College Savings

[snafu]

We have two sons in university, they have grants, small scholarships and contribute the sum equal to tuition so as to have 'skin in the game.' They've worked hard every summer and PT during the school yr. to come up with lifestyle funds. The younger got a break with his apt. buddies, free room & board in exchange for cook/shop and 9 PM tidy. These guys understood from early teens that we expected them to have good educations and pay for it, same story we got from our parents.

Since 1st year university is General Studies, they went to a local[2 yr.] college which is linked to the U and accepts their courses on par. That allows live at home, w-aaay cheaper tuition and lately books bought on-line [we print hard copy]. They spent two years hunting for grants and scholarships + a stipend from PT jobs. A councilor told them only 50% of grants and even less scholarships are filled.

Please consider that more and more post secondary education will be offered on-line for motivated learners. Caution and research is required as some are for-profit and others are programs from Brick & Mortar state schools. I can't explain why these courses are more expensive than classroom as the current $$$ is unconscionable but I feel confident that will change. I know the on-line instructors are those with the best teaching skills and the highest, up-to-date credentials. Those lazy profs who use TAs to mark papers and deliver lectures aren't considered. Feedback from students keep the standards exceptionally high.

[LivingAlmostLarge]

So even a lot of state universities are around $20k/year. Here I think they said tuition alone is $15k/year and $10k in room and board, so $25k/year at the public university. Very nice.

Feh, I am not sure if we can direct more towards college without cutting retirement or other savings. We started out late in retirement savings.

DS, I knew that tuition had gone way above inflation. The prices are ridiculous. I have no idea how people are paying for it. I have a friend who does scholarships/grants and she said parents making over $100k (very common where we live) don't get scholarship and grants. Sorry you make too much.

But then it's really not enough to afford honestly $25k/year while saving for retirement I think, especially if you are starting late and worried about paying off the home, etc.

[disneysteve]

Originally Posted by LivingAlmostLarge

she said parents making over $100k (very common where we live) don't get scholarship and grants. Sorry you make too much.

But then it's really not enough to afford honestly $25k/year while saving for retirement

I think the 100K income limit has changed. A school charging 25K or more per year is well aware of the fact that the parents can't possibly spend at least 25% of their income on school (and that doesn't count books, supplies, computer, clothing, travel, etc.). So I think everyone should apply for aid regardless of income. We'll certainly apply when our DD starts the process.

As I said, the state schools here in NJ will be 25K or more by the time she starts in 2014.

[elessar78]

For a slightly different perspective . . .

I'm a soccer coach and the amount of money that parents spend for training is astounding. Take one club for example, the annual tuition is $1250. Not including uniforms which for some reason need to be new (latest and greatest) every year, practice uniforms, travel and hotel costs for the 5 or 6 "away" tournaments per year. Wouldn't surprise me if the out of pocket is $4,500 for one child. Most of these people have at least two kids in the sport.

Oh, btw, this started when the kids were 9YO! So that's about 12,500 conservatively on tuition alone plus it can be as high as 45K by the time they head off to college.

Some of these parents spend this money in pursuit of a scholarship, but they fail to do the math. What can 45,000 do to defray the cost of college??

The figures I have up there are not for a major metropolitan area. My niece in DC was paying $5000/year for tuition alone for her soccer club.

[photo]

Originally Posted by LivingAlmostLarge

No we are not spending a ton, we live on $4k/month with $2400 going to our mortgage.

A rather large portion of your money is going towards housing.

That's our other cash savings, trying to save cash to buy a SFH. I feel like we should be able to afford college, but I wonder how do you balance saving for college with not jeopardizing your retirement?

You live frugally by living under your means with everything -- housing, included. Please understand that I'm not attacking your way of life, but many people do save for college by living in smaller homes, driving older cars, and simply getting by on less. You have to choose your own priorities, but your initial question was how people save for their children's educations, and that's how they do it.

[BMEPhDinCO]

It's very admirable that parents are worrying about how to pay for their children's college education. My parents paid for some of mine (~$10k per year for 4 years) and I paid for the rest with loans, working part time, and grants. I came out with just under $30k in loans (granted, this was in 2002-2006) and have paid off 2/3 of those by 28 (I also got my MS and am working on my PhD so they have been deferred quite a bit). I went to a private university that was very expensive, raising tuition 6-10% PER YEAR, not including fee raises, etc. Textbooks for my major (Engineering) were between $200-450 a semester...health insurance was covered by one of my parents so I admit that expense was probably another $50-100 a month and they also gave me $100 a month for "fun" stuff but regardless, it was less than $13k a year that they paid, so don't start worrying about $30k+ a year - that's why loans exist!

