Author Topic: College Savings: How much and why??  (Read 17932 times)

JustTrying

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College Savings: How much and why??
« on: February 07, 2016, 09:22:40 PM »
Hello! We'll be having our first child this summer. I've been thinking about college savings, and I'm wondering:

1. How much (in a dollar amount) do you hope to have saved for your child's college?
2. What are you hoping this will cover? (E.g. just tuition, tuition + books, tuition + books + living costs, etc.)
3. How did you arrive at that particular number?

I'd like to have a particular dollar amount in mind to work towards, but it seems difficult to determine a dollar amount to save when I don't know how much college will cost in 18 years (or which college my child will prefer). I'd love to hear what others are doing?

mxt0133

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Re: College Savings: How much and why??
« Reply #1 on: February 07, 2016, 09:55:15 PM »
At the moment we don't.  Not until we are FI and if I do save for their college education it will mostly likely cover only their first two years or some partial amount.  I firmly believe that people need to have skin in the game if they want to go to college.  Also if any of them say they want to go to college full-time to find out what their interests are, then they will do it with their own dime.  I think there are better and cheaper ways to find out what ones interests are other than college.  I would rather pay for them to travel, volunteer, take an apprenticeship, ect.

Also I am focusing on their education now by having one parent as a SAHP and spending money on educational experiences now rather than wait until they are 18.

This podcast closely captures my attitude towards saving for college:

https://radicalpersonalfinance.com/276-financial-planner-refuses-save-money-kids-college/

Helvegen

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Re: College Savings: How much and why??
« Reply #2 on: February 07, 2016, 10:27:48 PM »
1) $0
2) n/a
3) Planning on encouraging community college or apprenticeships while she is allowed to live at home rent free. We will pay for the books, supplies, some tuition. She will need to work part-time for her own fluff and a percentage of tuition. If she wants to go to a traditional uni, she will need to go back to her country of second citizenship where it is basically free, assuming the whole system here hasn't collapsed under its own unsustainability and become far more affordable. Sorry, not bankrupting ourselves or letting our daughter go way into debt for a chance maybe to win a job.
« Last Edit: February 07, 2016, 10:29:26 PM by Helvegen »

Goldielocks

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Re: College Savings: How much and why??
« Reply #3 on: February 07, 2016, 11:29:13 PM »
Savings I plan is for in state Tuition and books only, for 4 years.
We live within an hour and half drive of three universities and several colleges.

Tuition costs -- I took the best local university in state tuition fees this year, and projected them out at 2% increase a year -- the max  limit mandated by the government here a few years ago, when tuition was rapidly increasing.   I added on $600 per semester for books.

The only caution is that  many previous 4 year programs may end up taking longer now, due to class schedules, etc, and cost more over all. 

Oh, and I expect that my support of my kids will not end in university, that I will continue to have costs relating to them like in high school, that I pay out of my annual income and personal expenses.


So - drum roll...  this adds up to $25,000 per kid, in today's money. 

 I don't understand why so many internet sites, even here, state $40k for college or more...  I don't think that they do their fact checking...DH just completed a 3 year program, so we know how much it actually costs.   The surprise was how much cheaper books are now, with more internet based books and ability to buy used texts on amazon or wherever...   

« Last Edit: February 07, 2016, 11:34:34 PM by goldielocks »

madamwitty

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Re: College Savings: How much and why??
« Reply #4 on: February 08, 2016, 12:44:00 AM »
I went into some detail in my journal post here.

In short, we will be FIRE so I expect my kids will qualify for financial aid. I plan to cover the family's expected family contribution assessed by FAFSA. I do not consider it my moral obligation to pay for my kids' college no matter what school they choose or how well/poorly they do in school. Rather, I consider it my responsibility to make sure they are not penalized for MY financial situation.

I have 3 kids age 7, 4, 1 so will have 10 consecutive years of kids in college. I saved up ~$40k in today's dollars, which I expect will grow to ~$90k by the time DD1 is ready to head off to college. This looks like more than enough to cover EFC assuming my financial strategy of being FIRE (low income) and keeping most of my net worth in my house and in retirement accounts.

teen persuasion

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Re: College Savings: How much and why??
« Reply #5 on: February 08, 2016, 06:53:00 AM »
I decided a long time ago to focus on retirement savings over college savings.  In our situation (large family size, relatively low income) the kids have been able to fund their college educations thru scholarships, grants, work study, loans (fed only), and summer jobs.  So far, 2 are graduated, one is still attending, one is beginning this fall, and DS5 has a few years left for us to prep (he's 10).

Like madamwitty, I am making sure that I understand the current FAFSA calculations to minimize the EFC, so that the kids are not penalized for our decisions.

I am actually most concerned about how things will play out for DS5.  He will effectively be an only child in a family of 3 by the time he hits FAFSA age.  The rules that worked so well in our favor in 2008 will not be as generous by 2020, if current trends continue.  Our best outcome would be if we could be FIRE before that, but it is a stretch, and the push to achieve it might affect DS4's EFC in the meantime.

So for us, pushing as much into retirement and HSA accounts as possible is better than saving for college.  Saving in a 529, or taxable, would hurt our EFC, not help it.
« Last Edit: February 08, 2016, 12:07:48 PM by teen persuasion »

onlykelsey

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Re: College Savings: How much and why??
« Reply #6 on: February 08, 2016, 06:56:44 AM »
We're in the "getting ready to TTC" mode, FWIW.

I think our baseline goal will be four years in-state tuition until our retirement is fully funded.  Setting yourself up to not rely on kids is a huge gift to them, as much as student loan debt sucks.  Anything on top of that is gravy, and I think it honestly makes sense to have kids a bit invested in their education.  I put myself through BA, MA and JD, and it sucked, but I think I also appreciated the experience in a way wealthier classmates did not.

so
1. ~60K in today's dollars per kid
2. Just tuition at state school
3. See above.  I'd also like my kids to consider college abroad.

