Author Topic: Factoring College into Projection  (Read 3911 times)

mntnmn117

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Factoring College into Projection
« on: October 28, 2020, 03:28:59 PM »
Looking to FIRE in about 8 years on 1.5M. Typical 4% withdrawal rate. However this assumes no cost for college. That same year it seems like FIRE is attainable, my oldest would graduate high school. Followed every 2yrs after that by her 3 siblings. With inflation, tuition, room, board that 25k/yr ends up being a massive part of expenses for the first 12 years post fire. FAFSA hacking seems out of the question because I'd still be working too close to college start. Both DW and I had college paid for by parents so doing the same for our children seems like the right thing to do.

How do most people factor this into their FIRE projection? Just show costs significantly higher while a kid is in college and in doing so push back FIRE?  I just don't want to really settle on 2028 and find I'm 400k short of FIRE.

secondcor521

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Re: Factoring College into Projection
« Reply #1 on: October 28, 2020, 07:12:57 PM »
I'm 51.  I FIREd at 46.  So far I have funded my 3 kids college (DS25, DS20, and DD18) through a mixture of 529s, ESAs, FAFSA hacking, and scholarships (which were in turn due to encouraging my kids to go to schools where they are in the upper half of the student body academically).  I'm on track to have them all graduate debt free, although the younger two are still in college so I don't yet fully know how things will turn out.

Because it was hard for me to plan for college and FIRE together, I chose to separate it into two problems and two piles of money.  I had basically one spreadsheet for their college, and one for FIRE.  For their college, I started with estimates of what I would pay for and when, and then I added in how much was in their college accounts and projected how those would grow.  For my FIRE, I had how much I would need, how much I had in my retirement accounts, how much I was adding, and how much those would grow.

I then just kept adding money to their college savings accounts and my retirement accounts until I thought both were fully funded.  I refined and shifted contributions around between both my retirement accounts and the kids' college accounts, and then among the kids' college accounts as things changed, as time passed and things became clearer.  Eventually I could replace the guestimates with actual college costs once I knew where they were going.

I did hit a point where I had enough to FIRE and my two youngest kids were not in college (and my oldest was only halfway through) so all I had for them was projections.  I decided then to take a calculated risk - I would FIRE, and spend whatever was needed on their college educations, and if the college funds ran out I would return to work to finish paying for their college.  The way things are turning out, that looks like it probably won't be necessary.

lhamo

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Re: Factoring College into Projection
« Reply #2 on: October 28, 2020, 08:23:07 PM »
Looking to FIRE in about 8 years on 1.5M. Typical 4% withdrawal rate. However this assumes no cost for college. That same year it seems like FIRE is attainable, my oldest would graduate high school. Followed every 2yrs after that by her 3 siblings. With inflation, tuition, room, board that 25k/yr ends up being a massive part of expenses for the first 12 years post fire. FAFSA hacking seems out of the question because I'd still be working too close to college start. Both DW and I had college paid for by parents so doing the same for our children seems like the right thing to do.



If you are sure your kids will go to schools that only look at the FAFSA, this is pretty easy -- just save enough in the college fund for #1 to cover her first two years of expenses, plus maybe a bit extra that you can tap into slowly for the others.  When you fill out the FAFSA for the first year that you will have two in college, you will already have been FIREd for two years so you can manage your income stream so that your EFC will be close to $0.  In my state, that would mean both kids are eligible for a full tuition waiver.  Should be the case for the rest of them since you will have two kids in college until the last two years for the youngest one.

We actually had $80k in each of our kids' college funds so we didn't have to worry about this.  But if I didn't have it saved already I probably would have used the FAFSA + income management strategy.

TheFrenchCat

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Re: Factoring College into Projection
« Reply #3 on: October 29, 2020, 06:41:08 PM »
We're in a similar position, though our daughter seems to be younger and our FI number is about $800,000.  We're currently saving enough each month that we should have 100k by the time she's done her junior year of college.  Any more than that we'll probably finance by working into her college years.  I count that college savings amount as part of our expenses when I calculate our FIRE date, which I like as an extra security cushion. 

This works for us, but we're not super in a rush to RE and our daughter's education is one of our primary priorities and expenses.  Plus we'll only be 43 when she graduates high school.  Also we don't know much about using FAFSA to our advantage, so keep that in mind.

