When to start using College 529 plan?

[liz]

DS has a 529 plan that will only cover a few years of college. DS will have to take a school loan at some point. Is it better to use up the 529 plan first or start with the loan? DH's thinking is that the 529 plan is making more money than the current interest rates on school loans. He's thinking letting the 529 money sit untouched for a bit and let it make more money. WWYD?

[o_mom]

DS has a 529 plan that will only cover a few years of college. DS will have to take a school loan at some point. Is it better to use up the 529 plan first or start with the loan? DH's thinking is that the 529 plan is making more money than the current interest rates on school loans. He's thinking letting the 529 money sit untouched for a bit and let it make more money. WWYD?

We went ahead and took the federal student loans. A few reasons. As you said, the 529s right now have more potential growth, they are also down and we are trying to avoid withdrawals in a down market. Also, there is a good possibility that the student loan pause will be extended again, making them 0% interest for the time being. Lastly, you cannot go back at the end and take out the federal loans as there is a max per year. If you end up in 3 years needing more than the federal loan, you are looking at private/parent loans.

For the most part, this is a cash flow issue for us with 3 starting college in the next 4 years. We have told DS1 we will pay the interest while he is in school, and if things work out, we plan to pay them off for him, but due to his program and other factors, we are not as sure as we would like.

[sariana]

I saw some info about this when I was looking for something else, so I’m not sure if I’m remembering correctly. But I THINK the advice was to use loans first because they don’t have to be paid back as long as the person is still a student. So it extends the timeline or something. But I’m not sure if that’s right (or universal).

I do know there’s a ton of advice about this online.

[sariana]

Double post.

[belovedgandp]

We're pulling out as much as we can now as DS1 enters freshman year. But, we do not anticipate needing loans at anytime for his college degree. His largest scholarship is structured to give him more money his 3rd and 4th years so he could potentially need less funds as his schooling goes on.

I had moved all of DS1 ESA account (which was 2/3 of our college savings) into a money market fund last year because I was afraid of taking a ride on the short timeframe. So it is not invested there.

[belovedgandp]

We're pulling out as much as we can now as DS1 enters freshman year. But, we do not anticipate needing loans at anytime for his college degree. His largest scholarship is structured to give him more money his 3rd and 4th years so he could potentially need less funds as his schooling goes on.

I had moved all of DS1 ESA account (which was 2/3 of our college savings) into a money market fund last year because I was afraid of taking a ride on the short timeframe. So it is not invested there.

[bnme]

We are taking the student federal loans as we know we don’t have enough to cover all 4 years. Just be careful to make sure you use the 529, as there is a limit on how much can be used to pay back a loan if you borrow too much. (And I think it is a very small amount).