The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: freeazabird on June 26, 2014, 10:52:40 AM
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Do you save for your child to go to college? If so, how much? Does anyone feel it is not their responsibility to save fully for their kid's college?
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Yes. It isn't my responsibility, but it is something I would like to help with as much as I can. Not having that student loan is a big help coming out of school.
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We don't feel that we are responsible to save fully for their college, but we plan to contribute some (goal is at least half, but it will be highly dependent on their choice of school, major, and keeping their grades up).
I do feel that it would be wrong for us to retire early without saving for their college. It's one thing if you can't afford it, but unless we are retiring for health reasons, we can work a few extra years to help them get a better start.
We currently do the following:
My grandpa puts 60$ a month in a 529 for each kid. This should pay for one year.
We have a Fidelity AmEx that we use for all purchases. It is 2% cash back into a 529.
We will increase contributions to either our 529, or a brokerage account of some kind, after a few other financial goals are met (like paying down mortgage enough to get rid of PMI). We won't go crazy though, we will put most savings to retirement still.
We will cash-flow most of it either through my H's normal employment, or through me getting a job (currently a sahm).
Basically, we aren't stressing about it too much yet. Our kids are 6 and 4. I will encourage them to take a gap year, consider trade school, get as many college credits as they can during high school, etc. and like I said, just me going out and getting any kind of job would be $$$ that can go straight to college payments.
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http://forum.mrmoneymustache.com/mini-money-mustaches/college/ (http://forum.mrmoneymustache.com/mini-money-mustaches/college/)
http://forum.mrmoneymustache.com/mini-money-mustaches/kids-and-college-will-you-pay/ (http://forum.mrmoneymustache.com/mini-money-mustaches/kids-and-college-will-you-pay/)
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I have a few grand in each kids' 529 for but stopped contributing a few years ago. I do plan on paying for their undergrad tuition at a public school (or the equivalent value at a private school if they choose to go there) but I'll figure out some other way to do it. My undergrad tuition was paid for and I figure it's my turn to bite the bullet.
The reason I stopped using the 529 is a few years ago I was talking with a recent college grad and asked him about what it cost. He said, "oh about $X per year, but only the very richest kids pay that, 90% of the kids get some grant or tuition reduction." It hit me that if I save 200K in a 529, then my kids tuition cost will conveniently be 200K.
I've got no problem paying but IMO universities are playing a retailer's game of pricing things far more than the market will bear, seeing which suckers will pay full retail, then discounting the product to a fair price for the remainder. I did not get this close to FIRE by paying full retail.
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We plan to pay up to $10K per year for tuition at a state school, and their first year in the dorms. We've saved 20% of this, and the rest will either be saved haphazardly in the next few years or paid for out of cash flow. We financed a rental on a 15-year term with the express purpose of using the income after it was paid off for college expenses; glad now to have made that decision 13 years ago!
During the years they are in college, we'll likely save less for ourselves, but we'll be going into those years with a decent net worth and an ever-closer pension, so our savings can take the hit for a few years.
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We paid for most of our daughter's college, but she went to school in town and covered her own room and board, so it was a lot less for us than others. We hadn't saved for it however, we paid as we went (about 4K a semester at the time, perhaps 5.5K now).
As for our son, he is utterly disinterested in college at the moment. He will either pay rent if he opts to just work or not pay rent if he eventually decides he wants something more.
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Don't have or want kids, but here's my perspective.
My parents didn't pay for any education costs for me. I don't feel like they were obligated to, because one adult is not obligated to fund the lifestyle choices of another adult.
My boyfriend's parents paid for his creative writing degree, but not his bookkeeping classes that he enrolled in after realizing after graduation that he picked a pretty bad major. I thought that was a little douchey as they had ample education funds set aside for him but pulled a "Surprise! We're not going to pay for it!" at the last minute.
Both of us have ended up in a similar position - similar types of jobs, salary, and net worth.
I think it's a nice gesture to help out with post-secondary, but certainly not required. However, I do think not teaching your kids basic life skills and money management makes you a bad person.
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I intend to pay for large state school one way or another. They're both in diapers still. I'll be long FIREd by then so maybe we ramp up self employment during those years or maybe the stache will be able to support it as is or maybe they'll get scholarships or maybe their grandparents will help with it or maybe it will be near free by then or maybe they won't go. Either way I'm saving as much as I can already so I don't see a need to view kids college as a separate money bucket. All in all not a huge concern to me as yet.
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I have a few grand in each kids' 529 for but stopped contributing a few years ago. I do plan on paying for their undergrad tuition at a public school (or the equivalent value at a private school if they choose to go there) but I'll figure out some other way to do it. My undergrad tuition was paid for and I figure it's my turn to bite the bullet.
The reason I stopped using the 529 is a few years ago I was talking with a recent college grad and asked him about what it cost. He said, "oh about $X per year, but only the very richest kids pay that, 90% of the kids get some grant or tuition reduction." It hit me that if I save 200K in a 529, then my kids tuition cost will conveniently be 200K.
I've got no problem paying but IMO universities are playing a retailer's game of pricing things far more than the market will bear, seeing which suckers will pay full retail, then discounting the product to a fair price for the remainder. I did not get this close to FIRE by paying full retail.
From what I understand colleges are asking about parents' net worth as well. They didn't when I went to college (graduated 6 years ago) but a friend of mine said he was asked about it when his kid was going to college. I could be wrong on this; they always just asked for parents' income when I went to school.
My parents made good money but not in the top 10% and I still paid full tuition at the state school I attended (in fact it was tiered and engineering students paid more, so I paid higher than most). The only ones I'm aware of with potential discounts like what you're talking about are private schools.
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From what I understand colleges are asking about parents' net worth as well.
The FAFSA (federal aid) only asks about net worth outside of retirement accounts (so IMO, fund these first) and IME the vast majority of state and medium tier private schools only request the FAFSA. The schools that ask more questions regarding total net worth do so b/c they offer more generous need-based aid *in addition to* the state/federal aid. They also tend to be generous with this aid, and IME one's aid won't be lower at schools that ask for this extra info than at a school that only requires FAFSA, but could be much much higher.
I'm helping DSD prep to apply to college this fall. I just went through and made a spreadsheet of 13 schools that dsd is interested in with estimated total cost based on financial info, the tuition exchange I'm eligible for, average sats and gpas, etc and DSD will choose 7-8 to apply to. We have a set max amount we'll help her with, which will completely cover the estimated cost of 1 school on the list (b/c she'd live with us, so no room and board) and about 1/3rd to 1/2 of most of the rest of the schools with room and board. If she chooses a school that's more than our contribution plus what her mom offers to pay she'll have to get loans/figure out how to pay. I feel that this is reasonable and won't impede her ability to get a good education.
We do have a 529 for DD (age 3), but only put $50 a mo in. I really prefer to put money in tax deferred and Roths instead. It really makes more sense for us to save primarily in retirement accounts, but for some emotional reason I want a small amount in the 529 in her name. We'll probably cover a set amount for DD, which will be somewhere around the cost of in-state tuition with room and board, but it'll probably be mostly funded from Roth accounts.
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I have a few grand in each kids' 529 for but stopped contributing a few years ago. I do plan on paying for their undergrad tuition at a public school (or the equivalent value at a private school if they choose to go there) but I'll figure out some other way to do it. My undergrad tuition was paid for and I figure it's my turn to bite the bullet.
The reason I stopped using the 529 is a few years ago I was talking with a recent college grad and asked him about what it cost. He said, "oh about $X per year, but only the very richest kids pay that, 90% of the kids get some grant or tuition reduction." It hit me that if I save 200K in a 529, then my kids tuition cost will conveniently be 200K.
I've got no problem paying but IMO universities are playing a retailer's game of pricing things far more than the market will bear, seeing which suckers will pay full retail, then discounting the product to a fair price for the remainder. I did not get this close to FIRE by paying full retail.
I'm trying to get my head around this right now, as DH and I are debating how much to fund our 2-year old's 529. We have maxed out our available tax-deferred retirement vehicles, so any extra cash we have is going to go into taxable investments and likely be considered in parental contribution calculations... so why not gain the tax benefits of a 529 while we're at it?
Maybe we don't yet understand enough about what schools look at and what they don't...
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I have a few grand in each kids' 529 for but stopped contributing a few years ago. I do plan on paying for their undergrad tuition at a public school (or the equivalent value at a private school if they choose to go there) but I'll figure out some other way to do it. My undergrad tuition was paid for and I figure it's my turn to bite the bullet.
The reason I stopped using the 529 is a few years ago I was talking with a recent college grad and asked him about what it cost. He said, "oh about $X per year, but only the very richest kids pay that, 90% of the kids get some grant or tuition reduction." It hit me that if I save 200K in a 529, then my kids tuition cost will conveniently be 200K.
I've got no problem paying but IMO universities are playing a retailer's game of pricing things far more than the market will bear, seeing which suckers will pay full retail, then discounting the product to a fair price for the remainder. I did not get this close to FIRE by paying full retail.
From what I understand colleges are asking about parents' net worth as well. They didn't when I went to college (graduated 6 years ago) but a friend of mine said he was asked about it when his kid was going to college. I could be wrong on this; they always just asked for parents' income when I went to school.
My parents made good money but not in the top 10% and I still paid full tuition at the state school I attended (in fact it was tiered and engineering students paid more, so I paid higher than most). The only ones I'm aware of with potential discounts like what you're talking about are private schools.
They ask for assets, not net worth. And any money in a retirement account is excluded.
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I have a few grand in each kids' 529 for but stopped contributing a few years ago. I do plan on paying for their undergrad tuition at a public school (or the equivalent value at a private school if they choose to go there) but I'll figure out some other way to do it. My undergrad tuition was paid for and I figure it's my turn to bite the bullet.
The reason I stopped using the 529 is a few years ago I was talking with a recent college grad and asked him about what it cost. He said, "oh about $X per year, but only the very richest kids pay that, 90% of the kids get some grant or tuition reduction." It hit me that if I save 200K in a 529, then my kids tuition cost will conveniently be 200K.