So yes, it's nice that you worry about this, but realize that in the end, you can't do it all and your children will have to grow up and take on the responsibility themselves. A PT job in college won't hurt them, and reasonable loans that take a few years to pay off won't hurt them either (in fact, good payment records will boost their otherwise scanty credit reports!).

Take advantage of 529 accounts if you can, CDs, i-bonds, etc also help but take care of yourself first! I'd rather have SL for a few years than have to live with my mother when she's 80 and out of retirement money because she gave it to me for school instead!!!

[LivingAlmostLarge]

photo out of that $2400 our mortgage is $1600 the rest is taxes,not a cheap place to place. I'm not living in luxury, it's not a SFH, it's a townhouse. I don't know how much lower we can go, we bought, put 20% down and our mortgage is about what friends pay to rent 1 bd in the city. We are under the PITI at 18%, so it would appear our mortgage is well within our means.

DS, I don't know about what they consider "enough" to afford college. I do realize that in 15 years it's possible we'll be making more money and that's how we'll afford it. We'll have to just count on making more money then and maybe saving less.

I'm really curious any parents out there making $120-$150k and kids in college? Did you get lots of aid? Did your kid go private or public? Did you pay for it all? Did you save a lot?

BME, that's it exactly. I feel so nervous that in 15 years if we aren't careful now and save a lot for retirement we could be in the position of looking at our portfolio and saying "gee college or retirement".

[photo]

Originally Posted by LivingAlmostLarge

I'm really curious any parents out there making $120-$150k and kids in college? Did you get lots of aid? Did your kid go private or public? Did you pay for it all? Did you save a lot?

Child 1 has received undergrad degree and is currently attending grad school (receiving stipend), child 2 and 3 are currently attending university, and child 4 is still in high school. No financial aid for any, although oldest 3 have received some merit aid scholarships; we paid the rest. We saved, on average, a little more than $10,000 per year, and no loans have been taken out. (Our mortgage, when we had one, was about $900 a month, but that was about 10 years or so ago, and we don't live in an expensive area, so that helped a lot.)

[MonkeyMama]

Originally Posted by LivingAlmostLarge

I'm really curious any parents out there making $120-$150k and kids in college? Did you get lots of aid? Did your kid go private or public? Did you pay for it all? Did you save a lot?

Living in a high cost area, too, I have to say I wouldn't expect much aid. Friends, family, clients are squarely middle class ($120k-$150 is very average income) and the only situation I have seen that has warranted any Federal aid is 2 kids in college at once. Of course, aid is a function of both income and cost. Most schools here are public, and so that is probably the kicker, for aid. BUT, I do have one client who earns $150,000 per year and pays $50k per year for private school (5-year program). They have not qualified for a penny of aid. (I am not 100% sure how assets play into that - but they seemed to be focused on *income* when griping to me how they didn't qualify - they were just on the cusp).

That said, there are plenty of other options. In college, I was in the catch 22 of parents had high income by federal standards, but didn't have big means to help with college. So, I kind of threw up my hands realizing I could never qualify for aid, even funding my own college on minimum wage. BUT, in later years I received several scholarships that I did not even apply for (was nominated by others).

Also, I have a couple of friends who found all-paid-for colleges (merit based scholarships that did not consider *need.*). So, you'll probably be focusing more on merit-based aid than need-based aid. & even if you strike out pre-college, keep trying in college. Lord knows what more I could have found if I was looking!

[photo]

Originally Posted by MonkeyMama

Friends, family, clients are squarely middle class ($120k-$150 is very average income) and the only situation I have seen that has warranted any Federal aid is 2 kids in college at once.

If financial aid were based on income alone, our two at university right now might qualify. But here's the really nasty part for people who are responsible and save their money: federal financial aid (and probably the educational institutions, as well) is based not only on income but on assets, excluding primary residence. So, if you have a fair chunk of change in cash, the stock market, bonds, and so forth, it counts against you.