Le Poisson

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Re: College Savings: How much and why??
« Reply #7 on: February 08, 2016, 07:29:52 AM »
Our kids responsibility is to pay for year 1.

We will happily step in and pay for the rest of their undergrad, but its up to them to pay for/pass year 1. We (momma and I both) saw way too many kids go to school, party, and drop out in the first year. The ones who had enough discipline to make it past the first year seemed to at least graduate.

If they take a one-year certificate program, we will pay their way for whatever else they decide to take, but if they fail/drop out of year one, the clock resets to zero.

Post grad studies we haven't discussed.

Petuniajo

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Re: College Savings: How much and why??
« Reply #8 on: February 08, 2016, 10:09:14 AM »
We are aiming for $25k per kid.

DH and I both work at public universities in neighboring cities. Children of employees get 50% off of in-state tuition. We will encourage them to attend one of these universities and live at home (or, pay their own living expenses if they choose dorm/apartments). Overall, we will try to cover half of their tuition at one of these universities (so, ~25% of in-state tuition). Assuming an exorbitant tuition increase of 5% per year, $25k should more than cover 25% of tuition for 4 years of school.

However, we expect that they are also likely to receive a good deal of scholarships, and it is possible they won't need our assistance with tuition. As such, we are putting the money in our own Roth IRAs. Contributions can be taken out at any time penalty free, if the kids don't need it we can use it for our own retirement, and we are already in the 15% tax bracket (so I'm not too worried about "losing" the tax deduction for choosing Roth for this purpose).

Goldielocks

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Re: College Savings: How much and why??
« Reply #9 on: February 08, 2016, 10:22:48 AM »
I am spitting a bit of green envy at all of you that plan to FIRE and have kids qualify for federal loans or bursaries...

FAFSA formula works very differently in Canada than in the USA.   Retirement accounts of the parents are taken into consideration, so FIRE and get ability to still qualify for federal Canada Student Loans for your kids is not an option here....   

But 2 years of living on your own, working for income does qualify... so a delay before school is a possible route for kids whose parents won't contribute anything but make more than $70k per year.

Oh well,   the difference is because if you withdraw from 401k / IRA in the USA before age 59.5, there is a 10% penalty, but no penalty here other than taxes...   I guess I will take that trade off in the long run.

soupcxan

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Re: College Savings: How much and why??
« Reply #10 on: February 08, 2016, 10:32:17 AM »
I am spitting a bit of green envy at all of you that plan to FIRE and have kids qualify for federal loans or bursaries...

FAFSA formula works very differently in Canada than in the USA.   

Isn't the cost of college in Canada for citizens like 25% of what it is in the US? That sounds like a much better deal  than taking a bunch of loans.

Goldielocks

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Re: College Savings: How much and why??
« Reply #11 on: February 08, 2016, 10:53:28 AM »
I am spitting a bit of green envy at all of you that plan to FIRE and have kids qualify for federal loans or bursaries...

FAFSA formula works very differently in Canada than in the USA.   

Isn't the cost of college in Canada for citizens like 25% of what it is in the US? That sounds like a much better deal  than taking a bunch of loans.
Depending on where you are at,  Tuition (undergrad) ranges from $5000 per year to $7400 per year, plus books and association fees.
Quebec is a lot cheaper.  Colleges are on the lower end, Ontario is higher,  and you can take university transfer programs.

I think that this is really not that far off of many US  in-state tuition fees?   There appear to be many more scholarships in the US as well right now, most CDN students, other than those that score in the 98-99% percentile on a SAT like exam and named the top student by the principal, would get maybe $2000-5000 in scholarships (total), at best.  Most of our "scholarships" have been converted to bursaries for students receiving Canada Student Loans, which is nice, but if your parents make more than $70k or have retirement assets, you won't qualify unless you have bleedingly high costs for your program and room and board expenses.

 All students enrolling at the CSU (california) pay the system-wide Tuition Fee which is currently $5,472 per academic year for undergraduate students - Wiki 2012  Illinois state is $13,600 for 2016,   Georgia Tech is $8,200 per year, Georgia State is $8,500, Washington State $10,900, etc.

This is for our equivalent of "in state"... I believe that means "Canadian" as opposed to "Foreign" whose tuition is about 2.5x this amount.  the difference is the amount that the government subsidizes.  There is one Private university near me that also does not receive the full government amounts, but the vast majority of the best ones do.

Masters level programs, part time or single courses (e.g., taking 6 years to complete 4 years while working) and private colleges do not have the government subsidy to the same degree and are double this cost or more (like for profit schools in the USA).  An MBA at the same schools ranges from $50k to $100k for a 2 year program.

So Student loans tend to be needed for those pursuing masters programs,MBA,  doctor / lawyer or psychology degrees, etc.  At the master's level, the government grants tend to be focused on research that they choose, so there are paid research positions for some people available, but high tuition for all.
« Last Edit: February 08, 2016, 10:57:53 AM by goldielocks »

TVRodriguez

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Re: College Savings: How much and why??
« Reply #12 on: February 08, 2016, 11:04:48 AM »
Our state has a prepaid tuition option for state universities.  We're buying four years of prepaid tuition per child--one is already fully paid, and the other two are partly paid.  Additionally, we currently have about $3000 in the 529 account for each for room/board/other expenses.  Our kids are 8, 6, and 4, so that $3000 will grow some before they start school.  DH is adamant that they not end up like him, with $300,000 in loans.  I'm okay with them owing something in loans.

honeybbq

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Re: College Savings: How much and why??
« Reply #13 on: February 08, 2016, 11:15:15 AM »
$100k.

It just seemed like a good round, reasonable number for 4 years of college.

If she needs more or less, so be it, I'll cash flow the rest.

