Let’s Get Rid of College Savings Funds

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Later this summer, thousands of families will open up their pocketbooks and tap into the sacrosanct savings fund that many parents set up before their first child was even born: the college fund. As they prepare to send their high school graduates off to college, they’ll shell out thousands of dollars to universities, housing companies, and textbook publishers — maybe symbolically giving it to the student first, but with the very clear understanding that it can only be then given directly to the universities and their colleagues. This money will support the student through their college years and help them launch themselves forward into stable adulthood, offsetting any student loans that may need to be taken out and just making life a little bit easier.

Ideally, parents set aside sums of money for their children so that they can go to college, get a job, and launch themselves into the middle class. After all, when these parents themselves were growing up, going to college was a sign of securing for yourself a lot in the American Dream. Nearly everybody who was upper-middle class was either college-educated or sending their children to college. If you were marginally middle class, college seemed like the thing that would set you and your children on the path to the upper middle class.

Perhaps more romantically and generally, it is so the young person has opportunity. Any good parent wants to give their children opportunity to become their best possible selves. The most obvious and safest path to this in the mind of the Boomers is to attend college. Go and learn about the world for a few years, try something new, and at the very least, even if you don’t find a job upon graduating, you’ll have a good experience and a degree under your belt.

But this is the romanticized vision of the college experience. In a world of so much more information, so much more (cheap!) connectedness, and generally more opportunities for ambitious young people, there’s a huge opportunity cost to just taking the college-as-success pill no-questions-asked.

But even more, there’s the huge financial cost of the college savings fund.

If the purpose of saving up so much money ($10,000, $20,000, $50,000, maybe upwards of $100,000) is to use it on something so that your child may learn how to become a successful adult and be exposed to the experiences that will mold them as such, giving that money directly to a college is one of the worst possible things you could do.

Imagine that rather than giving this money to a university to cover tuition as a “college savings fund,” you instead took this money and gave it as a “coming of age fund.” The stipulations are simple: the newly-christened adult can spend it on whatever they would like. If they want to spend it on college, they are free to do so. But they are also free to spend it on buying a fancy car, putting a down payment on a house, traveling around the world, or seed-funding their own company. It would give them the freedom to explore the options around them without feeling pigeonholed into any one specific area.

Would some people take the money and blow it? Absolutely. Would others take it and make something greater out of it than if they had just used it to go to college? Absolutely. What matters is that these young adults would actually be treated as adults and given the freedom and responsibility of dealing with freedom and responsibility.

Even in the worst-case-scenario of this young person taking it and blowing it on sheer thrills and gambling, they would still earn more about themselves and managing sums of money than if they were just subsidized through sitting in an academic bubble for four years where they very rarely felt the pain of spending $10,000 per semester so the university Vice Provost to the Assistant Secondary Dean of Diversity Student Life could afford a new Mercedes Benz.

The college savings fund appears to be a great idea in the abstract — a sort of safety net to help push children of Boomers into the path to the middle class — but when considered with the opportunities that it closes off and the other ways that the money could be spent, it is an antiquity of a risk-averse generation. Giving every young person the opportunity to spend a large sum of money how they wish would teach them more about themselves, the world around them, and the opportunities they do and do not have better than going to college because that’s what they’ve been told to do.

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