I've got no problem paying but IMO universities are playing a retailer's game of pricing things far more than the market will bear, seeing which suckers will pay full retail, then discounting the product to a fair price for the remainder. I did not get this close to FIRE by paying full retail.
From what I understand colleges are asking about parents' net worth as well. They didn't when I went to college (graduated 6 years ago) but a friend of mine said he was asked about it when his kid was going to college. I could be wrong on this; they always just asked for parents' income when I went to school.
My parents made good money but not in the top 10% and I still paid full tuition at the state school I attended (in fact it was tiered and engineering students paid more, so I paid higher than most). The only ones I'm aware of with potential discounts like what you're talking about are private schools.
They ask for assets, not net worth. And any money in a retirement account is excluded.
Oh, and the value of the home you live in is also excluded.
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I have a few grand in each kids' 529 for but stopped contributing a few years ago. I do plan on paying for their undergrad tuition at a public school (or the equivalent value at a private school if they choose to go there) but I'll figure out some other way to do it. My undergrad tuition was paid for and I figure it's my turn to bite the bullet.
The reason I stopped using the 529 is a few years ago I was talking with a recent college grad and asked him about what it cost. He said, "oh about $X per year, but only the very richest kids pay that, 90% of the kids get some grant or tuition reduction." It hit me that if I save 200K in a 529, then my kids tuition cost will conveniently be 200K.
I've got no problem paying but IMO universities are playing a retailer's game of pricing things far more than the market will bear, seeing which suckers will pay full retail, then discounting the product to a fair price for the remainder. I did not get this close to FIRE by paying full retail.
From what I understand colleges are asking about parents' net worth as well. They didn't when I went to college (graduated 6 years ago) but a friend of mine said he was asked about it when his kid was going to college. I could be wrong on this; they always just asked for parents' income when I went to school.
My parents made good money but not in the top 10% and I still paid full tuition at the state school I attended (in fact it was tiered and engineering students paid more, so I paid higher than most). The only ones I'm aware of with potential discounts like what you're talking about are private schools.
They ask for assets, not net worth. And any money in a retirement account is excluded.
Oh, and the value of the home you live in is also excluded.
If I live in a single unit of a 100-unit apartment building that I own (and provides me with an amazing amount of income), would that also be excluded (theoretical: I own no such building, and have no children)?
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Yes. My parents paid for my undergraduate (I did some things that meant that was pretty inexpensive, but still, I came out of college debt free which is a big advantage I think) and I will pay tuition and necessary books for my kids undergrad, up to the level of in-state public uni tuition levels. If they want to go to a $60,000 a year private school they will have to figure out how to pay the difference.
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I have a few grand in each kids' 529 for but stopped contributing a few years ago. I do plan on paying for their undergrad tuition at a public school (or the equivalent value at a private school if they choose to go there) but I'll figure out some other way to do it. My undergrad tuition was paid for and I figure it's my turn to bite the bullet.
The reason I stopped using the 529 is a few years ago I was talking with a recent college grad and asked him about what it cost. He said, "oh about $X per year, but only the very richest kids pay that, 90% of the kids get some grant or tuition reduction." It hit me that if I save 200K in a 529, then my kids tuition cost will conveniently be 200K.
I've got no problem paying but IMO universities are playing a retailer's game of pricing things far more than the market will bear, seeing which suckers will pay full retail, then discounting the product to a fair price for the remainder. I did not get this close to FIRE by paying full retail.
From what I understand colleges are asking about parents' net worth as well. They didn't when I went to college (graduated 6 years ago) but a friend of mine said he was asked about it when his kid was going to college. I could be wrong on this; they always just asked for parents' income when I went to school.
My parents made good money but not in the top 10% and I still paid full tuition at the state school I attended (in fact it was tiered and engineering students paid more, so I paid higher than most). The only ones I'm aware of with potential discounts like what you're talking about are private schools.
They ask for assets, not net worth. And any money in a retirement account is excluded.
Oh, and the value of the home you live in is also excluded.
If I live in a single unit of a 100-unit apartment building that I own (and provides me with an amazing amount of income), would that also be excluded (theoretical: I own no such building, and have no children)?
It's my understanding that rental properties (so all the units you are renting out, I assume) are reported in the FAFSA. Here's an article that discusses the specifics of assets and the FAFSA and CSS (what some schools use in addition to the FAFSA). http://www.forbes.com/sites/troyonink/2014/02/14/how-assets-hurt-college-aid-eligibility-on-fafsa-and-css-profile/
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We took the appreciation we got on a house sale (about $50K in 2002 on a house we bought in 1996 - luck of timing) and invested it in mutual funds that are earmarked in our heads as our DD's college fund. She had just turned 1 at the time. Our hope has been to never need that for anything else and have it available to pay for college (or at least pay the lion's share) when the time comes.
I wish the state I currently live in had better state-school options. I'm not an education snob, but I'd like my kid to aim a little higher than what's on offer for cheap around here. Okay, maybe I am an education snob.
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I have a few grand in each kids' 529 for but stopped contributing a few years ago. I do plan on paying for their undergrad tuition at a public school (or the equivalent value at a private school if they choose to go there) but I'll figure out some other way to do it. My undergrad tuition was paid for and I figure it's my turn to bite the bullet.
The reason I stopped using the 529 is a few years ago I was talking with a recent college grad and asked him about what it cost. He said, "oh about $X per year, but only the very richest kids pay that, 90% of the kids get some grant or tuition reduction." It hit me that if I save 200K in a 529, then my kids tuition cost will conveniently be 200K.
I've got no problem paying but IMO universities are playing a retailer's game of pricing things far more than the market will bear, seeing which suckers will pay full retail, then discounting the product to a fair price for the remainder. I did not get this close to FIRE by paying full retail.
Under nearly all scenarios, having $X in 529s vs. $X in (non-retirement) investment accounts isn't going to matter under current financial aid formulae. Others have pointed out that assets in retirement accounts generally aren't going to be treated as assets for financial aid purposes, but remember that withdrawals from those retirement accounts will be treated as income (while withdrawals from investment accounts will not be, although it may trigger some income via capital gains). The interplay of funding retirement, minimizing taxes and optimizing financial aid is very complicated.
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I have a few grand in each kids' 529 for but stopped contributing a few years ago. I do plan on paying for their undergrad tuition at a public school (or the equivalent value at a private school if they choose to go there) but I'll figure out some other way to do it. My undergrad tuition was paid for and I figure it's my turn to bite the bullet.
The reason I stopped using the 529 is a few years ago I was talking with a recent college grad and asked him about what it cost. He said, "oh about $X per year, but only the very richest kids pay that, 90% of the kids get some grant or tuition reduction." It hit me that if I save 200K in a 529, then my kids tuition cost will conveniently be 200K.
I've got no problem paying but IMO universities are playing a retailer's game of pricing things far more than the market will bear, seeing which suckers will pay full retail, then discounting the product to a fair price for the remainder. I did not get this close to FIRE by paying full retail.
Under nearly all scenarios, having $X in 529s vs. $X in (non-retirement) investment accounts isn't going to matter under current financial aid formulae. Others have pointed out that assets in retirement accounts generally aren't going to be treated as assets for financial aid purposes, but remember that withdrawals from those retirement accounts will be treated as income (while withdrawals from investment accounts will not be, although it may trigger some income via capital gains). The interplay of funding retirement, minimizing taxes and optimizing financial aid is very complicated.
This is a good point. Although, I don't think it's that complicated compared to the other financial topics/plans that people on here regularly deal with. For example, I'm aware of people who have enough in Roth accounts to cover college who then get loans (esp if their kid qualifies for subsidized loans) for the first 2.5 years and only start to withdraw from their Roth starting Jan of their kid's junior year (since financial aid is determined using the previous full tax year's info). This way the Roth withdrawals aren't recorded in years used for financial aid.
One just has to weigh the interest in carrying these loans vs the amount of aid it would afford. Also, schools and the feds are getting pretty open about how things are calculated; there are many detailed calculators out there. So, one can run a variety of sitches ahead of time and have a pretty good idea exactly how an extra "x" of income would influence aid.
I'm not saying it's trivial, but I don't think it's something folks on hear should be scared of (frankly, I'm finding my wade in pretty enjoyable in my own twisted way).
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Our oldest is in college now at a private school in VA; we live in TN. We are paying around $2500 per semester. She does have an outside scholarship that covers about 1/3, another scholarship from the college and she takes out whatver aid (grants and/or loans) that FAFSA says she is eligible for so we are just paying the balance left due.
These funds are coming from a savings account (not a 529 because we wanted the flexibility if she didn't go to college) that we have for her education. Once that runs out we will either use a portion of our tax refund, cash flow it, or use some of my DH's GI Bill.
For our younger 3 children (6 and under), we have a savings account for each one (also not a 529 but that will probably change soon) to pay for higher education (vocational training or college), braces, or whatver. We set aside $65 mo per child for that.
Neither my DH or myself have a college degree which probably affects how we view financing college for our children. We don't feel we have to but we do want to help as we can.
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I do not believe paying for college is a parent's responsibility. Teaching their children about money is. Neither my parent's or my husbands parents paid for our college education. I never had to take out loans because I worked while in school to pay for school. I paid each semester as I went along.
As we are still struggling to max out our retirement savings, saving for our kids is not even a priority. If we reach FI we may reconsider our position on the matter, but I'm still not convinced my children will go to college.
An avenue to remember, is that many employers will help with tuition remission if the job one is working is directly related to your area of study. I wish my employers told me about this when I was in school, because I would have been able to take advantage of this, but I was too young/inexperienced to even know about these types of things. I will make sure my children know.
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I am in college right now and I was raised with the idea that I would be paying half of everything. And my goodness, it had such a large influence on me - it's unbelievable. It taught me to get involved with budgeting, frugality, working hard, reality of life, etc. I am so thankful for that.
