An interesting article in the most recent Business Week examines the increasingly-circumspect relationship between colleges (and alumni associations) and banks or credit card companies.
Not only do financial institutions use free food and gifts to lure 18-year-old students into signing up for a credit card, the banks and credit card companies are using gifts (high-dollar contracts) to form partnerships with colleges. Here is a chart showing some contracts colleges signed to sell out their students to credit card issuers.
States are now starting to look into this practice, including an investigation by New York Attorney General Andrew Cuomo. According to an aide for Mr. Cuomo:
It seems that the schools are simply selecting the university credit card based on who pays the school the most, and that may not be best for students, especially in these hard economic times.As an undergrad, I singed up for a credit card and received a free t-shirt. However, that card still sits in my wallet and is my usual means of payment (paid off monthly, of course). At the time, it offered 5 percent back on all gas and grocery purchases, and 1 percent on everything else. It recently dropped to 1 percent on all purchases, which is good enough for me.
I admit that when I signed up for the card, I was probably more concerned with the free shirt than the terms of the credit card. That is what usually happens with 18-21 year old kids. I lucked out and got a decent card. That isn't always the case, however.
Labels: College, Credit Cards, Schools
Now that we're parents, we have 18 years to figure out how to pay for Baby Boy's college. After researching various options, we've decided to go with Ohio's CollegeAdvantage plan. In case you find yourself in a similar situation, I wanted to outline my thought process for selecting the best plan for us.
We're from Texas, which offers the Lonestar 529 and Texas College Savings plans. We don't have a state income tax, so there is no in-state tax deduction for 529 contributions. Other states' rules vary, so you should check out a list of states that offer a 529 Plan tax deductions. It’s not the most recent list, but the best I could find. If your state offers a tax deduction, it might be best to go with that plan. If not, look around at other states' offerings to see if you can find a better deal on fees and investment options.
What to look for in a plan:
- Minimum Investment
Some states require $1000 or more to start a 529, and others require as little as $15. Depending on how much you have to invest, this could be a factor. - Maintenance Fees
Some plans charge yearly maintenance fees. Depending on the invest options and a plan's performance, this could eat up a good portion of your investment. - Expenses
Similar to mutual funds, 529s have expenses. I tend to stick with index funds because of the low fees. I found fees ranging from .30 percent to well above 1 percent. - Investment Options
Most 529s are set up like retirement plans, with age-based plans, equity plans, balanced plans, etc. Many plans also are operated by big names, such as Vanguard or Openheimer
Posts
