Do you save for kid's college?

[mom2_3Hs]

My parents paid for my college (everything the first two years, tuition only the years I lived off campus, plus a May sem class where we visited 7 countries in 30 days).  The expectation and plan is that I will do the same.  Luckily I work at a college, and we get 16 semesters at any of our 12 sister schools for $5K/yr (all private liberal arts schools that do well in the ratings).  Unfortunately we have three kids, so one of them will not be covered (unless one of them decides to go to my institution, which would be free other than room and board, and they could live with friends in a rental we own near campus).  We are saving in a 529 plan, but only because the state we live in gives us a 20% tax credit for the first $5K invested anywhere.  I don't know of any other guaranteed 20% interest rates :)

[Pigeon]

My kid is a high school senior.  I'm very glad that we've saved enough to send her to a public university.  Our EFC will be substantially more than what the public college will cost per year, so we would qualify for nothing.  She's a smart kid, probably in the top 10 percent of her class, but not the top 1%.  She will get some financial aid if she applies to private colleges.  Some of it will be in the form of loans though, and even if it does meet the EFC without a gap, that's still a lot more than the public institution will be.

I feel very bad for her friends whose parents don't intend to contribute much to their kids' educations.  Their income and assets still count against the kid for the purpose of financial aid, even if they don't help  out.  Their kids are screwed six ways from Sunday.

[SomedayStache]

My first year of college my families EFC was quite high.  That summer I married my high school sweetheart and suddenly didn't have to claim my parent's income and I started receiving grants because myself and my hubbie had extremely low incomes.

So how about some arranged marriages for our kiddos???  On paper only of course

....I'm joking...maybe.

[foobar]

It is better for the grandparents to set up their own because it is not counted in the FASFA calcs.

But when the money is spent on college education it counts as the kids income. Grandparent money  is great for the last year of college not the first 3.

[foobar]

The reason I stopped using the 529 is a few years ago I was talking with a recent college grad and asked him about what it cost.  He said, "oh about $X per year, but only the very richest kids pay that, 90% of the kids get some grant or tuition reduction."  It hit me that if I save 200K in a 529, then my kids tuition cost will conveniently be 200K.

Thats not how 529 and financial aid works. You have 200k in the 529. You will be expected to pay about 5% of it per year towards tuition. At most that plan is costing you 40k. If you shove that money in a taxable account, you will be expected to pay that exact same 40k. Rough rule of thumbs to maximize financial aid
1) Have all your money in retirement accounts
2) pay off your house before having taxable accounts
3) have low income (401(k) and ira contributions count as income during those 4 years

There are a lot of details but if you expect to get it you should spend some time reading up on and understanding it.