So for my kids I'm going to do the same. In the meantime though, I'm going to save for my kids (once I have them).
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This is one of two topics I struggle with Daily. The other being when in total FIRE exactly our needs etc...
Anyhow we have 4 kids entering Tenth Grade, 9th Grade, 5th Grade and 3rd Grade. Early on before we smartened up a bit we were one of those that though $ would just always flow in and just pay for it when it comes....college that is. My wife went to College full ride for both Academics and Athletics and I went into the Service. My feeling is I wanted to do something and that increases with the more articles I read about Kids debt after College. My wife thought got everything handed to her feels the same way they should pay part of it. So a while back we decided to Start 529s and in our State there is a State Tax deduction. They all have currently in the mid 20's in there account so there will be something for all of them. As they go to College we can determine then based on our own financial situation if we will help out or not plus based on how responsible they are being. So i have come to terms with more a wait and see approach because I dont want to ruin our future when at the very least I feel they will have mid 30'sk to help already. I'm not going to put anymore pressure on us that its our responsibility. The older ones if they stay healthy have good opportunity's for sports to help and academics. Time will tell but not counting on anything. Do what we can and teach them to have to do the rest by setting hopefully a good example.
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My problem is that kids no longer can truly pay for college with full time work over the summer and part time (12-15hours) during the school year. I worked my way through and it required part time school or taking semesters off sometimes and I did do community college to university. Also, my state's requirements to transfers as a junior meant over 15 units more than going straight through.
Aid awards do take into account parental income so, those who can, IMO, should pay.
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I have a newborn 2 month old (Probably will be our only child). I opened up a 529 account for him last week. I put in $1K initial contribution and plan to do $250 monthly (over time will probably increase monthly contribution). His grandparents will be opening up a 529 account for him as well, they have not yet but probably will this week. Not sure what they plan to contribute. College is so expensive and I do not want him saddled with ridiculous student loans so I figure what our contributions and grandparents he will have enough to cover his college education (or at least at a state school). Also it is state tax deductible in my state (PA) so nice little added benefit for me. One question I do have is what if after all this my son were to get a scholarship and not need the 529 funds, what would happen then.
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I have a newborn 2 month old (Probably will be our only child). I opened up a 529 account for him last week. I put in $1K initial contribution and plan to do $250 monthly (over time will probably increase monthly contribution). His grandparents will be opening up a 529 account for him as well, they have not yet but probably will this week. Not sure what they plan to contribute. College is so expensive and I do not want him saddled with ridiculous student loans so I figure what our contributions and grandparents he will have enough to cover his college education (or at least at a state school). Also it is state tax deductible in my state (PA) so nice little added benefit for me. One question I do have is what if after all this my son were to get a scholarship and not need the 529 funds, what would happen then.
If a child gets a scholarship, to the point that they do not need the 529, you can withdraw it penalty free.
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Do you save for your child to go to college? If so, how much? Does anyone feel it is not their responsibility to save fully for their kid's college?
Yes, I did save. I am now paying, and I've found that paying for college has not been nearly as difficult as anticipated. We set limits on what we would pay -- what type of school, how many years -- and we've had no problem.
Yes, I feel it is my responsibility to help my child into the world of adulthood, and part of that is helping her prepare for her career -- for that, she must have a college degree. My husband and I can pay for college with only small sacrifice; on the other hand, it would be very difficult for our daughter to do it on her own.
Balance is a good word to use when discussing finances. If we were unable to save for our own future, I wouldn't put aside money for college -- but then, if we were truly unable to save, our kids would probably qualify for a PELL grant. On the other hand, I would not feel good about retiring early so I could relax and do my own thing, while saying to my 18-year old (who isn't really an adult at all), "Go figure it all out!" I'm willing to work a couple more years to see my kids through university without debt. I'll still retire early and comfortably, and they'll begin their professional lives without the burden of debt.
The reason I stopped using the 529 is a few years ago I was talking with a recent college grad and asked him about what it cost. He said, "oh about $X per year, but only the very richest kids pay that, 90% of the kids get some grant or tuition reduction." It hit me that if I save 200K in a 529, then my kids tuition cost will conveniently be 200K.
I don't think that's true. I hear a whole lot of parents saying they were expecting grants, and they were offered only loans.
From what I understand colleges are asking about parents' net worth as well. They didn't when I went to college (graduated 6 years ago) but a friend of mine said he was asked about it when his kid was going to college. I could be wrong on this; they always just asked for parents' income when I went to school.
My parents made good money but not in the top 10% and I still paid full tuition at the state school I attended (in fact it was tiered and engineering students paid more, so I paid higher than most). The only ones I'm aware of with potential discounts like what you're talking about are private schools.
I have a college student and a high school senior, and no college has asked about our income.
I wish the state I currently live in had better state-school options. I'm not an education snob, but I'd like my kid to aim a little higher than what's on offer for cheap around here. Okay, maybe I am an education snob.
It may vary from place to place, but in my state the average state school is vastly superior to the average private school. We have a number of small, un-prestigious private schools whose "target student" is a high school slackard from a moderately wealthy family (or one willing to borrow). As such, I am firmly in the camp of, State schools are an amazing value for the money, and we have at least one that will fit every student's academic and career needs.
You also need to consider what the student plans to study. I am a teacher; my salary is set by the state, and no one cares where I went to school -- the name on my diploma will not help me advance or get me more money. Likewise, my oldest child is studying nursing. It won't matter where she studied; what will matter is that she can pass the test that will make her an RN. In contrast, someone planning a career in politics might benefit from being able to show off a class ring from Snooty-U.
My problem is that kids no longer can truly pay for college with full time work over the summer and part time (12-15hours) during the school year. I worked my way through and it required part time school or taking semesters off sometimes and I did do community college to university. Also, my state's requirements to transfers as a junior meant over 15 units more than going straight through.
Aid awards do take into account parental income so, those who can, IMO, should pay.
Yes, it is much, much harder to "pay your own way" than it was back in the 80s when I did it -- and it was pretty bone-crushingly difficult then to pay for college without any help.
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Yes, my kids about 3 and 1 now. Gov't kicks in 20% grant up to $7200 (max per year though) over the lifetime. All B-day money and cash gifts go towards it. I'm front loading so we already have close to 20k already. If they choose to decide to attend post secondary education this is available to them. We're playing with the idea they we pay 1/2 and they pay 1/2 over the course of the university life (if they choose). Of course we're just investing their share. Then when they graduate or land their first job or whatever, hand over the investment account to them as a 'FIRE' starter, lol. Notice I say 'choose' to go to university... I didn't go and never will, I will understand if they don't want to either.
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Canadian here, so our University costs are not so absurd as they are in the States.
We have saved a little for our kids to go to college. Some of it from grandparents that was earmarked for exactly that, and some of our own money. In Canada we have the RESP thing that provides a 20% grant up to $500 per year (with a few qualifications etc) into a tax deferred investment account. There is an incentive to save for the kids education.
On the flip side, tuitions are rising dramatically here in Canada (though the quality of education does not seem to be rising alongside it). So my kids' first year tuition will likely be equivalent to the tuition I paid for all 6 years of my university education.
My grandmother left me some money earmarked for school, and my parents helped with the tuition. In the end I was responsible for paying my living costs and everything other than tuition and books, as well as a (small) portion of my tuition. I had a lucrative but intensive job in the summers (treeplanting) that covered the rest fairly comfortably, though I would have picked up a p/t job if I had needed to. I'm sure my parents could have helped me more (they both retired at 55 while I was in school), but I didn't want them to because I didn't like the dependency.
It is my hope to make sure the kids have tuition covered, unless they go to Harvard or something, in which case I'll only be able to help a little. Adults can and should pay their own living expenses. Every kid needs to learn some of the basics of money the hard way (not matter what their parents try to teach them), and I'd prefer they do it while in school than afterwards.
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I've never saved for anything.
I've just spent less than my income.
When it came time to buy a car I had the money and bought one. And I had enough for the down payment on my house. When it was time for the kid's college he paid for part and we paid the rest.
If you just save there's enough money for when you need to buy something.
I've never had an emergency fund, either. Never needed one.
That's what worked for me, and it worked very well.
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I'm going to take care of future kid by putting some money into a 529 and encouraging looking at the ROTC scholarship for the rest.
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I have the GI Bill and 3 boys. Oldest tried CC (which I funded as long as he got a B or higher) and didn't like it. He is now working full time and paying us rent. If he finished CC I would have let him use 1/2 of GI Bill for last 2 years at state uni.
2nd son has Autism and most likely won't attend.
3rd son is 10 and at this point will have the whole GI bill available for school.
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I have a newborn 2 month old (Probably will be our only child). I opened up a 529 account for him last week. I put in $1K initial contribution and plan to do $250 monthly (over time will probably increase monthly contribution). His grandparents will be opening up a 529 account for him as well, they have not yet but probably will this week. Not sure what they plan to contribute. College is so expensive and I do not want him saddled with ridiculous student loans so I figure what our contributions and grandparents he will have enough to cover his college education (or at least at a state school). Also it is state tax deductible in my state (PA) so nice little added benefit for me. One question I do have is what if after all this my son were to get a scholarship and not need the 529 funds, what would happen then.
The grandparents shouldn't have to open there own 529. In every case I have know they can contribute to the same 529 as you have set up and receive the same benefits the 529 might offer. I.E. my state you get a tax deduction up to 3k a year.
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one acronym: CLEP.
Don't throw money at the first two years of college at a university. Today there are a crazy number of online courses from Duke, Stanford, etc. Take the free online course and pay $80 to sit the CLEP exam and whammo you have 3-4 college credits. Put $ into the last 2 years undergrad. Not the first two.
http://forum.mrmoneymustache.com/share-your-badassity/frugal-parents-and-frugal-high-school/msg300293/#msg300293
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I have a college student and a high school senior, and no college has asked about our income.
