For the future.....a 529 plan

At last, we have come to the final chapter of seemingly unending problem in our society, high costs of colleges and universities.

In my last post, I have mentioned two respectively different, but similar, Free College Act proposed by presidential candidates Hilary Clinton and Bernie Sanders.

However, these plans may sound highly innovative and tempting, they may be disastrous.
Sen. Sanders once established the need for free public college by saying, "in a global economy, when our young people are competing with workers from around the world, we have got to have the best educated workforce possible. And, that means that we have got to make college affordable."

But... wait a second, don't you think producing the best workforce possible foreshadows over-saturation of job markets??
What impact of free public college would have on the delivery system of higher education?
Does it necessarily mean that higher education be more efficient and prospective?


Because we are living in a decentralized system where we can take as much student aid as possible in regards to our choices of institutions, we are able to have variety of options when choosing colleges and programs. But think about the situation where those choices no longer exist due to free colleges, which make private colleges tough to survive. Since those colleges are free, can we be 100% that we are receiving the best QUALITY of education out there??

I do not think so.

Enough debating the shortcomings of alternative plans that weigh the value of today 100 times more than that of tomorrow, let's seek some "real" solutions for our sake.

There are a couple of solutions that are practical as to a solution for the high costs of colleges. There has been a case when something called a "Prepaid college tuition" was introduced back in 2008. 

What is a prepaid college tuition? 

It is one of the different types of a 528 plan that provides tax benefits in order to encourage saving for future college costs. It is named for Section 529 of the Internal Revenue Code that authorized it. This plan is  exclusively sponsored by states, state agencies, and educational institutions. Basically, a prepaid tuition plan gives one incentives to save by holding credits in current tuition prices. According to an article dedicated to pros and cons of a 529 plan, it states that college tuition costs increase with an annual rate of 8%. Meaning the average cost of one year at an in-state public institutions like PSU would cost around $19,288 for tuition, fees, boarding. It also scares us with the fact that if tuition rate increases continually at the current pace, a newborn baby born in 2016 will pay approximately $77,475 for her first-year in PSU, a public college. In fact, colleges in  such states like Colorado and California, they have raised their tuition 10%-12% and 10% to 30% respectively!!

Wow.... $77,475 and a 30% increase... that is why a lot of pensive parents are throwing every single penny they got in to a jar called, a prepaid tuition plan. Now wonder why it is so appealing to them.Subsequently, for parents who already bought either a year worth or years' worth of tuitions at current prices are guaranteed  paying the same amount despite increasing tuition rates. 

Another type of a 529 tax-benefit program is called, a college savings plan. For this one, you establish an account and choose among investment options, including stock mutual funds, bond mutual funds, money market funds, and age-based portfolios that automatically become more conservative as the beneficiary gets closer to college age (College Savings). However unlike a prepaid tuition plan, the values of mutual funds and bonds tied up with a college savings plan are not guaranteed by the states nor state agencies.

Moreover, states implementing a 529 plan provides tax advantages as a means to tax returns. Participants of it only applicable to this benefit.So as of moment, the state of Florida has officially encouraging its habitants to participate in 4-Year-Florida-University Plan. And there are unique clauses guaranteeing refund under two circumstances: a) when the child receives a scholarship b) giving 10 years from the projected year of college enrollment to use 4-year plan. 

In University of Illinois, there are more than 28,000 students who have attended college as beneficiaries of a 529 plan.

While a 529 plan sounds as the ultimate answer key to solve the skyrocketing tuition costs, there are some drawbacks. First, it can only be used for member colleges, and funds invested in a state-run prepaid plan can only be used at full value to pay for tuition (Cons of a 529 plan). Furthermore, the prepaid plan might be fragile in terms of security. As mentioned above, like Florida or Illinois, when they confront a budgetary shortfall, those who have participated in college saving programs might get struck.

Tim Higgins, the authors of "Pay for college without sacrificing your retirement" commented with a highly skeptical view that how can a 529 plan will keep up with 7-8% annual increase in tuition inflation (Bankrate).