Hopefully if she goes to MIT or something else she'll have a scholarship. :D

ZiziPB

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Re: College Savings: How much and why??
« Reply #14 on: February 08, 2016, 12:19:06 PM »
Can't give you any help with future costs but we set aside $200K for my DD (who graduated last year) - it ended up covering all expenses (tuition, books, living expenses, travel to and from) for 4 years at a fancy pants university and almost all for the first year of her masters program.  She's supposed to get a scholarship for the second year that will cover the bigger costs (tuition and room).  I am planning to help her with additional living expenses next year. 

MrsPete

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Re: College Savings: How much and why??
« Reply #15 on: February 08, 2016, 12:39:58 PM »
Hello! We'll be having our first child this summer. I've been thinking about college savings, and I'm wondering:

1. How much (in a dollar amount) do you hope to have saved for your child's college?
2. What are you hoping this will cover? (E.g. just tuition, tuition + books, tuition + books + living costs, etc.)
3. How did you arrive at that particular number?

I'd like to have a particular dollar amount in mind to work towards, but it seems difficult to determine a dollar amount to save when I don't know how much college will cost in 18 years (or which college my child will prefer). I'd love to hear what others are doing?
I have a college freshman and college senior right now.  Long ago we set a goal to save 10K per year for their educations; that is, a total of 40K per child.  Our thought process:  We're in a low cost of living area, and our state universities are in the 14K/year range.  We figured that with 10K per year, we'd be in a comfortable position to pay the remainder out of current earnings.  We also set a goal to have this put away before the kids were teens, and we weren't sorry:  Even if you're living frugally, the teenaged years are expensive. 

We set limits for our kids.  Early on, we told them we'd pay the following:
- 4 years tuition and fees ... but not extra semesters or summer school
- Dorm room and meal plan OR a reliable, efficient car ... but not both ... and we'd gladly run up and down the road to bring them home for holidays and weekend visits, if they opted for the dorm room ... if they opted to move to an apartment, we'd still give them the cost of the dorm room, and they'd have to pay the difference
- They had to choose an in-state public school; this gave them a choice of 16 schools ... if they opted for a private school or out-of-state school, we'd give them the cost of tuition, and they'd have to pay the difference. 
- We'd keep them on our health insurance and cell phone plan during college
- We told them that whatever scholarship money they earned /whatever money we didn't have to pay on their behalf would go into a car account for them when they reached their junior year ... we said junior year because that's when college kids typically take part in internships, student nursing or teaching, or whatever.  We wanted them to graduate with a car that still had lots of life left in it so they wouldn't have to buy something right away. 

Summary:  We have covered all the basics, but they're responsible for extras. 

In the event, we over saved.  Not a bad thing at all.  Our kids are both on excellent scholarships, but that is NOT something you can assume will happen to you.  This is the year about which I worried, yet I have spent less than $1000 this year for BOTH my kids' college needs.  As a teacher of high school seniors, I assure you that fewer and fewer of our students are earning scholarships these days, and for BOTH of my kids to have full scholarships is really quite unique.  I don't actually know anyone else RIGHT NOW who can say that -- though a decade ago I knew several people for whom it was true.

Equally important to saving:  You need to groom your kids to think about money when it comes to college -- society will work against you, telling your kids lies about "good debt" and so forth.  Obviously you're going to teach them about saving money in small ways as they grow up ... but about the time they begin high school, it's time to start talking about college and scholarships.  You don't want to raise a kid who'll say, "Yes, I plan to attend a four-year party."  And you want to talk about choosing a major that will lead to a job, and you want to walk them through likely entry-level job budgets to help them SEE their financial future.  If you wait 'til senior year for this, it is too late. 

However, I don't buy into the skin-in-the-game concept.  The kid you send away to college is the same one who's been living in your house for 18 years. You know him. If he's been responsible with money under your care, he's going to continue to watch his pennies when he leaves your home.  On the other hand, if you've raised him to think money grows on trees, he's unlikely to pick up frugal habits simply because you start espousing them in his senior year of high school.  Seems logical, but I see sooo many parents who don't grasp this idea:  I see parents whose kids are graduating with lackluster GPAs, kids who hate reading and skip school regularly ... yet so many parents somehow think sending them away to a university will suddenly make them more responsible and appreciative of their sacrifices in saving over the years.  The parents of one-semester-wonders are very bitter about the money they've spent.  The theme: Make decisions based upon the student you have, not the one you wish you had. 

And I'll end with this thought:  Education is changing FAST.  The options that are available for my kids right now probably will look quite different when your 2016 baby is 18 years old and is making college choices.  I suspect some of your child's options will be better, while others will be worse.  It's up to you to keep yourself abreast of the changes.  I can't imagine that saving now would be bad in any way -- you can decide later just how you'll parcel out the college money. 


MsPeacock

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Re: College Savings: How much and why??
« Reply #16 on: February 08, 2016, 12:43:17 PM »
I hope to have about 100k set aside for each kid by the time they reach college. A fair amount was tucked away for the early so monthly contributions at this point are fairly small (200 a month for each kid). One has 5 1/2 years to go and the other 9 1/2. I have also told them that they should not plan on an expensive school, they should take college credits in high school (both are in excellerated tracks, so I expect they will be able to do this), in state school if possible, and community college first if reasonable. Any monies left over will roll back to me afterwards and I am not contributing to more than 4 years unless they go to grad school.

I very much want to see them graduate without student loan debt. a

MrsPete

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Re: College Savings: How much and why??
« Reply #17 on: February 08, 2016, 12:59:54 PM »
Our kids responsibility is to pay for year 1.
We made the opposite choice:  We told our kids they were on the semester plan.  We'd gladly pay for the first semester, and when we saw good grades and progression towards graduation, we'd pony up for second semester ... and so on.  They've done nothing but make us proud, so we've continued to pay ... but if that had not been true, we wouldn't have continued to pay for the next semester.  Instead, we would've looked at better options, like coming home to a community college or working with a tutor (out of their own pocket). 