From what I understand, you are paying for your kids' college educations. My parents didn't, so when I filled out my FAFSA (applying for federal loans, grants and scholarships), I had to submit my and my parents' income tax information each year. This is also because my parents claimed me as a dependent (technically they weren't supposed to but I didn't mind at the time). I actually would fill out my FAFSA on January 1st to be eligible for grants requiring application by February 14th, which was before my parents filed their taxes, so I had to estimate their income and mine. Later in the year I had to fill out an Income Verification Form (April timeframe).
If a student isn't applying for federal grants/loans then the university/federal government probably doesn't care what the parents make. Same with if the kid is applying but isn't claimed as a dependent by anyone else (they still want the applicant's income info though). Did your children apply for grants or fill out a FAFSA? If so and you haven't been asked, then rules have changed since I was in college (I graduated 6.5 years ago).
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I have a newborn 2 month old (Probably will be our only child). I opened up a 529 account for him last week. I put in $1K initial contribution and plan to do $250 monthly (over time will probably increase monthly contribution). His grandparents will be opening up a 529 account for him as well, they have not yet but probably will this week. Not sure what they plan to contribute. College is so expensive and I do not want him saddled with ridiculous student loans so I figure what our contributions and grandparents he will have enough to cover his college education (or at least at a state school). Also it is state tax deductible in my state (PA) so nice little added benefit for me. One question I do have is what if after all this my son were to get a scholarship and not need the 529 funds, what would happen then.
The grandparents shouldn't have to open there own 529. In every case I have know they can contribute to the same 529 as you have set up and receive the same benefits the 529 might offer. I.E. my state you get a tax deduction up to 3k a year.
It is better for the grandparents to set up their own because it is not counted in the FASFA calcs.
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I would really like to hear anyone's experience in paying for college from divorced parents.
My ex has a very high income but nearly no savings. I have a very low income but strong savings/home equity. When we were married, he used to scoff at saving for college, saying he'd just pay out of his paycheck -- and he probably can.
Our divorce agreement pushes the problem off, leaves it to state law which won't require either parent to pay more than the in-state public rate. My current impression is that my personal situation would qualify for financial aid, but because of my ex's income, the kids will not.
Has anyone lived through this, can tell me how it works? Is there a presumption divorced parents will split the costs 50/50 or is the ratio need-based? Can you get your financial profiles evaluated separately under FAFSA or the other scheme?
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I have about $5k in a 529 account for my 14 year old that I stopped funding several years ago in order to focus on funding retirement and the last remaining amount of my student loans.
I am fully prepared to pay for the full amount for a 4 year degree at a public, state school, but only if the grades are right. This will be modelled on a tuition reimbursement plan from work. So, if she gets an A or B, I will pick up the tab. If she gets a C, I will pay half. I will not pay for Ds or Fs.
She needs some financial incentive to work hard, so this should work for us.
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I would really like to hear anyone's experience in paying for college from divorced parents.
My ex has a very high income but nearly no savings. I have a very low income but strong savings/home equity. When we were married, he used to scoff at saving for college, saying he'd just pay out of his paycheck -- and he probably can.
Our divorce agreement pushes the problem off, leaves it to state law which won't require either parent to pay more than the in-state public rate. My current impression is that my personal situation would qualify for financial aid, but because of my ex's income, the kids will not.
Has anyone lived through this, can tell me how it works? Is there a presumption divorced parents will split the costs 50/50 or is the ratio need-based? Can you get your financial profiles evaluated separately under FAFSA or the other scheme?
Are you the custodial parent? If so, for state schools, his income/assets do not count. There are some private schools that will count both.
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I have about $5k in a 529 account for my 14 year old that I stopped funding several years ago in order to focus on funding retirement and the last remaining amount of my student loans.
I am fully prepared to pay for the full amount for a 4 year degree at a public, state school, but only if the grades are right. This will be modelled on a tuition reimbursement plan from work. So, if she gets an A or B, I will pick up the tab. If she gets a C, I will pay half. I will not pay for Ds or Fs.
She needs some financial incentive to work hard, so this should work for us.
I would change it to say if she gets an A you will pay for whole, B is half and C or below is NIL.
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I have about $5k in a 529 account for my 14 year old that I stopped funding several years ago in order to focus on funding retirement and the last remaining amount of my student loans.
I am fully prepared to pay for the full amount for a 4 year degree at a public, state school, but only if the grades are right. This will be modelled on a tuition reimbursement plan from work. So, if she gets an A or B, I will pick up the tab. If she gets a C, I will pay half. I will not pay for Ds or Fs.
She needs some financial incentive to work hard, so this should work for us.
I would change it to say if she gets an A you will pay for whole, B is half and C or below is NIL.
Lol, certain classes are harder than others. I certainly would not want to discourage my daughter from trying certain classes because she might get a C. I am in grad school, but the hardest course I ever had was my Ochem class and I worked my ass off for that C. I am much prouder of that C than the muliple As I got in some much easier classes.
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I would really like to hear anyone's experience in paying for college from divorced parents.
My ex has a very high income but nearly no savings. I have a very low income but strong savings/home equity. When we were married, he used to scoff at saving for college, saying he'd just pay out of his paycheck -- and he probably can.
Our divorce agreement pushes the problem off, leaves it to state law which won't require either parent to pay more than the in-state public rate. My current impression is that my personal situation would qualify for financial aid, but because of my ex's income, the kids will not.
Has anyone lived through this, can tell me how it works? Is there a presumption divorced parents will split the costs 50/50 or is the ratio need-based? Can you get your financial profiles evaluated separately under FAFSA or the other scheme?
Are you the custodial parent? If so, for state schools, his income/assets do not count. There are some private schools that will count both.
*most* state schools only require the FAFSA. There are a few (more prestigious wealthier, like UVa) that do require info from non-custodial. But, these schools are generally more generous than other less wealthy state schools, so even with submitting this info, they may still be less expensive if your child gets in.
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I would really like to hear anyone's experience in paying for college from divorced parents.
My ex has a very high income but nearly no savings. I have a very low income but strong savings/home equity. When we were married, he used to scoff at saving for college, saying he'd just pay out of his paycheck -- and he probably can.
Our divorce agreement pushes the problem off, leaves it to state law which won't require either parent to pay more than the in-state public rate. My current impression is that my personal situation would qualify for financial aid, but because of my ex's income, the kids will not.
Has anyone lived through this, can tell me how it works? Is there a presumption divorced parents will split the costs 50/50 or is the ratio need-based? Can you get your financial profiles evaluated separately under FAFSA or the other scheme?
Are you the custodial parent? If so, for state schools, his income/assets do not count. There are some private schools that will count both.
*most* state schools only require the FAFSA. There are a few (more prestigious wealthier, like UVa) that do require info from non-custodial. But, these schools are generally more generous than other less wealthy state schools, so even with submitting this info, they may still be less expensive if your child gets in.
I had NEVER heard of a state school requiring anything except for private scholarships. Learn something new.
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Are you the custodial parent? If so, for state schools, his income/assets do not count. There are some private schools that will count both.
Hm. Legally no, we technically have joint custody. But in practice, yes. They live here, visit there, and he pays child support. And I declare all the kids on my taxes.
Hey! I just looked it up at FAFSA:
The custodial parent for federal student aid purposes is the parent with whom you lived the most during the past 12 months. . . . Note that this is not necessarily the same as the parent who has legal custody.
Sounds promising, at least if we qualify for federal aid.
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one acronym: CLEP.
You needn't throw money at the first two years of college at a university. Today there are a crazy number of online courses from Duke, Stanford, etc. Take the free online course and pay $80 to sit the CLEP exam and whammo you have 3-4 college credits. Put $ into the last 2 years undergrad. Not the first two.
http://forum.mrmoneymustache.com/share-your-badassity/frugal-parents-and-frugal-high-school/msg300293/#msg300293
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one acronym: CLEP.
Very few places accept them; none in our state. In neighboring states, it's mostly community colleges.
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Older son is in college, and younger son starts this fall. We're operating on the limited 50% plan--tuition, books, and other approved education expenses only. Our home is a 30-minute bus ride from one Division I university (public), and a 45-minute bus ride from another Division I university (public). Owning a car and its numerous expenses are unnecessary. Paying for rent, utilities, laundry, and groceries in an apartment or college dorm is unnecessary.
My older son bought our old car and chose to move 2 hours away to go to another university, so he's working quite a bit to foot those additional bills (I strongly advised otherwise, but your child has to hear you and then make his/her own choices). The younger son is very frugal, working two jobs in the summers, banking 90+% of his pay, and plans to live at home and forego the car route. Given his hard work thus far, savings rate, and plans to continue to work weekends during the school year, he is considering moving on campus on his own dime for his final two years--cash up front. Time will tell what he eventually decides to do. He's often taken the more frugal route when decision time came. Last month, he even broke up with his senior year girlfriend after 8 months because of continuing differences about personal finances with respect to driving and dating vs longer-term financial goals.
No regrets with our advice and decisions thus far even though the sons chose two different paths. That is always a possibility, no matter what choice you put in front of two teens who are just beginning to test their wings.
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What about taking actual college classes during high school? My older son has been taking high school classes since sixth grade, and enters high school in the fall. He has completed Latin I, and the equivalent of a year of college organic chemistry. If he substitutes some college classes for some of the regular high school classes, will his eventual college accept the credits? He is nowhere near ready to go away to university yet, academically or socially/emotionally. I'm not interested in grade acceleration, really. But I do think he needs some additional challenge over the next few years.
I'm a late college savings starter. My kids will not get financial aid if I stay in my current job. So I'm saving as much as I can. So far this year I've put $25K in their 529 plans (combined, not each). My goal is $40K for the year. I'm also still working the adjunct professor angle, and have been given an additional project at the uni where I teach. So there is always the possibility that I could go full-time there before older son hits college and get the significant tuition discount.
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one acronym: CLEP.