Overall.... once again, a 529 plan seemed to be an ultimate answer key that can finally release us from the unending suffering of skyrocketing tuition costs, it will never be the permanent answer, extremely temporal. Therefore, people are being attentive to vocational schools stating the fact that only 40% of the total labor force in the United States have earned a four-year college degree (American Community Surveys). Eluding some highly saturated markets, such as business and tech industries, recapitulating the uniqueness of vocational occupations.


It has been a long journey from the beginning trying to analyze certain causes of high costs of tuition to possible solutions to responses of those countries facing the same problem to political answers to it to the most practical solution that has already been implemented or seemingly the most plausible.

I really do appreciate all of you who have been following and commenting!


Comments really encouraged me to convey the most recent and accurate information out there for yours sake. I'm getting sad that this will be the very last blog that I will be doing in this class, but it was an AMAZING journey, and I have learnt a lot from all of you. Appreciate your interest and it's time to farewell...

A political antidote

From the very first blog, we have discussed the main causes of skyrocketing tuition, some plausible solutions to it, and actual implementations of those solutions in numerous countries across the globe.

For today's blog, I want to take a look some presidential candidates who have already mentioned their "political" solutions to this noteworthy socioeconomic phenomenon.

Before we divide into the world of politics, it might be beneficial to succinctly examine how different the American education policy is from that of European nations.

If one were to look at the education system in Europe, as one can observe, most of European countries offer post-secondary education as either free or significantly less than that of America.


(Let's go study in Europe)  Click this to see all the list of European nations and their educational policies towards citizens. For instance, in Norway, there are no tuition fees at public universities and colleges. Even in Spain, students are only paying 12.50 EUR per credit, $14 USD per credit. I would simply quell my appetite  for a couple of large pizzas from Canyon for once and add another 3 credit-course on my schedule.

The reason is that most of European countries have different political structure than that of America.
They have socialist economy while the United States have

Most of these countries offer students to attend colleges tantamount to a day worth of college in the United States, if you excuse my exaggeration.. it is needed. Denmark, Sweden, Norway, and Finland are the countries that are firmly based on Socialism, where everyone gets an equal share and ranked as one of the happiest countries. However, most importantly, one mustn't be beguiled by the benefits of Scandinavian countries offer. All of those were possible because they are A) homogenous B) People are paying 40% 60% of their pay.


There are two circumstances that America don't hold: it is absolutely diverse and massive country and has much lower income tax rates.

So, even if we want "tuition colleges", it will never ever happen.


Luckily, the federal reserve finds a correlation between federal aid and high tuition fees.


Since there is no way that America will instantly put "free-education policy" in practice, one is highly encouraged to scrutinize the issue of high tuition fees in respect to binary perspectives, democrats and republicans.

As the presidential election of 2016 is flowing successfully, one could see that the Democratic presidential candidates often, and clearly mention the high cost of a college education as part of the debate along the 2016 election.

To begin with, Hillary Clinton recently announced her proposal that guarantees $350 government expenditure over a decade in order to subside states which would agreed to increase their college spending. By doing so, her proposal can prevent countless college students from taking loans to cover their tuition.

Along with Clinton's government spending to levitate burden on students' shoulders, her "New College Compact (Hillaryclinton.com)

* These are two main reforms that she is proposing: Student should never have to borrow to pay for tuition, book, and fees to attend a 4-year public college in their state under the New College Compact. The additional support they receive will reduce all costs, including living expenses, by thousands of dollars. Student at community college will receive free tuition. Students will have to do their party by contributing their earnings from working 10 hours a week.

* If you have student debt, you will be able to refinance your loans at current rates, with an estimated 25 million borrowers receiving debt relief. Typical borrowers could save $2,000 over the life of their loans.

Here, one can hope that with some buttress of a particular political regime, skyrocketing tuition seems resolvable.

Another contender, Bernie Sanders who values the wealth of today as 100 and that of tomorrow as 0
proposed his act called, "College for All Act". This will eliminate tuition at all four-year public colleges and universities. And the federal government would pay "two-thirds" of the tuition costs.
Therefore, states would be responsible for 1/3.

Significance of his bill is that 1) it would forbid the use of money to pay administrator salaries, merit-based financial aid , and the construction of luxuries, non-academic buildings.
2) It would lower student loan rates and allow borrowers to refinance. (Sanders Act).