WSUCoug1994

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Re: Factoring College into Projection
« Reply #4 on: October 30, 2020, 12:53:24 PM »
I have two kids - 4 and 2.  Each one will receive $6000 a year from their date of birth for 18 years put into 529's.  I haven't decided how much of that information I will disclose to them.  I have tried to figure out creative ways to budget for this and none of them are good since I am likely ~3 years away from retirement at age 52.  Initially I averaged out their college expenses over my entire retirement lifespan but I didn't like how that panned out.  My wife and I figured to include that $6K into our annual retirement expenses and then when they hit 18 we will allocate that $12,000 to our budget - most likely for travel but it doesn't really matter at that point.  We pay for the education and at the end of 18 years we end up with a $12K buffer in our retirement plan and can invest or spend it as we see fit.

JustTrying

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Re: Factoring College into Projection
« Reply #5 on: November 09, 2020, 10:08:04 PM »
My parents did not pay for my college. On the bright side: This meant I was a motivated hard-working student, as I had to pay for it myself. On the not-so-bright-side: I would have liked a little financial support and fewer student loans. Because of both of these things, I want to pay some, but not all, of my child's college expenses. We've been saving just $150/month to a 529 plan (which is invested). Whatever is there when she needs it, she can have. The rest, she'll be expected to pay on her own. I am hopeful that we'll be able to keep contributing our $150/month once we FIRE.

mizzourah2006

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Re: Factoring College into Projection
« Reply #6 on: November 11, 2020, 10:46:59 AM »
Looking to FIRE in about 8 years on 1.5M. Typical 4% withdrawal rate. However this assumes no cost for college. That same year it seems like FIRE is attainable, my oldest would graduate high school. Followed every 2yrs after that by her 3 siblings. With inflation, tuition, room, board that 25k/yr ends up being a massive part of expenses for the first 12 years post fire. FAFSA hacking seems out of the question because I'd still be working too close to college start. Both DW and I had college paid for by parents so doing the same for our children seems like the right thing to do.

How do most people factor this into their FIRE projection? Just show costs significantly higher while a kid is in college and in doing so push back FIRE?  I just don't want to really settle on 2028 and find I'm 400k short of FIRE.

529s are part of our requirements for the actual RE part. We're planning to be able to pay for 4 years of the equivalent of in-state + R&B. We have 1 year saved up for the 5 year old and a half year saved up for the 2 year old right now.

elaine amj

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Re: Factoring College into Projection
« Reply #7 on: November 11, 2020, 12:55:45 PM »
I saved the college money in a completely different pot and didn't count that into my FIRE numbers. I don't even include it in my net worth. I didn't save a massive amount - figured if they wanted a more expensive school or whatever, they could make up the difference themselves if necessary. 

I like the separate pot.  I think it would be too depressing to look at a nice big number and then have to subtract a chunk out of it for college savings.

Steeze

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Re: Factoring College into Projection
« Reply #8 on: November 14, 2020, 07:12:28 PM »
We have our first due next year -

We will put $10k/yr in a 529 starting this year, and for the next 3 years ($40,000 total) to grow to ~ $100k hopefully by 18 (in today's dollars).
If we end up having a 2nd kid later on then I'll probably add to that for another year or two. Probably will not cover 100% of expenses, but it will give them a good head start in life at least.

We don't really intend to FIRE 100% - so we will probably end up overshooting the FI number by the time college rolls around - maybe we will be able to do more. I would love to be able to send them off with no college debt and a down payment on a house if possible. Depends on how successful we are post FI at earning outside of W2 jobs.

DW's parents paid for her undergrad, masters degrees, and bought us a house. I went 100k into debt for my undergrad. Funny thing is DW doesn't think we should have to pay for our kid's college education, that they should earn it with scholarships. I feel the opposite - we have a HUGE advantage thanks to her parents - I think we should attempt to do the same for ours. Maybe we won't be able to do what they did, but we can try. Once our own needs are taken care of (FI) why wouldn't we pass on any excess to our kids?

Time will tell - we have a lot of time between then and now, and I couldn't tell you for certain what will happen two years from now.

Michael in ABQ

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Re: Factoring College into Projection
« Reply #9 on: November 15, 2020, 04:54:14 PM »
6 kids and FIRE is a decade plus away (oldest will be college age well before that). Paying for all of their college is not part of our plan. Frankly the value of college relative to the cost seems to drop every year.

We're a military family so there's pretty good odds some of our kids will decide to join the military - either a service academy (full ride) or ROTC or active duty or National Guard. Whichever one they choose that will cover all or most of their college cost. I have some GI Bill benefits I've transferred to them as well, though it won't cover much. For the rest we'll contribute some but by no means all. We'll encourage scholarships and going to reasonably priced schools and starting with community college for general education requirements. Plus they'll be expected to work before and during college as well.

