We have enough saved in a 429 to pay for our child's college education. It is currently earning 20% and historically over the last 10 years has earned 12%. Parent PLUS and private parent education loans are charging around 5%. It occurs to me that if we took out loans at 5% for a few years the college 429 plan would grow at 12%. This would net us somewhere around 7% which would be quite handy in helping pay for graduate school. I realize there is risk here too, especially as we would keep our 429 investments in relatively risky portfolios to realize this high investment return.
This seems a useful tactic for parents who are close but not quite there on there savings/investing as well. Of course maybe too risky if in this position.
Haven't seen this topic pop up anywhere... maybe because it is a dumb idea
Honestly, we think that Parent PLUS Loans are the worst loan a parent can get. Just don't do it.
If you want a hybrid of this, maybe let the student borrow Federal loans for year 1 and year 2, keep it under $10,000 - and you can use the 529 plan for up to $10,000 in student loan repayment if you desire. That would let the money grow longer.
However, you also face risks in market returns over time as well...