Very few places accept them; none in our state. In neighboring states, it's mostly community colleges.
If you get them accepted in a community college, most 4 year universities will accept the transfer credits. It can be a cheap way to do the first year or two of school, and still get a degree from a big name university.
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I invest for my children and grandchildren and great grandchildren. It is not necessarily a college targeted fund.
I am not looking to FI as an end. I believe if you have children that you're not financially set until you have enough diversified investments to fund at least 3 generations at a 1% withdrawal.
That said,
College can be virtually free for many folks. In high school make sure they take every college credit course available. Then make sure they are in an A+ program where they receive 2 free years of college for having good grades and good attendance. (you might google the recent story of the 16 year old teen who graduated from high school and college on the same day)
Then send them to a free college such as College of the Ozarks in Branson Missouri.
Alternatives include academic and sports scholarships. Remember to negotiate the sticker price heavily.
Remember also, it is not an 18 year old kids choice where they might go to school. It is the parents. The banker bloodsuckers will attempt to offer 18 year old kids with no experience massive loans for school. Tell your kids hell no! Be a parent!
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No. I save money for whatever future expenses may arise. Perhaps college expenses will be among them, maybe not. My college education didn't cost my parents a dime. Hopefully my kids will get scholarships or pay for it themselves or choose a different path, but maybe not. Money is fungible, so I see no need to distinguish the money I am saving to buy toilet paper 20 years from now from the money I am saving to pay for my kids' college tuition.
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I believe if you have children that you're not financially set until you have enough diversified investments to fund at least 3 generations at a 1% withdrawal.
So do you plan to ever stop working?
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Yes, but not directly (no college savings plan). 2 yrs paid so far; 6 more to go (2 dc)
I'm so proud we can do this for our dc!
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... I believe if you have children that you're not financially set until you have enough diversified investments to fund at least 3 generations at a 1% withdrawal....
That is an extremely tough standard you are holding yourself to. Most people here are happy to get themselves to a 4% withdrawal and let the kids make their own way. I'm somewhere in the middle, but I've never heard anyone here express this kind of sentiment. I wish you good luck achieving that size nest egg. I'm sure it's possible, but I'm not staying around to find out for myself.
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From what I understand, you are paying for your kids' college educations. My parents didn't, so when I filled out my FAFSA (applying for federal loans, grants and scholarships), I had to submit my and my parents' income tax information each year.
No, we're discussing different things: Another poster commented that schools want to know how much $$$ you have, and then they'll decide what to charge you. I said no school had asked us about our income. Yes, the FAFSA form does ask for income, but that's the government deciding whether they'll give you federal grants -- it's not the school asking.
No, we didn't apply for financial aid or grants. The guidelines showed that we were nowhere close to qualifying. My oldest did earn some nice scholarships, but we did enough research to know that anything need-based would be a waste of time. It's easy to be bitter about that and say, "If you save, you don't qualify for grants", but the big picture is that if you don't save, you can still go to college -- but what the FAFSA will offer you will be mostly loans. So you can save now, or you can make payments + interest later, but pretty much, you're going to pay one way or the other. one acronym: CLEP.
You needn't throw money at the first two years of college at a university. Today there are a crazy number of online courses from Duke, Stanford, etc. Take the free online course and pay $80 to sit the CLEP exam and whammo you have 3-4 college credits. Put $ into the last 2 years undergrad. Not the first two.
http://forum.mrmoneymustache.com/share-your-badassity/frugal-parents-and-frugal-high-school/msg300293/#msg300293
I think it's fair to say that anyone who's trying can get some college credits for free or at a low price during his or her senior year of high school, but I would not agree that the first two years of college can be essentially free.
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I had a Mustachian Light Bulb go on a couple of months back. We had put a lot of funds into our two kiddos 529 accounts already. I took a look at what the 529 money can actually be used for and realized we have saved plenty already. The money we were paying into 529s has been diverted into our post retirement, pre-401(k) payout years. That's the gap to fill which is our challenge right now, since we do not want to incur early withdrawal penalties.
Additionally, if our plans work out our kiddos may well go to college in the UK, which while no longer free of charge (as it was back in the day), it is very still very reasonable costwise in comparison to the US. Plus you can get a good BS (or a BSc. as it is called) in three years. Yours truly got a BS, MS and PhD. in 8 years in the UK, all paid for by grants etc. which was pretty handy when I entered the workforce at a tender age by comparison to my US contemporaries. When Dr. John used to show up at meetings in the early years (especially in the US) everyone was expecting someone much older.
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We did. Back in the day our state offered a 529 that was guaranteed to keep pace with tuition inflation. It sounded too good to be true - but hey it was backed by the state. So I rolled my kids funds over to that - enough for four years tuition each. And dang if a year later that guaranteed fund was closed but those that were already invested could still reap those guaranteed rewards. And yep it paid for four years tuition each. We had to come up with room and board and managed to do that. So two kids and last one just graduated 2014 - and debt free. Spent about $100,000 on each kid. Wow writing that down - crap ton of money. But both are doing well and employed and not dependent on mom and dad for money. One engineer and one business type major. So full steam ahead for retirement savings!
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We have 3 of 4 years in MD's prepaid, inflation-matching 529.
When I was in college in the last 70's, U of M cost like $500 per semester and my parents want me to pay half, which was easy on summer income. Not many kids today can pay for college with summertime work.
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I plan to fully my kid's college education. My kid will be turning 5 later this year and I have $40k save up already in the 529. The plan is to ensure that there will be $160k in today's dollar when she turns 18. If for some reason any portion of the 529 will not be used for college/grad education (scholarship, etc), I plan to put the amount into her FIRE fund. I am hoping she will work hard to not use the 529.
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We have 3 of 4 years in MD's prepaid, inflation-matching 529.
When I was in college in the last 70's, U of M cost like $500 per semester and my parents want me to pay half, which was easy on summer income. Not many kids today can pay for college with summertime work.
I'm in MD also and thinking about using their plan. Do you mind me asking how old is your kid? My husband and I have been going back and fourth on when's the best time to fund the account.
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My grandfather and parents paid for 100% of my college. I planned all along to pay 100% of tuition & room/board at the rate of our public state university (where DW and I went).
DD graduated in 2009 and DS graduated this May. Approximately $70-80k each. We made too much money to get any free money.
I'm very happy to have gotten my kids off to a debt free start to their careers.
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Isn't it the best school to learn to earn money yourself?
And by working a unschooled job, learning the importance of having an education...
I will make sure anyway to have some money available for my son to ensure he can educate himself.
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My grandfather and parents paid for 100% of my college. I planned all along to pay 100% of tuition & room/board at the rate of our public state university (where DW and I went).
DD graduated in 2009 and DS graduated this May. Approximately $70-80k each. We made too much money to get any free money.
I'm very happy to have gotten my kids off to a debt free start to their careers.
+1
My wife and I did exactly the same thing for our 2 sons. Neither of us had college loans to pay off and we wanted to give our kids the same start. Even though I could be $150k further along in my retirement funding, it's a good feeling to have given them a debt free start to their adult lives.
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My grandfather and parents paid for 100% of my college. I planned all along to pay 100% of tuition & room/board at the rate of our public state university (where DW and I went).
DD graduated in 2009 and DS graduated this May. Approximately $70-80k each. We made too much money to get any free money.
I'm very happy to have gotten my kids off to a debt free start to their careers.
Speaking as his daughter, I really appreciate it!
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We used to. We have 529 plans for each of them, and we used to contribute a little each month. Then we reconsidered the size of our debts, and we figured that money would be better to pay-off debt. When things are paid off, we will resume.
It won't bother me if we aren't able to fund college entirely. Maybe our kids will choose something else in life. I just don't want them to be strangled by huge college debts (like their parents) if I can help it.
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My grandfather and parents paid for 100% of my college. I planned all along to pay 100% of tuition & room/board at the rate of our public state university (where DW and I went).
DD graduated in 2009 and DS graduated this May. Approximately $70-80k each. We made too much money to get any free money.
I'm very happy to have gotten my kids off to a debt free start to their careers.
Speaking as his daughter, I really appreciate it!
Haha, no way! We have a family of Mustachians on the forum.
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My grandfather and parents paid for 100% of my college. I planned all along to pay 100% of tuition & room/board at the rate of our public state university (where DW and I went).
DD graduated in 2009 and DS graduated this May. Approximately $70-80k each. We made too much money to get any free money.
I'm very happy to have gotten my kids off to a debt free start to their careers.
Speaking as his daughter, I really appreciate it!
Haha, no way! We have a family of Mustachians on the forum.
I thought that was pretty cool, too.
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My grandfather and parents paid for 100% of my college. I planned all along to pay 100% of tuition & room/board at the rate of our public state university (where DW and I went).
DD graduated in 2009 and DS graduated this May. Approximately $70-80k each. We made too much money to get any free money.
I'm very happy to have gotten my kids off to a debt free start to their careers.
Speaking as his daughter, I really appreciate it!
Haha, no way! We have a family of Mustachians on the forum.
I thought that was pretty cool, too.
Super cool! I would LOVE if my daughters were on here.
My experience is varied. On one hand, I've witnessed kids who have skin in the game do really well. My classmates who paid their way were pretty damned serious about learning. On the other hand, my parents paid my way and I have to say that it was one of the best gifts I ever received. However, I didn't have much of a clue as to what they were paying. Now I want to pay that gift forward, but with more information about the finances.
So, this is what we've done: put aside $80k for each kid. If they need more, they can work and use their own money. If they need less, then it can go toward any education expenses beyond bachelor degree.
With our first daughter we probably could have laid the ground rules more clearly. I may end up giving her a $5k or so mulligan if she needs it because we didn't talk as much about the financing as we should have. But she's doing great.
Daughter # 2 is taking a gap year and doing classes online and working. I explained the $80k commitment. I may have another conversation with her to have her repeat back her understanding so that we have the same expectations.
