. But what's a monthly suggestion? Is the question to save for a newborn in a 529?

[Patricia Roberts]

Yeah, this is a very good question, Farnusha. Depends on a variety of factors. And I'm happy to say that Most of the 529 plan websites have great calculators to help families estimate really what their goal is. You've got to start with that. What are you saving for in order to back into how much do you need to save? So there are really good calculators out there that you can utilize. But what are some of the considerations? What are you envisioning this future to be and how much of it are you hoping to cover? Because it's going to be a very different amount. If you're thinking the child's going to go to the prestigious private school and you're going to cover 100% of the cost. If you're thinking, hmm, we're probably going to be more of a public in state family and my spouse and I or my partner and I are comfortable covering say 50% of it or a third of it, you're going to have a different number to start with and thereby your monthly or weekly or whatever annual contributions are going to be different. So I think you need to know what that is you're envisioning. These calculators are great because they'll help you to estimate what college will cost in that year that your child's going to go and we'll help you to back into. What would you need to get there? The other tips I would have, once that account's open, once you've decided on how much you're going to contribute, you can always change the contribution amount over time. We did in my family as we were paying back $100,000 in our own undergrad, grad and law school debt, we eventually were able to put more in and as will you. When that child's out of diapers, you're going to be saving 60 or $100 a month on those diapering and diaper supplies and your child's out out of paid daycare, you're suddenly going to have a windfall if your child's going to public school because now you've got more money on hand. So you'll be able to increase over time, but try to do some sort of estimate about what you envision for the future and back into what those monthly costs would be without being completely tied to what they are. And then my other tips are automate those contributions. Ideally, do it from your paycheck if you're an employed individual or your bank, checking or savings account. Why do I say paycheck? Individuals who save from their paycheck 75% more than those who first have the money pass through their hands. It's the way I saved and I think it's a great way to do it. And then lastly, I'd say invite others right from the get go. This newborn's here. Let's set the tone for the future. Smaller, more thoughtful gifts are welcome, but this is really what we want to work toward as a family. And see if you can get other people involved. I bet they will be.

[Farnoosh Torabi]

That's a great answer. And just for context, how we landed on that initial $500 a month for Evan. We were working with a financial planner and we ran the calculators and she asked us questions like, you know, what kind of parents do you want to be in this context? Do you want to pay for all

of college wherever the kid decides to

go, as expensive as it gets, or do you want to be middle of the road? Like, we both, my husband and I went to Penn State. State. So we were like, okay, let's say Evan decides to go to Penn State and we're living out of state, what's going to be that tuition? And that was what we targeted. Now that's not cheap, right? That's probably way more than what it would have been for us. It is way more than what it would have been for us. But I also find that if you get into these quote unquote elite private schools, if you've got good grades or if you write, if you apply for scholarships there, you can, a lot of times you, you can surprise yourself. You might get more aid than you think that this hundred thousand dollars, some people pay that, but many people pay less than the sticker price. And so while maybe you're targeting the average cost of college as part of your savings Strategy, in the 529, you may end up saving more than you need because again, your kid is able to qualify for aid and we're not anti try taking out a little student loan and having to pay that back because I think knowing that is going to be due whether you graduate or not encourages the child to graduate and also gives them some skin in the game and makes it so that they are more motivated to go out there and find paid work so they can pay off that debt when the grace period is over.

[Patricia Roberts]

That's great. And by the way, 529s can be used to repay $10,000 in student loan debt or account. Some parents are holding back some of that money, not letting the child know there's still a little bit left in the account and letting them take out, as you said, a loan or two for themselves, knowing if they needed to pitch in, they've got the money in the account. Not a tremendous amount you could repay, but it's interesting to know that they can. And Farnooch, I want to say one other thing in the one big beautiful bill is that employers ability to repay student loan debt was made made permanent. Employers can repay. So that's child of yours who's now graduated with student loan debt. Employers of all sizes can repay up to $5,250 a year tax free to the employee. So free of income tax, free of payroll tax for the employer and they can take a business tax deduction. So if your child's coming out with some student loan debt, have them look for employers who are willing to do this because there are employers who are and they're interested in attracting people that top talent and keeping people. And if you're working or your child's working for someone right now who's not offering it, ask the question because they can now do it. That's now permanent, was due to sunset at the end of 2025.

[Farnoosh Torabi]

I love that.

[Patricia Roberts]

And I want to talk about that. I just wanted to reference it. I know that's not our topic today, but people should know employers can help here.

