Advice on how to pay

Hi all -
Fall is coming fast and now reality is setting in. Looking for advice from experienced parents on the best way to pay for college for D21. Here is my situation:
Single parent with good income.
D21 is still between 2 schools, both offered great merit money.
I can cover all expenses after merit without taking loans.
I have about 1.5 years in a NY 529 account, this account the principal has more than doubled over the years.
Have another year covered in a Charles Schwab account (from a relative), this acct has lost a lot of money, esp over the past year.
Should I pay for the first year with the Schwab account and continue to throw money into the 529? Or hope that the Schwab account turns around and save that for later years? Is it possible that the 529 account could lose money, maybe I should use it before I lose it? Are there better tax benefits depending on which way I pay?
Any help will be appreciated!
Thanks in advance.

I will share our experience, which is that our older daughter’s 529, which had performed well, lost about $20K right before it was time for her to start college. That convinced me to abandon my original plan to divide the total 529 savings by 4, taking a bit out each year, and instead I opted to use 529 funds to pay for the entire cost of freshman year. In the end. I got comfortable with this approach, because although I might be foregoing earnings, the unpredictable nature of 2020 and related events definitely make me feel that a bird in the hand is worth two in the bush. Good luck with your decision!

1 Like

What are the funds in each account invested in? You need to gradually move money that’s in equities into a money market account as college gets closer, i.e. lock in the gains you have in the 529. Is the Schwab account in your name, just a normal brokerage account so that you gain some tax benefits (at least) by selling at a loss? Or something more exotic like an inherited IRA???

Do you know the split of each account- stocks, bonds, cash (money market)? And when you say “lost money”- the account is down from a high water mark (i.e. a paper loss) or actually down vs. the basis, what you or the relative paid for the shares? You get no tax benefit from a paper loss- but you haven’t lost anything either if the account is still up, just not as much as it was…

1 Like

thank you both for the responses, but now I feel like I have some homework to do here.
First, I didnt know that it’s possible for the 529 account to lose money suddenly, that is really scary and could make a huge difference in school decisions. I do know that is split 50% aggressive, 50% moderate investments and I’ve been thrilled with the performance so I never changed it. I drilled down on the investments portfolio and it looks like a mix of stocks and bonds, which doesnt mean much to me LOL. But maybe I should call them and go conservative now that the time to use it almost here?
The Schwab account, I need to get more information. I do know that it is way down from the basis. But the last statement that I was given was from Sept 2020 so maybe it has improved. It is not in my name, I think my daughter is the custodian. I will definitely do some homework on this.

Thanks again for the responses!

Do not keep the 529 50% aggressive if you’ve got tuition to pay in 7 months! Nobody can predict the market- stocks go up, they go down, they stay flat. A portfolio with 50% aggressive is great for a 10 year old, where you’ve got time to make up for a market pullback but is WAY too risky for a HS senior! You can still keep a small portion in the aggressive component (earmark it mentally for your final tuition payment for senior year) so you don’t lose out if the market continues to go up… but you need to shift to a less risky strategy since your first tuition payment will be in August.

For sure you need more recent information on the Schwab… for one thing, the year end report which was probably available in early January!

I think you get a NY State tax benefit from contributing to the 529-- I don’t remember the rules for every state, and I don’t live in NY. But check your last year’s tax return if you contributed last year… it is worth continuing to contribute even while your D is in college if you get a tax break from NY State, where you are already paying high taxes! The account doesn’t even need to go up to make it worth your while if you are getting the tax benefit- that’s already a reward for your thrift and planning.


My children’s 529 are in an age based option which adjusts downward in risk as they get older. Might be a good thing to switch to if you have that option. 529s can definitely go down as they are market investments. Given the sky high stock market right now it is not unlikely.

As far as the Schwab account, it is hard to say without knowing what it is invested in. Individual stocks would be more volatile than mutual funds

1 Like