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Short Summary
Main recommendation: Put all you can into a 529 plan for college, because most families are not saving enough to cover four-year tuition, and only consider splitting funds off into a custodial mutual fund once the 529 has grown to roughly $100,000 and actual costs are known. The video also addresses how fairly to treat children who choose trade school, and how the student loan crisis and the pandemic are reshaping views of higher education.
Key Points
- Most people do not contribute enough to a 529 to cover a four-year degree, so the default advice is to keep funding it fully rather than worrying about overfunding.
- Splitting money out of a 529 early costs the tax-free growth the account provides, which is why Ramsey advises against it until the balance is large.
- Ramsey says either a four-year degree or a trade school path is acceptable to him, and that he would still want his grandchildren to earn a four-year degree.
- The student loan system is described as an epic failure that has driven higher education costs so high that many people question paying for it.
- The pandemic has led many students to feel that full-price online college classes do not match the college experience they expected, pushing some toward cheaper online options.
Details Worth Noting
- Concrete instructions: Keep contributing to the 529 for all children, including nieces and nephews, so that funding remains equal and tax-free growth continues.
- Concrete instructions: If one child is likely to choose trade school and the 529 has grown to about $100,000, begin discussing moving some of the money into a mutual fund in that child's name, with a parent as custodian.
- Concrete instructions: Only consider splitting funds off when you are looking at actual numbers and the cost problem is current, not hypothetical.
- The caller's concern was that a lower-cost trade school could leave extra 529 money; Ramsey called this a valid concern only for families far ahead of the curve.
- Ramsey predicted nothing specific about education in ten years, saying he has no crystal ball, but he expected in-person schooling to be back to normal by now and noted that private schools charging around $40,000 a year may lose customers if they do not return to in-person instruction.
Bottom Line
A 529 remains the default savings tool for most families, with splitting funds reserved for families who are well ahead of their college goals and the trade school question is concrete.