HOW are you planning for your kids to pay for their first year?  It's a whopping amount of money for a high school senior to pay.  I would say DON'T encourage loans for that first year; promising to pay in the distant future (four years being distant to an 18-year old) doesn't feel real to high school students. 

I'm thinking about a friend of mine from high school -- my sister's boyfriend.  His father told him he had to pay for his first year of college, but he also insisted that ONLY one particular, rather expensive school would do.  No, he couldn't start at community college.  No, he couldn't live at home and attend the university 30 minutes down the road. No, he couldn't take a partial class load in his senior year to allow him to work more hours.  His dad's intentions weren't bad, but he tied on so many restrictions that the task was mathematically impossible, and the two of them fought constantly during his senior year. 

One day he disappeared.  Just gone.  Everyone was terrified.  He returned home two days later, explaining that unable to meet his father's demands, he had spent the day with his military recruiter.  He'd had his physical and had signed his name on the dotted line.  No one knew he'd even been interested in the military, and it wasn't what he really wanted to do -- he just couldn't find any way to meet his dad's demands, so he took a different road.  We've lost touch, and I don't know what became of him, but I hope he's happy.  He was a nice guy. 

The moral:  Help them with the HOW and make sure it's possible.  As I said in my previous post, schools in my state run about 14K/year for tuition, fees, dorm, meal plan -- if she were paying full price, which most students are.  My older daughter works as a CNA-2.  She earns about $10/hour.  Say she worked all summer:  14 weeks x 40 hours a week x $10/hour ... she'd earn $5,600 in the whole summer.  1/3 of what she'd need for school ... IF she had no tax deductions and never needed a tank of gas to get to work and never spent a penny on anything fun.  Add in a 15-hour a week job during the 15 weeks of the semester ... she'd earn $2250 each semester, giving her a total of $10,100 for the whole year.  Not enough to pay for a year of school.  So she'd need a second job in the summer or more hours of work during the school year.  Possible?  Yeah, I did it, but I didn't do it in four years, and I was forced to make unhealthy choices -- like living in an apartment complex where they found a dead DEA agent in the dumpster, like not having food. 

AZDude

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Re: College Savings: How much and why??
« Reply #18 on: February 08, 2016, 01:02:14 PM »
Currently have about $6K saved for little one's future college. LO is currently 4. 12 more years of compounding interest at a conservative 5% with regular $100 a month contributions, equals about $30K(conservative interest rates means this should similar in value to $30K today).

Maybe it doesn't pay for everything, but it should pay enough to give our LO a head start in life.


PhysicianOnFIRE

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Re: College Savings: How much and why??
« Reply #19 on: February 08, 2016, 01:15:39 PM »
Hello! We'll be having our first child this summer. I've been thinking about college savings, and I'm wondering:

1. How much (in a dollar amount) do you hope to have saved for your child's college?
2. What are you hoping this will cover? (E.g. just tuition, tuition + books, tuition + books + living costs, etc.)
3. How did you arrive at that particular number?

I'd like to have a particular dollar amount in mind to work towards, but it seems difficult to determine a dollar amount to save when I don't know how much college will cost in 18 years (or which college my child will prefer). I'd love to hear what others are doing?

1. Depends on market returns, but it will be a 6-figure number for each of 2 boys.

2. I hope it covers everything and then some.  I would love for them to be able to graduate from college / grad / professional school debt free.  Whatever they don't use can be left in the account to grow and be used for their kids someday.

3. I started with $5k in each account per year to get the maximum state tax benefit.  I doubled the annual contribution last year when I got a raise.

I don't disagree with the "skin in the game" line of thinking, but I've got the means to do this.  I wouldn't feel right walking away from a high income profession without having their education expenses covered.  It will be a finite amount of money, so the boys will have to budget, particularly if they plan on more than 4 years or want to have money left over to grow.

MrsDinero

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Re: College Savings: How much and why??
« Reply #20 on: February 08, 2016, 01:18:22 PM »
Mr. D and I have been talking about this.  We decided to open a 529 because family members have expressed interest in helping out with college fund on birthdays and christmas, etc.  We however are focusing on our retirement.  We may or may not help out when the time comes, it will all depend on the child and what their focus is.

nobody123

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Re: College Savings: How much and why??
« Reply #21 on: February 08, 2016, 01:28:38 PM »
I figure that there is no way to plan for what the costs / rules / laws will be 10+ years from now, or what schools my kids might want to attend, so making up some arbitrary number as a goal is silly.  If my kid(s) stink academically or want to join the military, I don't want a lot of money locked up in 529s.  I am paying extra on my mortgage and saving a decent amount in my retirement accounts, as well as making small contributions to their 529s (opened this year because I was tired of seeing them earn essentially nothing in their regular bank accounts).  If I we are in the position to do so, my wife and I will divert what we can towards their college expenses.  My big concern is figuring out how to keep it "equal" between the two kids.

funcomesfirst

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Re: College Savings: How much and why??
« Reply #22 on: February 08, 2016, 01:43:58 PM »
Assuming the $40k/yr for in state tuition number (because I hope that's a worst case scenario) we have decided to try to save up for half the tuition costs in a 529 for our child. My husband leans toward covering the rest with cash when the time comes but, even with our plans to retire before 50, I'm not so sure that I'll be willing to work longer to cover it.  Hopefully the money we do save up will be assisted by scholarships or a couple years at a community college. 

Gin1984

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Re: College Savings: How much and why??
« Reply #23 on: February 08, 2016, 01:50:24 PM »
My daughter costs us $11566/year now.  I plan to be FI much sooner than her college but work to cash flow college.  We also plan to have another child and do the same.  For now we are funding our 401ks and Roths and if we change our minds we can dip into the Roths.  I don't understand the idea to save for college before FI.

hdatontodo

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Re: College Savings: How much and why??
« Reply #24 on: February 08, 2016, 02:07:46 PM »
We paid for 4 years of the MD 529 Prepaid College Tuition plan (about $9K / year) when he was a toddler. I did 2. Wife did 2.