Therefore, a child of someone with a higher income but no assets, could actually receive more federal aid than you do, if you haven't been a spendthrift.

As far as financial aid, you're almost better to live paycheck-to-paycheck rather than save for college. Well, that isn't entirely true, of course, but it isn't so far-fetched, based on consideration for aid.

[MonkeyMama]

@Photo -I understand that part. BUT, you will get absolutely no financial aid if you have $0 assets and your income is higher than cutoff. Which is the reality in a high cost area - assets won't even come into the equation. (At least that is my very limited understanding. I have no professional frame of reference since subject never comes up, but have played a bit with online calculators to make sure I Wasn't crazy. It quickly became clear to me that combo of high wages and low cost colleges in region explained why financial aid was never discussed in my middle class circles, nor brought up by any tax clients - but to whine they were excluded solely for their high incomes).

As an aside, I personally don't think it's a bad thing that people with high incomes and/or savings don't qualify for aid. But I know I am general alone in these type feelings! I'll take fiscal responsibility any day (over government handouts).

[LivingAlmostLarge]

But I can't live without saving for retirement. It would be too irresponsible, and I've heard that from a couple of friends now with kids who are making about the same and saved diligently for college and no aid.

Photo how much are you paying out of tuition for kids 2 and 3 if they got merit based scholarships? What is their tuition and how much did they get versus what you pay? What did the first kid get? Do you expect child #4 to do the same? Did all three kids get the same or did the aid vary? And if it varied did you still pay for the kids 100%?

[Like2Plan]

Originally Posted by LivingAlmostLarge

But I can't live without saving for retirement.

LAL,
You are right, you have to save for your retirement first.

I think the most sucessful strategy is to save an amount you can comfortably afford in a systematic fashion and increase the amount as you are able.

Maybe you won't reach the entire amount needed for college, but every bit you save now is money you (or your child) does not have to borrow. Also, if you save in a 529 plan, the money is not as heavily weighted against you in the financial aid formula as opposed to other non-retirement assets outside the 529. Unless things change with the financial aid formulas, I doubt your child would qualify because over the next 18 years your income will continue to go up.

[LivingAlmostLarge]

Okay sounds good. I feel more comfortable knowing we're well secured in 15 years, but guilty at the same time because college maybe underfunded.

[moneybags]

There is some aid available for higher income families (over $100,000), but mostly at private schools with a lot of money (Harvard, Princeton, etc.). Many of these schools fund 100% of your education if family income is under $60,000. Schools will soon be required to have a financial aid calculator on their websites, so if you are curious, check one out. I know Princeton and Carleton College already have them. It asks for basic info from your tax return, house value/debt, family size, and savings/investments.

For those of you with kids in high school, my biggest tip is to buy a study guide book for the PSAT and make sure your child takes this test in their junior year. For those that do extremely well (top 15,000 in the country), there are great scholarship opportunities available from the National Merit Scholarship Program. For example, National Merit Finalists can attend University of Alabama for 4 years, free tuition, free room and board, a free Ipad, and a small stipend.

[another_chelle]

I currently only put away $100 per month per child. We have two kids we are hoping to pay for a majority of their college costs. Since both of our kids are daycare kids we are used to paying $20K a year in childcare and once the kids move onto elementary we will transfer at least half of the daycare savings over to the kids college accounts.

Also once the kids do go to college we should be in the position to pay for items such as books and supplies on an as needed basis. The goal is to have a paid for house by this time and we could redirect the mortgage savings to kids college needs.

The other half of the daycare savings will be moved to our retirement savings. We are saving about 13% for retirement at this time and we need to bump up to at least 15%. Our income varies but we are never under 150K/year.

My husband and I both paid for our own schooling and he came out with about 25K in student loans. With the price of college going up every year we don't want the kids to be saddled with crazy huge student loan debt. I see too many threads about people coming out of college with over 100K of student loan debt and that is no way to start a new life.

[LivingAlmostLarge]

Good to know about the school calculators. I know they pay 100% for kids whose families make less than $60k, but when will they adjust for where you live? Seems unfair because where I live $60k is barely making it for sure, versus $60k in a much lower COLA where it can easily be enough.

I don't know what the future holds but $100k of student loans, at least is it for graduate school? If just undergrad, I'd probably talk to my kid about CC instead and having $50k in debt for just 2 years.