DadJokes

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Re: Factoring College into Projection
« Reply #10 on: November 19, 2020, 06:12:37 AM »
Right now, we aren't factoring college into our numbers. I don't know how much I plan to pay, but we will be able to hack the FAFSA (assuming it doesn't change significantly in the next 15 years). We will probably pile up a little bit of extra money by working an extra year or so. If it isn't needed for college, then we'll just have that extra buffer.

formerlydivorcedmom

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Re: Factoring College into Projection
« Reply #11 on: December 01, 2020, 12:28:58 PM »
We have 3 kids also and are on track to retire the year youngest graduates from high school (oldest will be a college junior).

We set a goal for how much we'd pay for college for each of the 3.  (For us, it's $50k - enough to comfortably pay tuition + fees for 4 years at an instate university).  That makes planning easier.

Like secondcor, we keep the college money is in a different pot.   Instead of cash-flowing the costs, we are on track to have their college funds at our goal by the time they each graduate high school. 

Our costs may still be higher while they are in college (if we continue to pay car insurance, etc).  As we get closer to retirement, we'll adjust our plans.  We might have to work another year, and that's okay.

MissPeach

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Re: Factoring College into Projection
« Reply #12 on: January 11, 2021, 11:54:25 AM »
I have one going right about when I'll be eligible to FIRE. I initially hoped to FIRE junior year of high school which would have helped game the FAFSA but I used some of the stache for other things which will delay things a few years.

I am budgeting for one of our local state schools as a lump sum out of my FIRE number. If kiddo cares to go somewhere else they would have to pay the difference or get it elsewhere. I have an XH but he is the type to live paycheck to paycheck and will have 3 kids going to college around the same time so I doubt he will have anything to contribute. I have a well-off parent who used to say they would pay college but I don't want to have to depend on it.

I'm not sure if this is the right route but kiddo isn't the school type and my state doesn't offer anything too compelling for 529 plans so I don't feel comfortable putting a lot into one. So I have been lumping it into the taxable account. I need enough for that and seasoning the ROTH to pull from the 401K before FIRing even if I hit my number. Worst case I pay child support that is about what I would pay for tuition (and that ends at 18) so I could work another year or two at worst case and have enough and really not feel it too much since it's money I don't have access to right now anyway.


Fishindude

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Re: Factoring College into Projection
« Reply #13 on: January 11, 2021, 12:06:30 PM »
My parents did not pay for my college. On the bright side: This meant I was a motivated hard-working student, as I had to pay for it myself. On the not-so-bright-side: I would have liked a little financial support and fewer student loans. Because of both of these things, I want to pay some, but not all, of my child's college expenses. We've been saving just $150/month to a 529 plan (which is invested). Whatever is there when she needs it, she can have. The rest, she'll be expected to pay on her own. I am hopeful that we'll be able to keep contributing our $150/month once we FIRE.

I think this is the correct way to look at it.
There is no law that says all kids must go to college, and parents must pay for it.   There is also a lot of evidence that many college educations are pretty much wasted money and the individual would have been as well off just entering the workforce earlier.
You do what you can, but don't jeopardize your own financial security to pay for a kids college. 

Beach_Stache

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Re: Factoring College into Projection
« Reply #14 on: January 17, 2021, 05:53:23 AM »
I think the opinion you get about college is probably based on each person's own situation.  My parents didn't save much for college, but it was at a time when college was around $10k/year, so I was able to save up from summer jobs for around half of it, the other half student loans, a bit of help from my parents as well as we were not struggling, but they put their retirement needs ahead of mine.  Ate a lot of Ramen in college, but graduated w/loans that were manageable.  DW wasn't as well off so had to finance most of it and worked 20-30 hours/week during school and summers/winters, so she struggled, ate a lot more Ramen and had the stress of bills to pay while in college, which was not ideal.  I think somewhere in the middle is right, you want your kids to have skin in the game, otherwise what are you paying for?

We have 529 accounts for our 3 sons and are on track to fund most of college based on inflation and investment, but we don't tell them how much there is, and probably won't.  We tell them how expensive college is, if they do stuff around the house or I want to do silly things w/them I'll say stuff like "if you can do a pullup I'll put $5 in your college account".  It's fun for me, I'm doing it anyways and it puts college on their brain.  I tell my kids that "whatever money you make in scholarships, I'll match it" and that seems to get them excited.  Even if we have enough to fully fund college, I want them to put money in via scholarships, Summer jobs, possibly working in school, etc. 

There are a ton of non-traditional options as well, ROTC, 2 years of junior college, etc.  Financially I think there are a lot of easy but non-traditional routes that can work, but many (including me) want their kids to have the college experience.  My boys will go to state school, if they want to go somewhere else they'll pay the delta, if they are screw ups in high school I won't pay for state school, they can go to junior college to figure out what they want to do w/their life.