Two political reformation would be much practical and affective and trying to change a good chunk of the current education system, such as eradicating certain unpopular departments and replacing them into online courses or getting rid of disdainful notion/norm towards technical/vocational schools.


However, the rising problem would be taxation. It is the problem in both Clinton's act and that of Sanders.

They are both focusing on the use of "government spending", when the amount of debt of this nation possesses is absurd.

Who is responsible and willing to pay more tax when it is painful enough?

As the debt of America has surpasses 18 trillion a good month ago, it would certainly jeopardize our nation's economy, even aggregate it.

For Republican candidates, their primary focuses are foreign policy, abortion and anti-terrorism rather than spending time proposing "Education Act". But they clearly hold identical views that both Clinton and Sanders' proposals will result an economical catastrophe.

Sen. Marco Rubio's approach to this topic was to help working-class people in order to create alternatives to traditional four-year college programs with flexibility (NYT).

Bush once quoted that it is needed to change the incentives for colleges with fresh policies that would yield in more individualization, improved value of a college degree, driving down overall costs.


Once again, free college and high tuition fees are never-ending socioeconomic phenomenon that we have to carry on and hopefully minimize their toxicity by the time when our kids become college students.


Your thoughtful opinions and feedback are much appreciated!

Nuisance, Nuisance, everywhere around the globe

For the past two posts, we have scrutinized the main causes of skyrocketing tuition along with some possible solutions/ policies. It is true that people in 21st society are tend to be judged by their materialistic values, such as occupation, wealth, education and even appearance.

As accentuated numerous times, it is apparent that our society has become competitive than it has even been before. And with the experiences of living in three different countries so far, I've been comparing how each country deals with tuition problem  and its saturated market (competitive society),  The more you see dark sides around the world, the more you will appreciate your life.

Also, I have found a very interesting correlation between skyrocketing tuition and aging population.

What? an aging population and rising tuition?

Yeah! This is why countries in East Asia are facing right now that forces them to raise up their college tuition!!!

To begin with, there is a  common socioeconomic pattern that all east Asian countries possess, South Korea, Japan and China.  It is an "Aging population". An aging population is a looming economic and social burden, particularly, in Northeast Asia.

A brief explanation the correlation between these two:

As you can see from this graph, when the aged population reached 8% of total population, there is an enormous decrease in GDP/capita.


For instance, as of as of 2013, Japan's GDP/capita was $38,600 USD. However, when aging population reaches 8% of 127.3 million ( approx. 1 million), the GDP/capita will not only drop below $ , but also create astronomical amount of national debts, analogous to the United States.


Are you still wondering a correlation between them? Don't worry, it took me a while too.


So, the meaning of an aging population/society can be translated economically as "no more increase in GDP, a stagnant economy".


Why? Because, as you can see from the population pyramid of Japan, when old people retire by the age of 65, they tend to hold their wealth rather than accelerating he economy.

Therefore, fewer economic activities within a nation means increase in national debt, ultimately meaning no more investments from the government.


This is the general tendency of the States. Ever since it's debt surpasses 18 trillion USD, there has been a noticeable decrease in government funding.


For instance, due to the impact of budget cuts in California, UC colleges are accepting more international and out-of-state students in order to elude financial instability. Finally, we've come down to a conclusion that budget cuts in college education inevitably force college to raise their tuition.


Without further due, let's get right into policies and possible solutions that some countries have come up with.

In Canada, it came up with "Co-operative education programs" as a means to solve skyrocketing tuition problem. So, Co-op programs are implemented in majority of universities in Canada, such as U of Waterloo, U of Ottawa, U of Toronto, and allows students to apply concepts learned in class during paid-work terms. Basically, after four years of study, students will have not only a diploma that indicates participation in a CO-OP programs, but also 16 months of experience in their fields of study along with a network of valuable contacts. Ultimately, these factors will play significant roles when finding a job after their graduation (CO-OP benefits).


While I spent my 4 years of high school in Canada, every single kid around me was so preoccupied for finding a CO-OP program in order to make their parents feel less burdensome.