We paid off the house after doing that.

Kid is 8 now. the U of MD calc says he'll need $80K for books/room/board/etc. I just started a new account for MD College Investment plan and put in $750. I plan just to add money when I get something like a bonus.

I'm 55. Wife's 49. She wants to split up now so that will mess up getting the last $80K funded, having a paid off house, etc.

little_brown_dog

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Re: College Savings: How much and why??
« Reply #25 on: February 08, 2016, 03:37:26 PM »
We are just going to set a certain amount each year and dedicate it to each child's 529. At the end if 18 years they'll have what they have. Hopefully it will be enough. We opted for this strategy instead of a specific target number given that there is no way to truly predict what college will cost. Some calculators are predicting over 200k for instate public tuition while many think the govt will step in and cap costs before things get really out of hand. It seems less stressful to just decide how much you can afford to give per year and then let the chips fall where they may. I think saving 5k per year is plenty generous if one can afford it. I like the 529s for the tax advantages. There is less risk of the money not being used if you have multiple kids (chances are one of them will need to go to college).
« Last Edit: February 08, 2016, 03:46:00 PM by little_brown_dog »

mm1970

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Re: College Savings: How much and why??
« Reply #26 on: February 08, 2016, 06:16:13 PM »
I actually have no idea how much we have saved so far in the 529 accounts.  But our boys are 9 and 3.

I am going to encourage scholarships and state schools.
But honestly?  We can afford to send them anywhere, fully funded, barring any major catastrophe.
Of course, it would eat into our retirement.

JustTrying

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Re: College Savings: How much and why??
« Reply #27 on: February 08, 2016, 07:54:08 PM »
OP here.

Thanks for all the replies! It's pretty funny because I had to pay for all of my education, and I simultaneously agree with the skin-in-the-game theory and really wish that my parents had helped me out financially. For this reason, I think I'll go for saving 50% of the cost of tuition at the local "big" university and then also look at what Education Reform has done to influence how tuition will increase over the next 18 years (thanks for the idea, goldielocks!). This way I am offering them some assistance, but they also have to work for it too. There are so many ways that they could get through college debt-free if they have 50% of their tuition paid for. For example, here in WA state, they can get their associates degree for free at a local college while they're in high school and then transfer the credits to UW. They could live at home to save on room/board. I'd also expect them to be working (Nothing weirded me out in college more than the kids whose parents didn't want them to work so that they could focus on their studies...we all made As, but they played a LOT of video games while I worked hard).

I'd still love to hear more of what others are doing, it's an interesting conversation!

Thanks again!

aFrugalFather

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Re: College Savings: How much and why??
« Reply #28 on: February 08, 2016, 09:11:56 PM »
I think I'd feel like I've done enough to give them a head start if they have about 50,000 each for college.  It may not be enough if they are going far away at a private university but at least it gives them a decent start even in that case.  Its just too hard to predict.  I had some money in 529 but I quickly regretted the decision since I think contributing to other accounts makes more sense to me for long term growth. 

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Re: College Savings: How much and why??
« Reply #29 on: February 09, 2016, 06:20:22 AM »
Our kids responsibility is to pay for year 1.
We made the opposite choice:  We told our kids they were on the semester plan.  We'd gladly pay for the first semester, and when we saw good grades and progression towards graduation, we'd pony up for second semester ... and so on.  They've done nothing but make us proud, so we've continued to pay ... but if that had not been true, we wouldn't have continued to pay for the next semester.  Instead, we would've looked at better options, like coming home to a community college or working with a tutor (out of their own pocket). 

HOW are you planning for your kids to pay for their first year?  It's a whopping amount of money for a high school senior to pay.  I would say DON'T encourage loans for that first year; promising to pay in the distant future (four years being distant to an 18-year old) doesn't feel real to high school students. 


In our daughter's case, it was a job at a pizza place for the year before college to cover tuition/books, then she stayed at home for her year of studies in a local college - unfortunately she decided the program wasn't for her after semester one, and is now working another job in a hotel kitchen while she sorts herself out. When she is ready to try again, we will be too.

teen persuasion

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Re: College Savings: How much and why??
« Reply #30 on: February 09, 2016, 06:21:28 AM »

 As I said in my previous post, schools in my state run about 14K/year for tuition, fees, dorm, meal plan -- if she were paying full price, which most students are.

What is the breakdown on this?  Locally, R&B was about $10k / year when my oldest began in 2008.  It has gradually risen to about $12k / year today.  It has been pretty consistent across all the schools my kids have applied to and attended.  Oldest attended a private school that cost $54k, all included, her last year.  DS2's tech college was about $10k less per year.  DD3 is currently attending a state school: tuition and fees is $8k, but R&B is $12k.  The only variable here seems to be tuition and fees.

I just checked a local community college - R&B is over $10k, total cost of attendance was over $17k. Your family has found an amazing deal.

Pigeon

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Re: College Savings: How much and why??
« Reply #31 on: February 09, 2016, 06:37:33 AM »
We have enough for room, board and tuition for both kids for four years at a state school.  Personally, I want my kids to have a shot at coming out of college with a degree and no debt, and I'm happy to provide that.  I think that going away to college is a great experience if you can do it.  I don't want them to have to work more than a couple hours a week while they are in college.  Summer jobs allow them to save enough for books and miscellaneous expenses.

If they want to go somewhere more expensive, they will have to figure out how to make up the difference.  Our EFC is high enough that it is unlikely either of them will get enough in grants to bring the cost down to that of a public college.  Our state system also has almost no merit scholarship money, and most of the institutions are quite up-front about that.

My parents did the same thing for their kids as did dh's and we are forever grateful.  It was the best gift they could have given us.

We've been saving for it for a long time and are just about there.  DD1 is a freshman in college now.