Son, who is 8: we have put about $20k into a 529 and will earmark the rest.
I want to pay for my kids' educations. But I also want them to take it seriously and have skin in the game. This was our solution.
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one acronym: CLEP.
Very few places accept them; none in our state. In neighboring states, it's mostly community colleges.
If you get them accepted in a community college, most 4 year universities will accept the transfer credits. It can be a cheap way to do the first year or two of school, and still get a degree from a big name university.
But if you have your heart set on a particular big name university, do check first. Mine does not accept any community college credits at all.
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one acronym: CLEP.
Very few places accept them; none in our state. In neighboring states, it's mostly community colleges.
If you get them accepted in a community college, most 4 year universities will accept the transfer credits. It can be a cheap way to do the first year or two of school, and still get a degree from a big name university.
But if you have your heart set on a particular big name university, do check first. Mine does not accept any community college credits at all.
And some will require many more credits than can be done in two years to account for the first two years AND if your program has certain requirements that need to be done in the first two years, the program may not have those available to community college students.
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Re: the community college thing. I did this and transferred to the best state school. I worked on my own with the community college counselors with my eyes set solely on going to this Big 10 school (the community college and university were in the same city so the counselors were very familiar with the university's program). I took all the classes they said lined up, studied the university's materials on transferring in, got straight A's, worked my butt off, worked full-time as a server and got in to the school as a transferring junior. I found the university to be not much harder than the community college. So if you go this route, pick your schools, line up the classes to make sure everything is transferrable.
Also, I did not get an Associate's....I just focused on cherry picking the classes the university wanted. It was a great experience.
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A word of caution on funding 529 plans, from my own life experience:
My family culture is VERY pro-higher education. My brothers and I all went to college or more. In my parents' generation, everyone went to college on both sides of the family. My mother has a PhD. My father has a MBA. Even THEIR PARENTS went to college (even the women -- unusual in the early 20th century). So.... that's the family culture my kids grew up in.
I funded 529 plans for both kids.
My daughter had 4 years, tuition, 1 year of room/ board, fees fully funded to any public Fla. university. She turned it down. Twice. After she turned 20, my ex-husband and I cashed it out (529's don't earn any return so leaving it there meant idle money). We got back $14,700. Yep. That's it. We had bought in in 1995 got back only what we paid in. It nearly brings me to tears when I think that she could have a BA for so little. Plus, we had to declare it as income and pay taxes on it the year we cashed it out.
For my son, in 1999 we bought 2-years of university tuition/ fees and I'm still paying on it. He also has an Education IRA with about $8k in it. He's a HS senior. He has also said he's not going to college -- he's enlisting. So, I guess we'll be cashing that one out too. Note, when I cash out the Education IRA, I'll have to pay a 10% penalty and tax on the gain. I'll have to pay tax on the amount paid into the 529. It really frosts me when that payment drafts each month from now until next June.
Word to the wise... Your kids will have their own ideas about college and you can't make them understand what you know. 529 plans might bite you on the ass in coming years. I wonder what that $14,700 would be worth, had I put it in a Roth index fund.......!
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A word of caution on funding 529 plans, from my own life experience:
My family culture is VERY pro-higher education. My brothers and I all went to college or more. In my parents' generation, everyone went to college on both sides of the family. My mother has a PhD. My father has a MBA. Even THEIR PARENTS went to college (even the women -- unusual in the early 20th century). So.... that's the family culture my kids grew up in.
I funded 529 plans for both kids.
My daughter had 4 years, tuition, 1 year of room/ board, fees fully funded to any public Fla. university. She turned it down. Twice. After she turned 20, my ex-husband and I cashed it out (529's don't earn any return so leaving it there meant idle money). We got back $14,700. Yep. That's it. We had bought in in 1995 got back only what we paid in. It nearly brings me to tears when I think that she could have a BA for so little. Plus, we had to declare it as income and pay taxes on it the year we cashed it out.
For my son, in 1999 we bought 2-years of university tuition/ fees and I'm still paying on it. He also has an Education IRA with about $8k in it. He's a HS senior. He has also said he's not going to college -- he's enlisting. So, I guess we'll be cashing that one out too. Note, when I cash out the Education IRA, I'll have to pay a 10% penalty and tax on the gain. I'll have to pay tax on the amount paid into the 529. It really frosts me when that payment drafts each month from now until next June.
Word to the wise... Your kids will have their own ideas about college and you can't make them understand what you know. 529 plans might bite you on the ass in coming years. I wonder what that $14,700 would be worth, had I put it in a Roth index fund.......!
My 529 earned returns. What fund did you put your 529 in?
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A word of caution on funding 529 plans, from my own life experience:
My family culture is VERY pro-higher education. My brothers and I all went to college or more. In my parents' generation, everyone went to college on both sides of the family. My mother has a PhD. My father has a MBA. Even THEIR PARENTS went to college (even the women -- unusual in the early 20th century). So.... that's the family culture my kids grew up in.
I funded 529 plans for both kids.
My daughter had 4 years, tuition, 1 year of room/ board, fees fully funded to any public Fla. university. She turned it down. Twice. After she turned 20, my ex-husband and I cashed it out (529's don't earn any return so leaving it there meant idle money). We got back $14,700. Yep. That's it. We had bought in in 1995 got back only what we paid in. It nearly brings me to tears when I think that she could have a BA for so little. Plus, we had to declare it as income and pay taxes on it the year we cashed it out.
For my son, in 1999 we bought 2-years of university tuition/ fees and I'm still paying on it. He also has an Education IRA with about $8k in it. He's a HS senior. He has also said he's not going to college -- he's enlisting. So, I guess we'll be cashing that one out too. Note, when I cash out the Education IRA, I'll have to pay a 10% penalty and tax on the gain. I'll have to pay tax on the amount paid into the 529. It really frosts me when that payment drafts each month from now until next June.
Word to the wise... Your kids will have their own ideas about college and you can't make them understand what you know. 529 plans might bite you on the ass in coming years. I wonder what that $14,700 would be worth, had I put it in a Roth index fund.......!
My 529 earned returns. What fund did you put your 529 in?
"529" merely refers to the section of IRS code that allows these funds, so it's a very generic name covering two kinds of products [edited].
For my daughter, we bought the Fla. PrePaid 529 which, for a set price, guaranteed 4 years of tuition and fees and one year of room and board.
For my son, we bought two years of Va. PrePaid 529 which mirrored the Fla. plan -- a guarantee of 2 years of university tuition (we could have bought 4 years but chose not to). When I cash this out, I will get back what I paid in and not a dime more. I will have to pay income tax on it.
In 2010, Son received a settlement of about $6400 from an injury he sustained at a water park. We used it to fund the a 529-Education IRA which essentially puts the money into a mutual fund. That earns a return. When I cash it out, whether this year or in 10 years, I'll pay a 10% penalty (because we didn't spend it on education-related expenses) and income tax on any gain. It is now worth around $8k so it will add to my tax bill by roughly $2k, give or take. If I wait to cash it out, my tax bill will get bigger and so will the penalty. We'll likely cash it out this fall and whatever impact it has on my taxes I will take out of the proceeds. I'll then put it in Son's Roth IRA brokerage account (half for 2014 tax year and half in 2015 tax year) and let him choose some stocks to buy with it.
Here's a good explanation of the difference between the two kinds of 529 plans: http://www.virginia529.com/529plans/what-is-a-529-plan/index.php (http://www.virginia529.com/529plans/what-is-a-529-plan/index.php)
The moral of the story is . . . know what you're buying before you buy it and ask yourself "what if they don't go to college?" My kids are the first to not go to college in three + generations of my family. Even my great-great-grandfather had a PhD. You might be better off using another funding vehicle.
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One question I do have is what if after all this my son were to get a scholarship and not need the 529 funds, what would happen then.
If a child gets a scholarship, to the point that they do not need the 529, you can withdraw it penalty free.
Earnings are withdrawn penalty free if your child gets scholarships, but you will still owe taxes on them. So if there are enough scholarships that your kid's total bill is less than the earnings on your 529, then you'll end up paying taxes on the earnings. I have been reluctant to use a 529 because of this possibility of essentially having double taxation (since the contributions are with taxed dollars). Maybe I'm arrogantly overestimating the chances of full rides happening, but I'd rather maximize my progress towards FI and then pay for college out of pocket if necessary than slow down the retirement savings to prepare for an expense that may not materialize.
Of course, every person's situation is different. I have lots of Roth options for retirement savings, live in a state with no income tax to deduct 529 from, have only one child (so can't pass 529 dollars on if unused), and haven't hit a savings rate where I'm maximizing my tax-advantaged savings. So for me the deck is fairly stacked against 529 plans, but I think they make sense for a lot of people.
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I view providing a basic college education as my responsibility. If I wasn't willing to do that, I wouldn't have had kids. Sending me to college was the single best thing my parents did for me. Dh feels the same.
We are saving enough for both our kids to go away to college in our good public university system for 4 years or the equivalent. If they decide to live at home they can use the extra for grad school.
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Ill throw my hat in with the minority here. I consider paying for my own education part of my education; i wouldnt want to deprive my kid that if she chooses to go to school. However, shes already begun her financial education ("dont accept money from strangers") and ought to have a pretty good stash of her own when that time comes. I take the same approach on allowance. If she wants to buy something, she figures out a way to make the money herself. Shes been pretty resourceful, so far shes much better at earning money than spending it. I suppose that could change when she hits her teens. Fingers crossed.
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Wanted to throw my hat in the ring and say that we are planning our FIRE numbers based around paying for college $50K per year per kid, four years each. Since we don't know what college costs will be, we would rather figure high. They are 2 and 3 months old right now. We do feel like it is our responsibility to pay for university.
Something else that makes this tricky is that my in laws told us they are putting in $10K per year into a 529 for both kids. If they continue this, great. If not, we still have our plan. For reasons cited above, we are planning on using eligible Roth IRA funds (converted from traditional IRA) to pay for college and we are not doing a separate 529.
