Author Topic: Best way to pay for college  (Read 1133 times)

Guizmo

  • Bristles
  • ***
  • Posts: 259
Best way to pay for college
« on: December 29, 2015, 07:25:23 AM »
Hi folks,

A family friend is asking me what would be the most efficient way to pay for college. Since I pretty much went on scholarships, I really don't know the answer. She has some savings but will likely have to take some loans for her sons. Could she contribute to a 529 and get some tax savings? What are some things mustachians are doing? I only recommended scholarships because that's pretty much all I know.

Thanks!

rubybeth

  • Handlebar Stache
  • *****
  • Posts: 1401
  • Location: Midwest
Re: Best way to pay for college
« Reply #1 on: December 29, 2015, 08:07:04 AM »
Yes, a 529 would offer some tax savings, and scholarships are a great idea, but I have a few other thoughts, as my parents helped me through undergrad and DH and I now put ourselves both through grad school (me with loans, him totally without loans):

1) If possible, have the sons go to school at a state university/college instate vs. out of state tuition at an expensive private school. Consider doing a transfer curriculum for an AA degree at a local community college. If they are even younger, see if they can get AP credits or do PSEO (post secondary enrollment options) while still in high school to earn college credits (depends on your state if this is an option, but it's a great option in my state of MN).

2) If possible, live at home, or with roommates, to save on room & board.

3) Teach them to cook. Seriously. Easy/fast things like pasta, soup, homemade pizzas, etc. will save them a lot of money in the long run.

4) Jobs while they are in school to pay for essentials. Working a part-time job in school is really good for lots of reasons. Making them responsible for some portion of their tuition or books is good (my parents did this and I was much more invested in my education because I had to pay for part of it by working).

5) Avoid taking private loans. Only take the minimum in federal subsidized loans each semester for tuition.

MerryMcQ

  • Stubble
  • **
  • Posts: 131
Re: Best way to pay for college
« Reply #2 on: December 29, 2015, 10:41:32 AM »
Both my children are going to enroll in the community college while in their junior year of high school. It is called Running Start here in Washington. The high school pays the full tuition and we cover books (books are also paid by school if child receives free school lunches). The college classes count towards their high school diploma and they graduate high school with an Associate degree. They can take additional classes at the high school as well, if they are very ambitious.

Also, at our high school, they can take AP classes starting in 10th grade.

We consider Running Start to be one of the best values our school district offers!!!

sol

  • Walrus Stache
  • *******
  • Posts: 8492
  • Age: 42
  • Location: Pacific Northwest
Re: Best way to pay for college
« Reply #3 on: December 29, 2015, 11:10:11 AM »
What state does your friend live in?  529 plans offer state income tax benefits if you live in a state that has both an income tax and a 529 plan.  If you don't, you can always invest in another state 529 plan.  Vanguard uses Nevada's plan, which is basically like a Roth IRA for most people; you contribute after tax dollars but then earnings and growth are tax free as long as the funds are used for qualified educational expenses.

There have been a number of posts here about optimizing financial aid strategies.  Depending on the school, assets are evaluated in different ways to decide who is in need of aid.  The FAFSA, for example, doesn't count your home equity so it sometimes makes sense to empty you taxable investment account to pay down your mortgage as this essentially "hides" those assets from the FAFSA asset test.  Some schools do count home equity.

There are a ton of other strategies for financial aid optimization, some we've talked about here and more you can find by googling that phrase.

In general, the smartest kids will go for free on full scholarships regardless of income.  The richest kids will pay full freight through their parents unless they are very smart.  The in between kids have the most to gain by playing the financial aid game.