5 benefits of CO-OP programs:

Gain valuable paid work experience in your field of study

Develop professional skills and gain a better understanding of the workplace

Discover what career fits you through different job opportunities

Meet key people in the job market who will facilitate your placement after graduation

Travel and meet interesting people


Like this Canada has already cultivated a new trend on their own in order to maintain the interest among students to apply for colleges. Experiences in one's desired field can sure attract students since we all look forward to get a job related to our fields of study.


Furthermore, in South Korea, college tuition has risen astronomically since early 2000s.
When there's a $0.50 increase in inflation, there's a $50 increase in college tuition. As of moment, the annual cost of attending public colleges in Korea is second-highest in the World, led by the United States.

With the acknowledgment of that the total population of Korea is 1/6th that of the States, and its size is tantamount to that of Pennsylvania.

(4500,000 KRW = $4500 USD)




 why the tuition is so high in such a small country?

Because the Korean government covers all expenses for pre-school to high school, which means if you go stick with public schools, everything is free including lunch, and textbooks.
This education policy ultimately came back at it. Numerous college students committed suicides due to high college tuition.

In order to react to it, its government decreased interest rates on college loans. However due to high dependence on college as a means to success, colleges in Korea are reluctant to lower their tuition.

Fortunately but could be unfortunate enough, all men between 18-35 are subjected to mandatory military service. So, college students tend to take a two-year gap after their freshman year to serve in military. During this period, they can save money for upcoming tuition, and luckily, legislative branch is reviewing a  bill that guarantees extra credits for all men who have served their militant duties.

A vicious and unending cycle

As mentioned on last post,  I noted in the fashion insinuating that the government intervention is what to blame for skyrocketing tuition. 

It would be much idealistic if the federal government suddenly steps out of this secondary education sector and let other private sectors to jump in, creating "perfect competition". 

However, there are practical issues confronting the government intervention issue. 

Let's recap. 

Public four-year post-secondary institutions : 76 percent increase on average over the last decades.

Private four-year post-secondary institution: 62 percent increase. 


Another problem that can rise is that the speed of increasing tuition is clearly surpassing the rate of inflation, increase in income amongst middle-class family which is 5 percent. 

If government grant more aids, more student will head to colleges  = we might face the future where getting PhD is a social norm. 

If government steps back and let private sectors to compete = less students will pursue post-secondary degrees. 

If that happens, public institutions will lower their tuitions in order to prevent loosing students who are pursuing private institutions. 


But!! all those possible solutions bear one big problem that keeps this unsolvable cycle; what about people who are intellectually eligible without sufficient financial supports from their households??


The point that I'm trying to emphasize here is that the government intervention in college tuition wasn't intentionally aimed to correspond to skyrocketing tuition. It all started to purely "support"
students with very potential futures who are in need. 

But as always, once positively implemented policy is now has turned up by "business-minded" people, who are trying to make plethora amount of profits by taking advantage of the government intervention. 



So.... What are some REAL solutions when it comes to skyrocketing tuitions?? 


According to Dr. Fichtenbaum, professor at Wright State Univesrity and the president of the American Association of Univesrity  Professors, he claims that, actually, put blames on three distinct factors that are quite different from my previous condemnation.  In agreement with Dr. Fichtenbaum, he picks the first factor controlling price at public colleges is the decline in state support for higher education; between 1987 and 2012, statistically, government support has diminished from $8,497 to $5,906/ student (Fichtenbaum).

His statement is further buttressed by the fact that there has been a decrease in maximum AMT available from a Pell Grant for the last five years (solutionsforfuture).

Fichtenbaum's second factor is surprisingly, faculties salaries. 
But, don't be fooled, "When measured in constant dollars, salaries for full-time facutly at public institutions have actually declined." 

This can be explained by looking at University presidents, who act verisimilitude as CEOs' of multinational companies. 
It is a big business, and they don't seem to voluntarily stop earning profits when they can. 


Last but not least, rising costs can simply a result of growth in luxurious entertainments and amenities of universities. For instance, Penn State has just finished polishing up Burrows and Steidle. Universities borrow or have already borrowed millions  to attract students visionally by building luxurious dorms, new dinning halls, and not to mention subsidization of college athletics (Fichtenbaum).

