The pursuit of higher education in the United States remains a cornerstone of the American dream, attracting millions of eager students worldwide in search of limitless opportunities and a brighter future. A degree is a prized asset that can never be replaced. However, the rising costs associated with obtaining a degree continue to outpace inflation, presenting significant financial challenges for students and their families.
As the S&P just closed at an all-time high surpassing 5,000 on Friday, the market’s performance and overall economy prove they have a direct correlation to application rates for school. Flashback to 2022–2023, when recessionary fears, questions around interest rate moves, and geopolitical destabilization were at their highest point, applications across the board went up for school, acting as a hedge. Education plays a direct role in the economy, workforce, and virtually every market in the world, since it provides hints on where the next generation of leaders and innovators are headed. And behind these trends, the 529 college savings plan and finances play a sizable role.
As a recent May 2023 NYU graduate now embarking on my MBA journey at Stern, I’ve been met with numerous questions about my decision to return to school less than a year upon graduating. I’m incredibly grateful to have this opportunity and discuss how I’m making the most out of it with my 529 plan by my side for the first time. Many assume if one heads to a master’s less than a year out of undergrad that they either lack direction in life or may have no prior experience, but my journey tells a completely different story.
From my early days in middle school as a tennis coach to the roles I’ve held on the trading floor and in the startup world, I’ve been no stranger to being financially independent and working as a full-time student. My undergraduate years at NYU were planned to be covered through my sizable 529 plan set up by my parents when I was born, allowing me to focus on my studies without the burden of tuition fees. However, to my surprise, after receiving a generous tuition reimbursement, my entire ride was essentially paid for without tapping into my 529. It felt like I won the lottery since I not only got to attend my dream school but also saved massively.
Fast forward to freshman year in 2020, as with many students, the pandemic disrupted my college experience, leaving me with the feeling that I had missed out on the traditional college experience I had hoped for. Three years later upon graduation, with a fulfilling job at a fintech company, I stumbled upon NYU Stern’s part-time MBA program. With my 529 funds still on the sidelines, I saw an opportunity to further my education, enhance my career, and explore new avenues of finance with a renewed perspective. Thus, my journey back to NYU began this week, less than a year after graduating.
Entering the MBA program has been both exhilarating and quite unique. Despite being one of the youngest students, I’m eager to embrace this new chapter of my life and tackle any challenges that come my way, including brushing up on what the 529 plan covers.
Navigating 529’s Do’s and Don’ts
For many Americans, 529 savings plans are a popular means of financing education. These tax-advantaged investment funds are designed to cover college expenses including tuition, room & board, meals, etc offering benefits when used for specific educational purposes.
However, despite the tax advantages of 529 plans, the soaring costs of education often leave students burdened with debt and lots of questions.
While the best investment will always be in yourself, success in school requires more than just attending classes and earning good grades. The real ROI comes with the network you build and the opportunities you can tap into with that degree.
A 529 plan covers qualified expenses such as tuition, meals, and books, but doesn’t cover some basic expenses I was surprised to discover can add up fast for students.
These non-qualified expenses include:
- Application/test fees
- Clothing
- Lifestyle purchases — exercise classes, events, etc
- Sorority/event/social gatherings
- Transportation
Commuting costs, in particular, can pose a significant financial strain on students, especially those studying in high-cost areas like NYC. These are the types of costs that aren’t usually considered until classes begin since they aren’t compared to the larger scale expenses such as room & board or tuition. Everyone’s circumstances are unique in college, and depending on where you go to school, whether it be in the middle of the woods in Maine or in the concrete jungle of NYC, commuting is an inevitable part of life. It helps us experience life and get to class, and is one of those costs that seems to be considered last minute, when it starts adding up fast.
Savvy Business Student
My tip for anyone budgeting for school is to pay close attention to the hidden miscellaneous costs that can eat into the budget. You don’t need to give all expenses equal weight but make sure to consider all small random purchases. They need attention too.
When I thought of this, I was reminded of one of the most common expenses business owners charge and get a tax deduction on which is transportation. We’ve heard of high-profile CEOs and celebrities like Elon to the Kardashians charging their jets to their business. As students, I find we should be able to get at least some sort or kickback or reduction in commuting costs. Even many employers offer commuting benefits and reimbursements.
After all, when we get to class, it helps us succeed, bring more revenue to the school to enroll in future semesters, and boosts their reputation, making the institution more selective. As a result, including commuting and transportation costs as part of 529 expenses, will only boost revenue to schools, make grads wealthier, happier, and the economy stronger. It’s a win-win for all!
Making the Most Out of Your Wallet As A Student
To make the most of your 529 plan and navigate the financial challenges of college, it’s essential to budget earlier than later and prepare for these additional expenses not covered by the plan.
Building a social network and seizing networking opportunities are an instrumental part of the college experience and as investments, it comes with a steep price that must be factored in.
What you put in is what you get out, including with expenses. We can’t expect college students to have time to scour the internet for deals or find the cheapest rides. Planning ahead and setting aside a ‘social/networking/non-qualified expense’ budget is the most strategic way to get ahead and put your dollar to work.
While 529 plans are valuable educational plans millions rely on each year to fund their college dream, understanding their limits and preparing for additional expenses is essential. Sticking to the motto, “something always comes up” will always serve you well. In and especially out of college. By being proactive today, students can maximize the benefits of their investment and better navigate this wild journey.