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What about taking actual college classes during high school? My older son has been taking high school classes since sixth grade, and enters high school in the fall. He has completed Latin I, and the equivalent of a year of college organic chemistry. If he substitutes some college classes for some of the regular high school classes, will his eventual college accept the credits?
That's going to depend on the individual college and their policies at the time he applies. Some will take some of the credits, some take none. Some places will only take them if you get a 4. You can look up a college at https://apstudent.collegeboard.org/creditandplacement/search-credit-policies to see their policies, but be aware that the college can place additional restrictions on what's listed there. For example, some colleges will give you gen ed credit for certain courses, but if you are majoring in the discipline, they want you to take the introductory courses at their institution, so the AP won't help.
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Re: the community college thing. I did this and transferred to the best state school. I worked on my own with the community college counselors with my eyes set solely on going to this Big 10 school (the community college and university were in the same city so the counselors were very familiar with the university's program). I took all the classes they said lined up, studied the university's materials on transferring in, got straight A's, worked my butt off, worked full-time as a server and got in to the school as a transferring junior. I found the university to be not much harder than the community college. So if you go this route, pick your schools, line up the classes to make sure everything is transferrable.
Also, I did not get an Associate's....I just focused on cherry picking the classes the university wanted. It was a great experience.
You didn't happen to go to Michigan State did you? There were a LOT of people who went to LCC then moved over to MSU, especially in CANR.
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I am in college right now and I was raised with the idea that I would be paying half of everything. And my goodness, it had such a large influence on me - it's unbelievable. It taught me to get involved with budgeting, frugality, working hard, reality of life, etc. I am so thankful for that.
So for my kids I'm going to do the same. In the meantime though, I'm going to save for my kids (once I have them).
My parents and I also split tuition and room and board while I was in undergrad. They didn't tell me they were going to do that, though, so I didn't exactly prepare for it like you did. Well done!
If I ever have children, my goal is to either contribute a certain amount to each (assuming I have more than one) or commit to pay for two full years, with the understanding that they will need to fund it from there. In each of these scenarios, I will have taught them about money management, saving, frugality, etc, so they understand what they need to do to make up the difference I am not covering. I don't believe in paying for certain majors only, but I might only save for public school tuition rates. And for what it is worth, I wouldn't contribute any money to a graduate degree. They can figure that out by themselves just like I had to. That isn't to say I wouldn't send them some "fun money" every once in a while :)
I think the best thing my parents did, in a sense, was to not pay for my entire college education. Having to get out of that debt was what brought me to you fine people and this lovely love of frugality and money-saving! Without all of that, I'd probably still think money grew on trees and it was fine to up your level of spending every time you got a raise!
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I save $2500/year for my kid, I should have to do it for 10 years (obviously evaluate another few years as the date nears). Based on current projections of tuition increases that should suffice to pay for tuition and books at my local university (living at home is common here). I get a 30% match on the first $2500/year, 0% on anything over.
Since I can help I feel responsible to do so. If times are ever tight it's an expense I'll drop.
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We do plan to pay for our kids college, and are currently budgeting to pay $100K+ per child per year. We have two kids under the age of 6, and we are estimating that the cost of a private college in 15 years or so may be this high, if college costs continue to grow faster than inflation. Obviously if we didn't save for this, we'd be retiring a few years earlier (in 4-5 years), but with this large college expense, we are planning to retire in 7-10 years.
We do have help from the grandparents who are contributing to a 529.
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On the flip side of the question, my parents paid in full for my B.S. at an expensive private institution. I'll admit I took it for granted when I graduated, but after seeing the burden of student loans affect my friends, I now appreciate how incredibly liberating it is to graduate debt free, and I will always be grateful for this.
At the same time, during undergrad, I didn't take care to budget my money wisely. I did keep track of spending, never went over the allowance my parents gave me for food, and was never in any danger of zeroing out my checking account. But in retrospect I definitely could have spent a lot less money in undergrad. And I'm certain that if I was expected to contribute towards tuition, I would have budgeted my money more wisely.
If I have kids, so long as I am making reasonable progress towards my stache, I plan on paying in full for my kid's tuition.
To give myself some credit, I did graduate a year early, saving an entire year's worth of tuition.
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@TrulyStashin, thanks for sharing the cautionary tale. I'd like to share a strategy I'm considering for anyone interested.
If you've been around a while you're likely familiar with the Roth IRA ladder, rule 72t (SEPP) and the 0% tax on investments in the 15% bracket. All of that is great for fed taxes, but states might be different. So here's my plan:
Skip 529 for now. Worry about FI and RE. Defer as much tax as possible via 401k & such. RE when the 1st kid finishes junior high. Start the conversion process then and max out all 15% tax bracket space with taxable investment income. The problem in my state (MO) and likely other states is there is no 0% tax on investments so I would owe more state than fed income tax.
At this point max out the 529 plans. No fed deduction but a huge state deduction to offset investment income and reduce the state tax burden. Might not work for everyone, but it's my current plan. Hope it helps someone.
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On the flip side of the question, my parents paid in full for my B.S. at an expensive private institution. I'll admit I took it for granted when I graduated, but after seeing the burden of student loans affect my friends, I now appreciate how incredibly liberating it is to graduate debt free, and I will always be grateful for this.
I think thats pretty awesome. In my experience, both for myself and observed in others, there is often a tendency to feel a sense of entitlement. Kudos to you!
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Re: the community college thing. I did this and transferred to the best state school. I worked on my own with the community college counselors with my eyes set solely on going to this Big 10 school (the community college and university were in the same city so the counselors were very familiar with the university's program). I took all the classes they said lined up, studied the university's materials on transferring in, got straight A's, worked my butt off, worked full-time as a server and got in to the school as a transferring junior. I found the university to be not much harder than the community college. So if you go this route, pick your schools, line up the classes to make sure everything is transferrable.
Also, I did not get an Associate's....I just focused on cherry picking the classes the university wanted. It was a great experience.
You didn't happen to go to Michigan State did you? There were a LOT of people who went to LCC then moved over to MSU, especially in CANR.
Nope, a Big 10 school in Illinois. ;0)
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Skip 529 for now. Worry about FI and RE. Defer as much tax as possible via 401k & such. RE when the 1st kid finishes junior high. Start the conversion process then and max out all 15% tax bracket space with taxable investment income. The problem in my state (MO) and likely other states is there is no 0% tax on investments so I would owe more state than fed income tax.
At this point max out the 529 plans. No fed deduction but a huge state deduction to offset investment income and reduce the state tax burden. Might not work for everyone, but it's my current plan. Hope it helps someone.
Damn, that's a really good idea. I love reading tax avoidance strategies.
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I never expected to see so many Yes answers in this thread. Guess I'm in the extreme minority as both my wife and I received no assistance from our parents for our college expenses. I covered my own through scholarships and loans, and my wife the same. I paid mine off within 2 years of graduation, and we're both working towards paying off her Master's from a private med school.
We're putting $10/month into our new son's 529. The 529 will be split between however many kids we have, but we won't be telling them about it. Whatever they get will be a bonus for good grades I imagine. I cannot, I mean absolutely cannot fathom coming from a family that paid my tuition 100%. Sometimes I'm jealous of those that were given a free education, but I'm proud of what I've done myself.
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I never expected to see so many Yes answers in this thread. Guess I'm in the extreme minority as both my wife and I received no assistance from our parents for our college expenses. I covered my own through scholarships and loans, and my wife the same. I paid mine off within 2 years of graduation, and we're both working towards paying off her Master's from a private med school.
We're putting $10/month into our new son's 529. The 529 will be split between however many kids we have, but we won't be telling them about it. Whatever they get will be a bonus for good grades I imagine. I cannot, I mean absolutely cannot fathom coming from a family that paid my tuition 100%. Sometimes I'm jealous of those that were given a free education, but I'm proud of what I've done myself.
I did not get help, at all. And because the government believed she should help it took me much longer to get done. My grades were lower in semesters where I had to work more, I took semesters off etc. I fully intend to cover the cost of university for four years, though I will expect my child to either live at home or get scholarships to pay for living expenses.
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Then send them to a free college such as College of the Ozarks in Branson Missouri.
Never heard of it, but after looking it up that is one heck of a deal. My wife would like to retire to the lake of the ozarks so perhaps this will be a legitimate option for our kids. Thanks for the idea.
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I fund $2,000 to each of my two boys (ages 2 years and 9 months) into a Coverdell ESA with Scottrade. I like being able to self direct the investments vs a 529 plan. So far I have maxed it out (for a whole 2+years).
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college funding the 'educational way' (mine paid their own and held Professors and Schools to a very high std because they were doing so). They would not accept 'adjunct or aides teaching... they said we are paying full tuition so give us a full prof!
Farm Kids, so they had earned income & started their self directed ROTH's @ age 12 (I matched their earnings $:$ till age 18) They each had ~ $20k by then (Not FAFSA 'attachable' ;-)
I homeschooled 2 boys, and they needed something to do with their hands about age 13... so using CAD (as part of edu) they designed their own tax frugal, rural view homes (Having lived in Switzerland and Basque Spain... they were chalets (Low taxes due to Lofts above and barn below.)
I paid for the acreages in Columbia Gorge National Scenic area(via loan to them)...i.e. they had to get FEDERAL approval to build there (More EDU for them... especially going to court to mediate with Native Americans)
then age 14 and 15 they had to build their own homes.. I lent them my bulldozer to dig the holes. and They took their septic installer tests to learn to do that themselves too (saving ~$6k each). Dozer and Backhoe was rented from me.
We did the homes as 'homeschool projects' as a family... (a long 2 yrs)
The kids did excellent with much pride of craftsmanship (Custom wood and stone work)
They got very high marks on inspections, especially electrical, it was PRETTY !
then... (AFTER qualifiying for FAFSA) they sold the homes and made $70k clear after paying me off. They reinvested into income producing commercial properties. = income while in school for food, insurance and such... (no GASOLINE... they are 'greaseburners like me) 50 mpg since 1976, no OPEC required
Thus they had about $100k for school, with NO capital added from me.