I want to make sure my boys don't have a free ride, but want the emphasis to be on school.  They should be working over summers to contribute, I don't want to pay $100k so they can enjoy going on benders during the week away from home though, so each family I think just has to balance what they want.

yachi

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Re: Factoring College into Projection
« Reply #15 on: January 21, 2021, 07:29:03 AM »
Looking to FIRE in about 8 years on 1.5M. Typical 4% withdrawal rate. However this assumes no cost for college. That same year it seems like FIRE is attainable, my oldest would graduate high school. Followed every 2yrs after that by her 3 siblings. With inflation, tuition, room, board that 25k/yr ends up being a massive part of expenses for the first 12 years post fire. FAFSA hacking seems out of the question because I'd still be working too close to college start. Both DW and I had college paid for by parents so doing the same for our children seems like the right thing to do.

How do most people factor this into their FIRE projection? Just show costs significantly higher while a kid is in college and in doing so push back FIRE?  I just don't want to really settle on 2028 and find I'm 400k short of FIRE.

What about an agreement with you oldest that you'll pay for college if she takes a gap year?  That would seem to me to be a good trade off if it allows you to use your ER withdrawals for the FAFSA.  There are lots of free online programs she could partake in during the gap year if she would need to beef up her application to schools.

Car Jack

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Re: Factoring College into Projection
« Reply #16 on: February 22, 2021, 12:26:31 PM »
I did things sort of on the opposite side of the spectrum.  I knew way ahead of time how much college could cost.  I attended town seminars for college planning when my oldest was 8.  I value education greatly and personally have gone to college all over the map....community college, state college, private college, really top notch private college, so I wanted to give my kids the opportunity to go wherever they fit.  I put aside $1MM for the 2 of them.  First one started at a mediocre private college with merit aid because of early high school rebellion and horrible grades.  He aced everything and transferred to a great private engineering college.  $60k all in a year when he started and $75k when he finished per year.  Younger one did a year of community college and has some learning issues.  Is now working at Amazon and thinking ahead with possible computer or other opportunities where Amazon will help.  So all in all, I spent only a little over $300k but will reserve some for both kids as I am sure the older one will go back at some point for a grad degree and the younger one will take some kind of courses and perhaps find something to go back full time for.  Anyways, that's my story.  We received nothing in aid beyond Stafford loans that my son will either pay back or likely half will be forgiven with what it looks like Biden is willing to do.

trollwithamustache

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Re: Factoring College into Projection
« Reply #17 on: February 22, 2021, 01:22:56 PM »
Get yourself a copy of the FAFSA form. It starts looking at your finances 2 years before college. but as you roll successive kids online, everyone is eligible for more aid.

note 529s are the devil, they must be used in full in year 1. But cratering your income is an excellent strategy to getting more aid.

It MAY or may not make sense for you to go to 1 income/pat time sooner and then work longer part time to maximize financial aid.

secondcor521

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Re: Factoring College into Projection
« Reply #18 on: February 22, 2021, 06:41:31 PM »
Get yourself a copy of the FAFSA form. It starts looking at your finances 2 years before college. but as you roll successive kids online, everyone is eligible for more aid.

note 529s are the devil, they must be used in full in year 1. But cratering your income is an excellent strategy to getting more aid.

It MAY or may not make sense for you to go to 1 income/pat time sooner and then work longer part time to maximize financial aid.

Note that with FAFSA simplification that was passed into law in December, the FAFSA form will look different starting in fall 2022.  The part about "rolling more kids online" is no longer true.

There is no requirement that 529s be used in full in year 1.

It is true that lower income, in general, will make you eligible for more aid.  However, the FAFSA stuff generally works like a tax bracket, so you might be giving up a dollar of income to get 10 cents more in aid.  So overall it's like lighting fire to dollars to be paid dimes.

lhamo

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Re: Factoring College into Projection
« Reply #19 on: February 22, 2021, 07:13:37 PM »
Notes on 529s under the new FAFSA rules:

1)  Do NOT put them in the child's name.  Assets in the child's name have a much higher percentage that has to go toward EFC.