[Farnoosh Torabi]

Great point. And so it just makes me feel like the 529 is amazing and nothing can stop us from opening one. But some are still on the fence. We actually have a question. This is our last question. When does it make sense to not open a 529 and do an alternative like a brokerage or a custodial account

or a Roth IRA even A lot

of people use a Roth IRA as a flex account where it's intended for retirement, but it has this flexibility where you can take your contributions out penalty and tax free. A lot of folks see it as a hybrid vehicle for retirement, slash fill in the blank. And sometimes that blank is college.

[Patricia Roberts]

Sure. No, that's a great question and it's a fair one. First of all, I want to say there's no one way to save for higher education. There's no right or wrong way. And you, you can save with multiple approaches. You can diversify your approach so you don't have to be pro or anti.529. You can do a little of a few different things if you wanted to. Certainly the things I love about 529 that are not the case with some other options are those tax benefits. The annual state tax deduction at the state level or credit depending on the state, and. And the fact that the accounts are growing free of federal and state taxes is something that's very attractive. And when those funds are withdrawn to pay for a wide range, and you heard how wide that range now is, range of expenses, you'll never pay tax on the earnings of these accounts. So that's something that you're not going to get in your average brokerage account. The other thing I like about 529 is that the account owner is always in control of this account. We love our children. We hope they're going to turn out the way we hope they do. We hope they're going to follow the paths that we think are best for them. But to the extent they know there's money out there that they can get their hands on and use for any other purpose, they might just do it, but they can't do it. In a 529 account. The beneficiary can never ever get access to the funds. So I like 529 and then that's protective. Oftentimes, parents set up brokerage accounts with these classifications called UGMA or utma, Uniform Gift to Minors Account Characterizations. And that money belongs to the child. And when they reach the age of majority, whether it's 18 or 21, it's their money. So if you are intending that money for a particular purpose, it's not going

[Farnoosh Torabi]

to be the case.

[Patricia Roberts]

The other thing about putting money in an account that with those trust classifications is that it will count more substantially against the child for financial aid purposes, federal financial aid purposes, because that's deemed to be the child's money. The FAFSA calculation looks at child assets at 20%. So they feel 20% of a child's assets can be used for education, whereby the 529 is considered a parental asset and only 5.64% of it is considered. So I think for those reasons, I prefer 529. I think brokerage would be great if you wanted to use the account for multiple purposes. You weren't sure if it was going to Be for education. You want it to be able to dip into it now, later, for a variety of things that might make sense for you. 529 really put 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 anything else. But some people like being able to pull out money. The things I'd ask, whether you're looking at an IRA or a brokerage account or any other form of investing, is whether there are income restrictions, age restrictions, minimums or maximums that you can put in roth's like what, 7,000? The child has to have earned income. There are these sort of rules you need to be thinking of. What are the fees and expenses, what are the tax treatment, what risks, if any, what are your earnings potential? You want to look at all those things, no matter what an investment is that you are considering. I hope that's helpful. But again, no right or wrong way here. I know 529best and I happen to like it best. But I think some of these other ways are perfectly fine. Saving is a good thing, however you're doing it. But just make sure you understand the type of account, what implications it may have down the line and particularly that implication of can your child get their hands on it? Because I think that's really important to know.

[Farnoosh Torabi]

Yeah, the custodial accounts, I think you brought it up. But just to re emphasize the risk of that money becoming their money in as young as 16 in some states, but most likely 18. And again, the compartmentalization of the 529. We talk about this a lot in personal finance. The behavioral strategies that we can implement that will just steer us in the right direction because left to our own volition, we cannot be trusted. And so when you have something that is earmarked for something, you just accept that and it's a boundary that you don't cross and you are more likely to be successful hitting that goal, hitting that savings target. Wow. We covered so much ground. And Patricia, as always, thank you so much. Tell us a bit more about your book again and where we can find it.

[Patricia Roberts]

Sure. So my book is Route 529, a parent's guide to Saving for College and career training with 529 plans. It is primarily sold on Amazon. That's the best place to get it. It is written from the heart, from a mom who's been there. I know you've read of Farnooch. My son has written the forward to it. You get to hear from a child about experience of growing up in a family that was prioritizing this, driving the same car, still driving the same car from the time he was an infant till now to save on money. We were determined for him to have a brighter future. So I share a little bit about my own journey and I don't miss a beat on how these accounts work. And I try to put it in plain English for the readers. And as I said, update it for 2025. You'll see the ribbon across the top that says 2025 Update when you go onto Amazon to look for it. But I hope you enjoy it. And I'm very it's one of the most satisfying things I've done. It was my pandemic project, wasn't good at baking sourdough bread. I said I've got to do something here with this time on my hands, how about I write a book on 529 plans? A little nerdy, but I think it's helped a lot of people and it's brought us together for a niche which I'm so grateful for.

[Farnoosh Torabi]

So grateful for you, Patricia. Thank you so much.

[Patricia Roberts]

You're welcome.

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