Smokystache

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Re: College Savings: How much and why??
« Reply #32 on: February 09, 2016, 07:57:03 AM »
So - drum roll...  this adds up to $25,000 per kid, in today's money. 

 I don't understand why so many internet sites, even here, state $40k for college or more...  I don't think that they do their fact checking...DH just completed a 3 year program, so we know how much it actually costs.   The surprise was how much cheaper books are now, with more internet based books and ability to buy used texts on amazon or wherever...

This is why many people estimate higher than $25k. (To be clear, I commend you on doing the research and attempting to project what future costs may be. I haven't done that myself). I believe that eventually the rate of higher education increases will eventually decline - but when it is currently going up at 8-9% a year, 2% increases aren't going to cover the whole bill).
https://upload.wikimedia.org/wikipedia/en/0/01/InflationTuitionMedicalGeneral1978to2008.png

Smokystache

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Re: College Savings: How much and why??
« Reply #33 on: February 09, 2016, 08:18:01 AM »
This is where I include my cautionary note about using community colleges (CC) for the first 2 years of classes.

(Full disclosure: I am a professor at a 4-year, small liberal arts college. Clearly I benefit from students not choosing that option. Interpret the following with that in mind).

More and more high quality colleges (they tend to be private colleges) are limiting the transfer credit they accept from CCs. Perhaps even more important is that some graduate and professional programs are limiting the credit they accept from an applicant when they completed specific courses at community colleges or through AP programs.

One example:
http://www.usnews.com/news/articles/2014/03/19/report-1-in-10-community-college-transfers-lose-nearly-all-course-credits

I was talking with a college student (not from my school). She is applying to medical school. She received credit for a Biology class through her high school's AP program. The med school won't accept it. As a graduating senior, she now needs to go back and take an introductory biology class before she is is a candidate.

Here is an example of a list of med schools that do and do not take AP/IB credit: (dated, but what I could find quickly)
http://www.unr.edu/Documents/science/chemistry/MedSchAP08.pdf

You might assume that 4-year colleges are doing this so that they can get tuition revenue from students. I'm sure that is part of the answer. The other reason is that some classes at CCs are significantly weaker than classes at 4 year colleges. (I know for a fact that in some cases, the class offered by the highly motivated and inventive CC instructor is better than the equivalent at a 4 year college/university. But on average, they don't cover as much material). I have students who take a science class at a local CC, earn an A, and then wonder why they flunk the next level of science at my college. Well, it is because your CC class only covered half of what our equivalent class does and you're 50% behind when you step in on day 1.

Let me give you a practical example. A nearby CC now offers college credit for classes taught at a local (poorly regarded) high school and the "college" instructor is the same teacher that has always taught the high school writing class. This is not a slam on high school teachers. But don't tell me that when you take a high school instructor and average high school students (there is no requirement to get into the class - this isn't the gifted program or anything), and have them learn in the same high school environment - but then slap on "college credit" that they are covering the same things that we do in a college writing class.

I'm not suggesting that no one should use a CC or that they don't serve a valuable purpose or that they may not be a more cost effective alternative to other paths. However, I often see statements about the positives like "Just get your first 2 years at CC and it is equivalent and cheaper" and nothing about the possible negative consequences of following that path.

Apples

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Re: College Savings: How much and why??
« Reply #34 on: February 09, 2016, 09:24:51 AM »
We don't have kids yet, and are recent college grads.  We intend to cover tuition and two years of room and board at a state school.  However, we'd like to also be able to cover the same at a private college, but this is dependent on how the next 20 years go :p  State tuitions are REALLY dependent on the state of residence.  My state, with it's many budget impasses and the land grant university recently paying off some very large fines related to some activities done by people in the football program.....well, the tuition isn't all that low.  It is low at the local po-dunk "university" down the street that gets people perfectly good degrees.  But those degrees don't compete on a national scale; they're just good for the local area.  For example:  teachers, nurses, entry-level gov. work for DEP and EPA, etc.  The types of people that most likely won't go get an advanced degree.

I've already been thinking about how we'll decide how much to put aside each year for school.  Right now, I have two possible benchmarks in my head:  5% of our income, per child (idk if gross or net),  up to 1/4 of the current year's tuition at State U.  I figure that means by 16 we'll have the majority of tuition saved and possibly room and board.  Or if our income stays low and with stick with the 5% of income, then we won't but we'll be much more likely to qualify for aid.

Also, I'm biased b/c I went to an out-of-state State U that with scholarships was cheaper than State U, so I'm firmly convinced that if you only look at large state universities even out-of-state isn't all that expensive.  No experience w/ private.

partgypsy

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Re: College Savings: How much and why??
« Reply #35 on: February 09, 2016, 11:25:23 AM »
I really appreciated that my parents covered college not covered by scholarship.
I would love to do the same, but it will not be possible.
Each child has 5K saved in a 529, but because of current budget any additional saving is on hold.
My nephew attended 2 years of community college, and 2 years of a good in-state school and got out with about 25K in debt.
That amount of debt is doable.
For the oldest I will encourage her to apply for scholarships and also see what need and non-need based aid is around, we will pay what our parent obligation is, more if we have extra (doubtful), the rest will have to be borrowed. She is really bright and talented, so I really don't want there to be an obstacle for her getting an quality education, within our means. We may put the youngest 529 money in our oldest 529 and write the youngest an iou for the same amount at that time to help with cash flow (our house should be paid off by the time the youngest hits college age).

For our youngest because of her learning disabilities and her interests (hands-on and non-academic) we don't know what she will decide. We will encourage community college or some kind of applied education or training in something that interests her and will provide a living. She is also considered "bright" but because of her learning difficulties most likely it's not going to be an academic route to success. 

SEAK

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Re: College Savings: How much and why??
« Reply #36 on: February 09, 2016, 11:27:20 AM »
We have two kids aged 8 and 6. Since they were born we've contributed $100/mo plus their entire State of Alaska permanent fund dividend check (has varied from $878 to $2,072 the past several years) towards each of their 529 accounts. By the time they are 18 years old I project they should each have ~ $70-80 k in their 529 account. I am hoping this is all that we contribute towards their educational costs and rest comes from scholarships, loans, their own summer jobs, etc.