2)  529s that are in a parents name will be treated the same as other parental assets -- 5%ish of the total amount will go toward EFC (does not matter if you have separate accounts with different beneficiaries, they look at the total)

3)  If relatives want to set up 529s to benefit your kids, have them do it in their names.  Funds gifted out of these accounts will not count against the EFC under the new FAFSA rules.

https://www.savingforcollege.com/article/new-fafsa-removes-roadblocks-for-grandparent-529-plans

CSS Profile rules are a whole different ballgame, so those anticipating enrolling in the more selective schools that use the CSS Profile would be wise to do some additional planning.

trollwithamustache

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Re: Factoring College into Projection
« Reply #20 on: February 23, 2021, 02:34:41 PM »

Note that with FAFSA simplification that was passed into law in December, the FAFSA form will look different starting in fall 2022.  The part about "rolling more kids online" is no longer true.

tell me more about this.  What are people with multiple kids supposed to do? do they go straight to credit for multiple kids in school? 

secondcor521

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Re: Factoring College into Projection
« Reply #21 on: February 23, 2021, 02:54:57 PM »

Note that with FAFSA simplification that was passed into law in December, the FAFSA form will look different starting in fall 2022.  The part about "rolling more kids online" is no longer true.

tell me more about this.  What are people with multiple kids supposed to do? do they go straight to credit for multiple kids in school?

I don't understand your questions, but I'll try anyway.

If you google "FAFSA simplification" you'll probably find several google results.  It was a division in the Consolidated Appropriations Act of 2021.  Here's one link, where the sixth bullet item down in the list is the one I was referring to:

https://heag.us/the-consolidated-appropriations-act-of-2021-fafsa-simplification-part-1/

If this affects a family, their options are (a) lobby the US federal government to change the rule back, or (b) work around the problem.  Working around the problem could mean saving more money as a family, getting more scholarships, taking out more loans, or some combination of these.  Spacing out the college experiences of the kids is a likely effect as well - maybe the second kid who is three years younger takes a gap year, that sort of thing.

mntnmn117

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Re: Factoring College into Projection
« Reply #22 on: February 23, 2021, 02:57:38 PM »
Thanks for all the input! I also forgot to mention that we are in a state without state income tax.  Seems that a big benefit of 529s is the ability to reduce state income tax. Without that carrot and the 529s typically higher fees, I'm probably going to start a small 10k per year contribution in the 529 to keep options open. 

I'm really hoping there is massive reform to college costs.  Also considering a conveniently timed sabbatical/ world trip to reduce a pair of years taxable income.

baby_stache

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Re: Factoring College into Projection
« Reply #23 on: March 06, 2021, 03:02:38 PM »
Ug. I hope $10k per year isn't considered a small contribution. That is a lot of money! Especially if you are doing it for something close to 18 years!

There does need to be higher education reform.

yachi

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Re: Factoring College into Projection
« Reply #24 on: March 23, 2021, 12:38:15 PM »

Sugaree

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Re: Factoring College into Projection
« Reply #25 on: March 23, 2021, 12:41:58 PM »
I'm planning on having enough in his 529 to cover the first two years.  The next 2-3 years will come from other sources (there's a better than zero chance that his grandparents have or will set up an educational trust for him).  I also plan on buying a condo in whatever city he decides to go to school.  As long as I don't take a bath on it after he's out of school then we'll come out ahead on room and board costs. 

If all else fails, I'll arrange a marriage and divorce between him and my best friend's kid.

Spiffy

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Re: Factoring College into Projection
« Reply #26 on: March 23, 2021, 12:58:50 PM »
Somedays I consider following in this dad's footsteps
https://www.cbsnews.com/news/boston-college-janitor-sends-all-five-kids-to-college-for-free/
This is what we are doing. My husband and I both work at an expensive private university. If all three of our kids attend, we will have saved over $600,000 by using our tuition remission benefits. But too bad for the janitors, groundskeepers and food service workers here. They are contracted employees who work for Aramark, so they don't get the free tuition.

yachi

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Re: Factoring College into Projection
« Reply #27 on: March 23, 2021, 01:27:10 PM »
Somedays I consider following in this dad's footsteps
https://www.cbsnews.com/news/boston-college-janitor-sends-all-five-kids-to-college-for-free/
This is what we are doing. My husband and I both work at an expensive private university. If all three of our kids attend, we will have saved over $600,000 by using our tuition remission benefits. But too bad for the janitors, groundskeepers and food service workers here. They are contracted employees who work for Aramark, so they don't get the free tuition.

That's awesome, and a HUGE perk!  When I brought up the idea, my wife said she saw listings for some educators at our alma mater.  They still allow janitors, groundskeepers and food service workers the tuition perk, which is what I was considering doing.  She was thinking about the educator position.

charis

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Re: Factoring College into Projection
« Reply #28 on: March 23, 2021, 02:45:40 PM »
We are in track to save up enough in 529s for two years of state school.  I plan to go part time maybe 3 years before the first is due to go. Our state have a free tuition program that is based on income, so we should qualify if nothing changes.