They did 'running start' (Free college instead of High School, available in WA and HI) Great deal and GREAT edu!!!
so... being seasoned investors... they took maximum school loans (free interest) and invested that amount in their favorite stocks (Netflix and APPL @$70/share)...
AFTER college they had made about 500% on their investments so they consolidated the loans ($16k) @ 2.8% for 20 yrs.. (they are frugal too).
It worked out well for them... but they still have college loans at age 30 ;-)
They are much better investors than I.
They learned the hard way... capital LOSSES at age 12 - age 16 can be rather traumatic if it was $5/hr farm labor or 4am cow milking
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This is our strategy.
When each child was born, we put $100/month into a 529. That stopped when I left my job to start a business and we've only really added small amounts since then. There is enough in there to cover 1 year at a state school, incl room and board for the first kid, but only half for the second.
When kid 1 was 3 and kid 2 was a baby, we bought a rental duplex for $150k, which required about $35k in down payment and closing costs. This was 2004. The down payment $ was from a home equity loan on our primary residence.
The house has appreciated pretty well. It held steady during 2008-2010, and the market has gone up quite a bit since then. It's currently worth about $235-240k. At some point we refinanced into a 15 year mortgage.
Between appreciation and mortgage paydown we should have a good $150k in equity (after closing costs and taxes) by the time my first gets to college in 5 years. Half of that will go to each kid for college.
Depending on our tax and equity situation at the time, we'll either sell it or do a cash-out refinance to pay for college. Our goal is to gift each child the cost of tuition/room/board at a state school. Anything they want beyond that is on them.
Kid #1 has already asked if instead of college, I could just give him the $$ so he can buy a duplex. :)
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This is our strategy.
When each child was born, we put $100/month into a 529. That stopped when I left my job to start a business and we've only really added small amounts since then. There is enough in there to cover 1 year at a state school, incl room and board for the first kid, but only half for the second.
When kid 1 was 3 and kid 2 was a baby, we bought a rental duplex for $150k, which required about $35k in down payment and closing costs. This was 2004. The down payment $ was from a home equity loan on our primary residence.
The house has appreciated pretty well. It held steady during 2008-2010, and the market has gone up quite a bit since then. It's currently worth about $235-240k. At some point we refinanced into a 15 year mortgage.
Between appreciation and mortgage paydown we should have a good $150k in equity (after closing costs and taxes) by the time my first gets to college in 5 years. Half of that will go to each kid for college.
Depending on our tax and equity situation at the time, we'll either sell it or do a cash-out refinance to pay for college. Our goal is to gift each child the cost of tuition/room/board at a state school. Anything they want beyond that is on them.
Kid #1 has already asked if instead of college, I could just give him the $$ so he can buy a duplex. :)
My husband and I bought a duplex when we moved to buffalo for grad school. In addition we have a roommate. Because of this, we only normally spend about $200/month on repairs, the rest is covered by roommate and renters. Obviously we have more expenses when they are gone. You may want to consider doing something like this for your kid.
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Kid #1 has already asked if instead of college, I could just give him the $$ so he can buy a duplex. :)
My husband and I bought a duplex when we moved to buffalo for grad school. In addition we have a roommate. Because of this, we only normally spend about $200/month on repairs, the rest is covered by roommate and renters. Obviously we have more expenses when they are gone. You may want to consider doing something like this for your kid.
Hmm, I like that idea. I suppose it will depend on where they go, but it's definitely something to keep in mind. It seems room & board is more than half of the cost at state colleges. It would definitely make sense if both kids go to the same place, or at least the same city.
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I have a few grand in each kids' 529 for but stopped contributing a few years ago. I do plan on paying for their undergrad tuition at a public school (or the equivalent value at a private school if they choose to go there) but I'll figure out some other way to do it. My undergrad tuition was paid for and I figure it's my turn to bite the bullet.
The reason I stopped using the 529 is a few years ago I was talking with a recent college grad and asked him about what it cost. He said, "oh about $X per year, but only the very richest kids pay that, 90% of the kids get some grant or tuition reduction." It hit me that if I save 200K in a 529, then my kids tuition cost will conveniently be 200K.
I've got no problem paying but IMO universities are playing a retailer's game of pricing things far more than the market will bear, seeing which suckers will pay full retail, then discounting the product to a fair price for the remainder. I did not get this close to FIRE by paying full retail.
This post is older (June) but timely for me. I have an 11 month old and started saving in a Coverdell and 529 just about the minute she was born. I put away $250 from each paycheck ($6500/year) along with gift from relatives. It could add up to over $200K by the time she's 18 assuming 7% a year return. Then I came to the same realization the poster (stuckinmn) had. If she has X dollars in her college fund the college might say the tuition is what is ever in the fund ($20K, $50K, whatever). I have heard this a few times now, at least for schools that do things need based (vs. merit based).
One the other hand she's 17 years away from college and it seems this ridiculous game can't go on forever but not saving is also crazy.
I heard a story from a friend of a well-to-do couple with 2 kids close in age entering college. A few years before the kids attended school they basically put everything in retirement accounts and their house. They liquidated everything not retirement because the college's scholarship calculators are blind to retirement accounts and the parent's home. To me it's insane people do this stuff but at the same time this is the game and big money is at stake.
Can anyone speak to this? Real life situations?
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I have a few grand in each kids' 529 for but stopped contributing a few years ago. I do plan on paying for their undergrad tuition at a public school (or the equivalent value at a private school if they choose to go there) but I'll figure out some other way to do it. My undergrad tuition was paid for and I figure it's my turn to bite the bullet.
The reason I stopped using the 529 is a few years ago I was talking with a recent college grad and asked him about what it cost. He said, "oh about $X per year, but only the very richest kids pay that, 90% of the kids get some grant or tuition reduction." It hit me that if I save 200K in a 529, then my kids tuition cost will conveniently be 200K.
I've got no problem paying but IMO universities are playing a retailer's game of pricing things far more than the market will bear, seeing which suckers will pay full retail, then discounting the product to a fair price for the remainder. I did not get this close to FIRE by paying full retail.
This post is older (June) but timely for me. I have an 11 month old and started saving in a Coverdell and 529 just about the minute she was born. I put away $250 from each paycheck ($6500/year) along with gift from relatives. It could add up to over $200K by the time she's 18 assuming 7% a year return. Then I came to the same realization the poster (stuckinmn) had. If she has X dollars in her college fund the college might say the tuition is what is ever in the fund ($20K, $50K, whatever). I have heard this a few times now, at least for schools that do things need based (vs. merit based).
One the other hand she's 17 years away from college and it seems this ridiculous game can't go on forever but not saving is also crazy.
I heard a story from a friend of a well-to-do couple with 2 kids close in age entering college. A few years before the kids attended school they basically put everything in retirement accounts and their house. They liquidated everything not retirement because the college's scholarship calculators are blind to retirement accounts and the parent's home. To me it's insane people do this stuff but at the same time this is the game and big money is at stake.
Can anyone speak to this? Real life situations?
While not a real life situation for me, I will say this - the FAFSA EFC formulas could change at any time. The consequences of saving too much for college (you could have thrown that money towards something else instead) are far better than saving too little for college (your kid may not be able to attend the college they want).
Also, apparently some schools will exercise gapping - they acknowledge a certain level of need, but then don't provide you enough aid to meet that need.
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My parents paid for my college (everything the first two years, tuition only the years I lived off campus, plus a May sem class where we visited 7 countries in 30 days). The expectation and plan is that I will do the same. Luckily I work at a college, and we get 16 semesters at any of our 12 sister schools for $5K/yr (all private liberal arts schools that do well in the ratings). Unfortunately we have three kids, so one of them will not be covered (unless one of them decides to go to my institution, which would be free other than room and board, and they could live with friends in a rental we own near campus). We are saving in a 529 plan, but only because the state we live in gives us a 20% tax credit for the first $5K invested anywhere. I don't know of any other guaranteed 20% interest rates :)
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My kid is a high school senior. I'm very glad that we've saved enough to send her to a public university. Our EFC will be substantially more than what the public college will cost per year, so we would qualify for nothing. She's a smart kid, probably in the top 10 percent of her class, but not the top 1%. She will get some financial aid if she applies to private colleges. Some of it will be in the form of loans though, and even if it does meet the EFC without a gap, that's still a lot more than the public institution will be.
I feel very bad for her friends whose parents don't intend to contribute much to their kids' educations. Their income and assets still count against the kid for the purpose of financial aid, even if they don't help out. Their kids are screwed six ways from Sunday.
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My first year of college my families EFC was quite high. That summer I married my high school sweetheart and suddenly didn't have to claim my parent's income and I started receiving grants because myself and my hubbie had extremely low incomes.
So how about some arranged marriages for our kiddos??? On paper only of course
....I'm joking...maybe.
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It is better for the grandparents to set up their own because it is not counted in the FASFA calcs.
But when the money is spent on college education it counts as the kids income. Grandparent money is great for the last year of college not the first 3.
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The reason I stopped using the 529 is a few years ago I was talking with a recent college grad and asked him about what it cost. He said, "oh about $X per year, but only the very richest kids pay that, 90% of the kids get some grant or tuition reduction." It hit me that if I save 200K in a 529, then my kids tuition cost will conveniently be 200K.
Thats not how 529 and financial aid works. You have 200k in the 529. You will be expected to pay about 5% of it per year towards tuition. At most that plan is costing you 40k. If you shove that money in a taxable account, you will be expected to pay that exact same 40k. Rough rule of thumbs to maximize financial aid
1) Have all your money in retirement accounts
2) pay off your house before having taxable accounts
3) have low income (401(k) and ira contributions count as income during those 4 years
There are a lot of details but if you expect to get it you should spend some time reading up on and understanding it.