In the end, he finally comes down to TWO solutions, which are extremely underlined by me. 

In order to reduce the federal presence in financial aid; 


1) reducing enrollments, the demand for higher education, lowering the ability of colleges to raise prices. 

By doing so, the pattern of reduction in size would lead universities to reduce its size, deducting administrative dues, and maintain the minimally required departments.

2) Cost-cutting ideas, such as three-year bachelor degrees or opening more online-based courses. 

In this way, universities can keep students motivated and likely to increase competition among them.  Eliminating quite pedagogical focus and freshly changing the aim to encourage students to demonstrate workplace competency. Nowadays, practicality and precision are required to survive in the saturated pool with influx of 2 million college graduates.

I have a lot of friends  in Canadian universities who are currently in Co-op program. 

Also, in Thailand, sponsorships from companies are very common and affective among Thai international students. 

Next week, let's change the scope and let's see how the world is dealing with the skyrocketing tuitions. 

Federal Aid, a double-sided sword

Have you ever had any problem that you don't know where to start? But surely recognizing its existence all the time? For instance, with the full realization of what I have done wrong after every presentation that I had, I simply couldn't fix my natural bad habits. Of course, I wish I could, but once again, have no idea where to begin. 

It might sound really odd, but the civic issue that I'm about to talk is quite analogous to that.

Even though we acknowledge that something is wrong with the rapid rise in college tuition, we simply don't know where all it started... 

Here are some clarifications... 

Ever since the government got involved with the higher education, it graciously entitled us to be bombarded with student loans and low possibility of living debt-free lives.

According to NCPA, 60% of college graduates end up with a minimum of $26,000 in student loan debt. Furthermore, during the 2013-2014 academic year, the amount of federal student aid reached $169 billion, aiding almost 9 million students across the nation. Basically, among st total undergraduate enrollment of 17.5 million back in 2013, 51% of them received any sorts of federal aids, ranging from a couple of hundreds to tens of thousands of dollars. From an international perspective, this phenomenon doesn’t seem to be a good omen at all. More government intervention in higher education, the more burdens on out-of-state students and international students’ shoulders.

But…. How in the world the government intervention is related to steeply rising college tuition?

As reported by the National Bureau of Economic Research, it found a critical relation between a huge increase in college tuition since 1987 and the increase in accessibility of student loans available by the federal government.

(Photo credited to writer, Dan Reimold)

The relativity between college tuition and governmental funding is also known as Bennett Hypothesis, a man who foresaw the current situation 25 years ago. In 1987, a secretary of Education William Bennett proposed the idea of increase in financial aid would inevitably backfire on college students no matter what. All blames must be put on two distinct goals set by the federal government: 1)every American must be accessible to education, and 2) all loans must not be dischargeable. 

The federal government is binding American college students under freedom education, but in fact, pushing them on the verge of cliff called student loans. Since the government is indiscriminately supplying money to aid students, numerous colleges and universities, clearly business organizations have no reason not to rais the tuition, due to unconditional payment from the students. The real sacrifices to this cycle of intervention are out-of state students and international students. For instance, while a normal inner-state American student pays $18,000 at the most, out-of-state and international students are paying as few as $30,000 and as many as $50,000. It is even worse for them who are not eligible for any kind of grants or federal aids except the institutions' own merits. 

My main point is that if the federal government withdraws from regulating tuition in higher education, other private corp orates will take its place. And due to the existence of competition in a capitalist society, college tuition will likely to go down. 

For instance, if the computer or telephone industries were solely controlled by the government, we would have been paying much higher prices for laptops, cell phones and wireless since there is only one company who sets price without threat of competition. 

Senator Ran Paul once quoted that if government steps back away from any economic activities, we, college students, would be paying the amount people paid back in 1980s. 

Fortunately, this world isn’t all that bad. There are some suggested solutions to this phenomenon.

A. Either convert student loans dis chargeable again, or limit the amount.

B. Above will result increase in competition among students to borrow money from private banks.

C. Thus, tuition will likely to diminish. And a good portion of students will less likely to come to colleges without sufficient amount of aids.

So next time, I’ll take a closer look in relations to practical approaches by any institution or Bureau of Education.