Letters to the President #1296: 'College savings'

Reporter's Note: I write to President Obama every day, even when I am off. Yes, that is strange.

Dear Mr. President,

Greetings once again from the college tour. As I mentioned yesterday, my younger daughter and I are out looking at colleges, with plans to buy one in the very near future. Ha! I'm kidding, of course, although when you look at the cost of attending you might think you were purchasing real estate.

Which brings me to an interesting observation: Have you noticed how aggressively the higher education system discourages families from saving money for college?

You may find that a strange statement. After all, the cost is so high, who would dare simply ignore that and count on help from someone else? Apparently the answers is "a lot of people." This is something I have been watching for years, since long before my own girls entered the college hunt.

Here is how it works: Two families, identical in every way, have babies. The Neversaves go on vacations, buy new cars, spend money like water, and never put a dollar into Junior's college fund. The Thriftys save like fiends; foregoing all sorts of immediate pleasures, so that when little Thrifty is ready for college, they'll have...oh say...$150,000 in the bank for that purpose.

So what happens? Both children from both families apply to the same college with the same grades, and both are accepted. The Neversaves fill out all the paperwork that says, in effect, "we have no money to pay for this" and a combination of the school and the government say in reply, "No problem! We don't want anyone to miss out on a good education. We'll pay! Or at least we will come up with a way to spread your bills out over a very long period of time with little interest."

But the Thriftys get a wildly different message. They're told. "You've done a wonderful thing saving so much money for your child to go to school. In fact, it is so wonderful, it is quite clear that you need no assistance. So hand ove the money. Thanks for playing. Next!"

Certainly kids should not suffer unduly for the bad planning of their parents. But what we have established is a system that encourages bad planning, because it punishes good planning so ferociously. The message is absolutely clear: If you save for college, you are a chump...because everyone who did not, will get the same education that you slaved to earn.

How we fix it, I am not sure, but I do know that as long as that terrible, mixed message reigns, the cost of college...and frustration about it...will only get worse.

Hope all is well with you.

Regards,
Tom