Michread

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Re: College Savings: How much and why??
« Reply #37 on: February 09, 2016, 11:47:50 AM »
We saved NOTHING for "college" specifically. 

We paid off our home and all debts years before dc entered college.  We saved toward our retirement and taxable accts.  We planned to pay out of pocket as we went and take out taxable monies and/or have student take loans. 

One dc is almost done at a in-state univ. and the other dc has 3 more years after this year at an in-state univ.  We've paid the whole sheebang!  If they chose to attend private colleges they would have had to take student loans as needed to cover the different between state and private college costs.

If I had to do it over, I would do it exactly how we did it because it worked!  This year with 2 dc in college was tight, but we managed to continue to add to our retirement accts. at the same rate and pay those 2 college bills thanks to living below our means, no debt and high income.

funcomesfirst

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Re: College Savings: How much and why??
« Reply #38 on: February 09, 2016, 11:52:55 AM »
This is where I include my cautionary note about using community colleges (CC) for the first 2 years of classes.

Thank you for the alternate thinking on Community Colleges.  Definitely not something I had considered.

dcozad999

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Re: College Savings: How much and why??
« Reply #39 on: February 09, 2016, 12:08:05 PM »
Currently have about $6K saved for little one's future college. LO is currently 4. 12 more years of compounding interest at a conservative 5% with regular $100 a month contributions, equals about $30K(conservative interest rates means this should similar in value to $30K today).

Maybe it doesn't pay for everything, but it should pay enough to give our LO a head start in life.



Right where I'm at. Little man is 4.5 yrs old and around $5500 in the plan.  $50/paycheck automatically sent to UESP. I add a couple hundred bucks for birthday and Christmas, and grandma also contributes a $200-$300/year in gifts. Will do the same for the little girl when she arrives in May/June.

I will have an extra year to save for my son though. Since he was born in mid-July we won't be sending him to kindergarten until he's six.

If we ever get to the point where we can both max out all our tax advantaged retirement vehicles, we will definitely kick in more.




catccc

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Re: College Savings: How much and why??
« Reply #40 on: February 09, 2016, 01:44:07 PM »
I don't really have a number in mind, but I'm also not set on covering all of it.  My parents had nothing saved for me (or my 3 siblings) but intended to pay out of pocket for us all.  The did cover my older sister's tuition, she had a partial scholarship.  I also had a partial scholarship, then lost it.  I felt super guilty and told them I'd pay my own way.  I managed to negotiate another scholarship, and I paid for the rest by working part time.  So I totally understand the need of some people here to instill a sense of self-sufficiency into their college aged kids (or future college aged kids.)

At the same time, the cost of higher ed is getting kinda crazy.  Working through college was a reasonable thing for me to do, between the partial scholarship, rent split with roomies, and working retail part time.  IDK if it would work so well these days.

Our kids are 4 & 7, and they have about $22K and $25K in their 529 accounts.  I wouldn't contribute to these if I wasn't already maxing out all tax-advantaged retirement accounts available to us.  The 529s just get whatever cash gifts my kids get from relatives, or if there's some non-regular income (bonus, etc) we get, it will often go to the 529s.  We don't contribute any amounts on a regular basis as part of our savings plan, though.




partgypsy

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Re: College Savings: How much and why??
« Reply #41 on: February 09, 2016, 03:22:15 PM »
We saved NOTHING for "college" specifically. 

We paid off our home and all debts years before dc entered college.  We saved toward our retirement and taxable accts.  We planned to pay out of pocket as we went and take out taxable monies and/or have student take loans. 

One dc is almost done at a in-state univ. and the other dc has 3 more years after this year at an in-state univ.  We've paid the whole sheebang!  If they chose to attend private colleges they would have had to take student loans as needed to cover the different between state and private college costs.

If I had to do it over, I would do it exactly how we did it because it worked!  This year with 2 dc in college was tight, but we managed to continue to add to our retirement accts. at the same rate and pay those 2 college bills thanks to living below our means, no debt and high income.

This is encouraging.

merula

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Re: College Savings: How much and why??
« Reply #42 on: February 09, 2016, 03:28:54 PM »
My grandparents paid for my dad's college because they valued education. (They were a teacher and a WWII vet who regretted not taking advantage of the GI bill.) They said that my dad shouldn't pay it back but instead pay it forward for his children's college. And my parents said the same to me. So, I do consider it a moral obligation to pay for my children's college, because I'm paying back my grandparents for what they did for my dad, and my parents for what they did for me and my siblings.

I disagree with the "skin in the game" concept, because I've seen it blow up time and time again. When I think of my friends who paid their own way, I can think of only one who did it on the cheap. Most stayed in dorms (our dorms were more expensive than surrounding apartments), didn't work to save on food or entertainment, and ended up with six-figure debt. For a public school. A typical 18-year-old doesn't understand what paying back the loan will mean. They just see "The bank is giving me $30,000 this year, so that must be what I'll need to live on." They don't realize what having $1,000 less per month for the next ten years will mean for their ability to do what they want after graduation.

The other thing was that paying for school gave my parents way more involvement in my education, which overall was a good thing. They basically insisted that I stay in the more-expensive dorms rather than get an apartment, for the "experience", which I probably could have done without, and insisted that I get the 3-meal-a-day cafeteria plan, which I definitely could have done without, but on the bright side they talked me out of a Political Science major and into a Business major, which I am eternally grateful for.

Pigeon

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Re: College Savings: How much and why??
« Reply #43 on: February 09, 2016, 05:02:56 PM »
I agree with Smokeystache's heads-up about community colleges.  I work at a public university within a large state university system.  Within our state system, which includes many CCs, credits do not necessarily transfer completely.  There is a push on by the Board of Regents to remedy this, but it isn't that simple.  As was pointed out, the courses taught at the CC level often simply don't cover nearly as much material and are often not taught at the same level of difficulty.  If you grant the credits for Chem 101 to the CC student, they fail the next required class. 

