Higher education endowment fund managers have not been the only people gambling with students’ futures. So have investors for some Section 529 College Savings Plans.
Several weeks ago, the U.S. Treasury Department issued a report on 529 plans in which it disclosed that such plans had lost about $25 billion. How much is that? Well, to put that amount in perspective, it’s a lot more than the $16.4 billion the United States spends annually on the nation’s largest financial aid program: the Pell grant program.
Why all the losses? Fund managers were investing in some of the same kinds of investments in which higher education endowment fund managers were investing. If you think the endowment fund investment strategy was crazy, consider how crazy it is to place money you know you’re going to need in just a few years in high-risk investments. It’s no different than placing your retirement savings in high-risk investments right before you retire, something any credible financial advisor would tell you not to do.
For a masterful undressing of 529 plans and their investment strategies, please read a commentary by Kevin Carey, policy director with Education Sector, in The Chronicle of Higher Education last May.
As tax-free 529 plans primarily benefit the rich, this is a case where the rich have gotten not richer, but poorer.
Is that your pre-k pic? Cute.
Of course not. I was A LOT cuter than that – and vain, too, from a very early age.
Not sure if the Taylor family would have approved of the poker playing.
Actually the Taylor family has a checkered gambling past when evaluated against conventional Alum Creek Church of Christ mores. When I was a child, my Dad would disappear on Saturday nights to the home of HK’s next-door neighbor’s father, and rumor has it they played a little poker there. It is a small, small world.
[...] Gambling with Students’ Futures: Part II. 30 September. This post highlights a report about risky investments made by 529 plans. I’m not sure why this post was so popular. [...]