By Betty Lochner, Chair of College Savings Plans Network
March 24, 2014
There are two things I really enjoy in life. One is visiting our nation’s capital. The other is watching Saturday Night Live. For years, I have been a lucky person because it seems like these two things always seem to find each other in funny satire political skits. Whether it’s Will Ferrell impersonating President George W. Bush or Jay Pharoah taking on the persona of President Barack Obama, you never have to look too hard to find humor in American politics.
As easy as it is to poke fun at our country’s leaders, a trip to D.C. reminds one what a tough and big job our federal leaders have. From the economy to education and foreign policy to the environment; each day brings a new set of challenges for our elected officials. They are consistently pressed for their time and attention, just like many of us with our own jobs. The key to their success –like our own — is having an understanding of a variety of topics, issues and subject matters, while not losing sight of the big picture and remembering what’s most important.
Today I returned to my office after spending a productive week in D.C. at the National Association of State Treasurers (NAST) Legislative Conference where financial literacy was an overarching theme. Given treasurers’ responsibilities of managing the finances of their states, they are very interested in the financial literacy of their citizens. This made me think about my own job in helping families save for their children’s college education and how we have an incredible opportunity to help young parents understand the basics of financial planning and budgeting.
I was surprised to learn in a report released early this month from the US. Federal Reserve that the average American has $15,252 in credit card debt, $152,209 in mortgage debt, $32,986 in student loan debt, and $16,769 in auto loan debt. In fact, according to a recent article from investopedia.com consumers aren’t just taking out larger auto loans; they’re also taking out more of them. The number of auto loans increased by 3.5 million, from 57 million to 60.5 million, last year.
With American’s taking on so much debt, how do we even begin helping them think about saving? This is a huge challenge, but I think we are making progress as seen by the steady increase in 529 savings over the past several years. While many parents are in debt themselves, they do not want their children to end up in the same boat, which is why many are starting their children’s college savings at an earlier age.
In addition to financial literacy, several state program directors met with legislative staff to educate and gain support for HR 529 and to also identify co-sponsors for the 529 technical bill, which is expected to be introduced in the next few weeks. This legislation will make 529 plans more flexible and remove some of the barriers participants may have to saving, including:
- Making computers an eligible expense;
- Allowing for investment changes up to four times a year (right now it is limited to once a year);
- Allowing the redeposit of funds for certain circumstances (e.g. a student gets sick at the beginning of the term) (Right now you can’t redeposit funds to an account once they are disbursed);
- Allowing leftover funds from a 529 to roll over to a Roth IRA under certain circumstances (e.g. a student gets a scholarship their last year, or graduates early).
While all of this technical work is important; it’s critical to remember why we are doing it. Our goal is to help improve the lives of families and children through education and smart financial planning. We can’t expect our customers to know all the answers, which is why we should provide them with a solid foundation of financial literacy and give them the tools they need to succeed in their endeavors.
About the author:
Betty Lochner is the director of Washington’s Guaranteed Education Tuition (GET) program. Under her leadership, the GET program has grown from 7,900 to over 153,000 accounts, with a fund valued at over $2.55 billion. Washington is unique in that their only 529 plan offered is a prepaid tuition plan. Lochner currently serves as Chair of the College Savings Plans Network (CSPN).