Transfer students at my institution tend to have far more academic problems like drop-out, failing grades and taking extra semesters to graduate.  We have a current project on campus that looks at transfer students on a very granular level to see where they get into trouble, and try to address those issues.  One interesting bit of data we've seen is that students who come in with a completed associates degree tend to do especially poorly.

I'm not anti-CC by any means, but agree with the PP that you need to be very careful in thinking that this will necessarily be a big money-saver or will be an equally useful path to a degree, especially if grad or professional school is a possibility.

mm1970

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Re: College Savings: How much and why??
« Reply #44 on: February 09, 2016, 05:10:57 PM »
Currently have about $6K saved for little one's future college. LO is currently 4. 12 more years of compounding interest at a conservative 5% with regular $100 a month contributions, equals about $30K(conservative interest rates means this should similar in value to $30K today).

Maybe it doesn't pay for everything, but it should pay enough to give our LO a head start in life.



Right where I'm at. Little man is 4.5 yrs old and around $5500 in the plan.  $50/paycheck automatically sent to UESP. I add a couple hundred bucks for birthday and Christmas, and grandma also contributes a $200-$300/year in gifts. Will do the same for the little girl when she arrives in May/June.

I will have an extra year to save for my son though. Since he was born in mid-July we won't be sending him to kindergarten until he's six.

If we ever get to the point where we can both max out all our tax advantaged retirement vehicles, we will definitely kick in more.
No childcare I guess?

I ask because my younger child is a July baby, and my goodness, the stress of all the other moms in my baby group about whether or not to hold their boys back a year so that they are six.  Because "I don't want him to be the  youngest".  Newsflash: someone has to be the youngest.

Considering that here, a year of preschool or daycare is $15k+, I'm better off putting my July baby in kinder at 5 and saving that money for college.

Note: in my town, a few of the elementary schools are requiring six year olds be in 1st grade (and kinder is optional). So some of the parents might be choosing to hold their kids back for kinder at six, but the school will force them to enroll in first grade.

DebtFreeBy25

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Re: College Savings: How much and why??
« Reply #45 on: February 09, 2016, 05:23:58 PM »
I'm child-free but have a suggestion that hasn't been mentioned yet.

Google "post secondary enrollment options [your state]". PSEO is a program that enables high school students to take college courses for free. Yes, FREE including tuition, fees and books. This is not the same as AP or taking a few classes offered through the high school. PSEO allows juniors and seniors to take up to a full course load at a local college.

There are minimum academic qualifications (not too terribly challenging) and transportation is the student's responsibility, but it's a hell of a deal. I did two years of undergrad while still technically a high school student, so I only needed 2 additional years for my bachelors. My baby sister is currently enrolled in PSEO and is also a big fan of the program.

FINate

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Re: College Savings: How much and why??
« Reply #46 on: February 09, 2016, 05:35:52 PM »
RE community college: We plan to actively ENCOURAGE our daughters to attend CC first, even if they can get in some place more prestigious. Why pay top dollar for gen ed classes? In California transferring from CC to state university works quite well, and we have 3 great state universities within commuting distance. Living at home saves a bundle of money, which was how I was able to graduate debt free.

We mostly view the 529s as money for grad school, and we don't mind spending more for something "name brand" and/or out of state for this. In the end no one is going to care where you went for your gen ed or undergrad.

chesebert

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Re: College Savings: How much and why??
« Reply #47 on: February 09, 2016, 05:48:02 PM »
$100k.

It just seemed like a good round, reasonable number for 4 years of college.

If she needs more or less, so be it, I'll cash flow the rest.

Hopefully if she goes to MIT or something else she'll have a scholarship. :D

+1

CindyBS

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Re: College Savings: How much and why??
« Reply #48 on: February 09, 2016, 07:26:59 PM »
We are giving each of our sons a "start of life fund" of $50K - to be used for college, downpayment on a house, car, etc.  All expenses must be pre-approved.  We have not saved it at all and will just spend it from our income (we already save more than $40K per year).

They have been told living in our house after high school graduation is allowed ONLY if they are working towards job training/degree or working their way up in a job.  No loafing around.  They are expected to move out by age 23.

Their grandparents have given them savings bonds and funded 529 plans that will total about $15K/each by age 18.

Our older son is extremely smart and will probably be able to get 3-5 AP or college credits in high school.  He also has a few disabilities including Asperger's Syndrome, so schools with strong disability support (typically state schools) or living at home will most likely be needed.  Luckily those both save $$.

Our younger son is not disabled.  He will have a lot easier time and a lot more choices, although AP or college credit in HS will most likely be very difficult for him.

Although I cannot bar them from getting student loans it will be strongly discouraged.


tobitonic

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Re: College Savings: How much and why??
« Reply #49 on: February 09, 2016, 07:50:21 PM »
Hello! We'll be having our first child this summer. I've been thinking about college savings, and I'm wondering:

1. How much (in a dollar amount) do you hope to have saved for your child's college?
2. What are you hoping this will cover? (E.g. just tuition, tuition + books, tuition + books + living costs, etc.)
3. How did you arrive at that particular number?

I'd like to have a particular dollar amount in mind to work towards, but it seems difficult to determine a dollar amount to save when I don't know how much college will cost in 18 years (or which college my child will prefer). I'd love to hear what others are doing?

1.) Quantitatively? No idea. Qualitatively, a lot.

2.) Everything for each child. In other words, tuition and a stipend to cover books and food. Basically, a full ride.

3.) We love our children and don't want them to have a large amount of debt hanging over them when they're starting out.

We have two kids and are thinking of having two more, depending on how physically taxing it is. This is our plan for all of them.