Saving for college vs paying down debt

**Weird Tolkienish Figure** · 09-04-2014, 06:16 AM

Originally posted by it99 View Post

Hello,

We have one kid whientering 8th grade and I want to send him to a private college.
So I am just trying to figure out how much I should be trying to pay down credit card debt vs. saving for college since its only 5 years away.
Here is my break break down.

Retirement- $200k saved in 403 B mostly
1st and 2nd Mortgage - 166k
My colege savings -15k
Other famy members college savings -20k
Probably about 35 saved for college

Car is paid off but we have 23k on credit cards. 10k is 16% and most of the rest is 0% for a short time. I've paid a lot down on our debt over the years and wanted to get it all paid off before really ramping up my college savings. But we had some unexpected expenses so our debt went up a little. But I'm not sure we can get the debt paid off soon enough. Probably the most we can pay down a month is $800. So what should I do? Pay off for a certain time and then start saving or just try to save for college at the same time trying to pay down a little at a time of the the debt.

Thank you very much

Why private? Seems like a colossal waste of money to me.

I will try to school my children at a CC as long as possible, then a state school.

**disneysteve** · 09-04-2014, 06:26 AM

Originally posted by Weird Tolkienish Figure View Post

Why private? Seems like a colossal waste of money to me.

That's an awfully broad statement.

As the parent of a child who just started at a private college yesterday, I can tell you that it isn't true as a generalization.

After her scholarship, the private college is costing us less than $5,000/year more than the nearby state school. The difference? Among other things, the private school has 4,000 students. The state school has 40,000. That's an entirely different environment and experience. Some kids thrive at a big school. Some kids, like my daughter, would get overwhelmed and lost at a school that size. Of course, there are many other differences. Classes at her school are capped at about 25 kids. At the state school, I'm sure there are lectures with 100 or more students. Again, a totally different experience.

So don't be so quick to automatically rule out a private school based on cost alone.

**it99** · 09-04-2014, 06:39 AM

Pros of Private collegs

Originally posted by disneysteve View Post

That's an awfully broad statement.

As the parent of a child who just started at a private college yesterday, I can tell you that it isn't true as a generalization.

After her scholarship, the private college is costing us less than $5,000/year more than the nearby state school. The difference? Among other things, the private school has 4,000 students. The state school has 40,000. That's an entirely different environment and experience. Some kids thrive at a big school. Some kids, like my daughter, would get overwhelmed and lost at a school that size. Of course, there are many other differences. Classes at her school are capped at about 25 kids. At the state school, I'm sure there are lectures with 100 or more students. Again, a totally different experience.

So don't be so quick to automatically rule out a private school based on cost alone.

The school my son will probably go to is one of the Engineering schools that was in the list of 12 schools whose graduates make mroe than Harvards's. They typcically contribute 50% for financial aid and then you have to come up with the rest. Still a lot of money but we have one son and he definately worth it to us. State school degrees are a dime a dozen since everybody is going to State schools now. With very tight job market getting a private school education can really get your foot in the door for jobs. I am speaking from expereince myself when I graduated

**disneysteve** · 09-04-2014, 07:26 AM

Originally posted by it99 View Post

With very tight job market getting a private school education can really get your foot in the door for jobs.

The exception to this is when the job requires a graduate degree. In that case, where the undergrad degree is from really doesn't matter. What matters is where the Masters is from.

To be fair, it also doesn't matter where you start your education but rather where you finish it. If you do 2 years at Community and then 2 years at the Name school, your diploma still says you graduated from the Name school and you save a bunch of money. Of course, that also means your kid lives at home those first two years which is not at all what we wanted for our kid.

**it99** · 09-04-2014, 07:29 AM

Any advice for paying down debt vs saving for college?

Any advice for paying down debt vs saving for college?
I have 5 years to go?

**disneysteve** · 09-04-2014, 08:14 AM

Originally posted by it99 View Post

Any advice for paying down debt vs saving for college?
I have 5 years to go?

Sorry. We got off track of the question.

I would absolutely focus on the debt before worrying about college. It makes no sense to save for college while paying 16% on your CC. And you want to be sure to pay off the 0% cards before the promo period ends and the rate jumps up.

The biggest red flag in your post is this:

we had some unexpected expenses so our debt went up

Do you not have any savings or emergency fund? An unexpected expense shouldn't result in debt.

There are lots of ways to finance college: scholarships, loans, work, etc. You need to get your own finances cleaned up first.

**Eagle** · 09-04-2014, 09:55 AM

Originally posted by it99 View Post

Any advice for paying down debt vs saving for college?
I have 5 years to go?

So here's what I gathered from what you've said IT99.

Your debt:
1st and 2nd Mortgage 166k (balance and interest rates?)
CC 10k at 16%
CC 13k at 0% (what are the balances and end of the promotional 0% periods?)
Other debts?

Your assets:
403b 200k
Car 1 value?
Savings?
College Savings 15k
Other assets?

You have 10k at 16% interest on credit card debt? How much in interest are you paying a month on that 10k credit card? This should probably be your first priority. The other 13k is at 0% interest for a short time. See question above.

How much do you have in savings other than the 15k for your son?

What does your budget look like? How much did you spend last month? How much did you make?

**snafu** · 09-05-2014, 08:38 AM

ingDH and I are at the other end of the spectrum with 2 DSs finishing Master degrees this past May. The choices you make now will make a huge difference in the future. Terrific to have a car free and clear but $23K in CC debt with $ 10 K @ 16% interest needs immediate attention in my opinion. I suggest you gather the August bills and add up how much interest was charged. Multiply that sum by 7 and you'll have an idea of how much interest you've already paid 2014. Print out the amotorization for your 1st and 2nd mortgages so that you clearly understand how much of each monthly payment goes to interest, property tax [escrow], mortgage insurance, and actual principal sum initially borrowed.

I'm impressed with your desire to pay for your son's university education. Dr. Steve explained the advantage of 2 yrs at Community College having 1st confirmed it fully transferable to chosen university. When DS starts high school he needs to begin to work with the counselor to research the thousands of awards, bursaries, grants, scholarships where he might qualify. Thousand of dollars of smaller sums never receive even one application. I teach at a university and I can pretty accurately tell which students have earned money to pay tuition, actually have 'skin in the game.' Middle school students can earn money by doing age appropriate tasks at home. They learn team work, responsibility and that money is earned and then allocated. By 16 y/o they can take small, part time, neighbourhood jobs like cutting grass, help paint fences, walk dogs or even bus tables at McD's.

Meanwhile it's in your interest to make paying off your debt the 1st priority. We don't know how you allocate income or what $ 23K bought. Would you consider making some changes to put you in better financial shape and make your son's education fund a major focus? Are you familiar with www.mint.com? Tracking your income/outgo is the 1st step. If DW is onboard with the idea of getting control of finances, perhaps go through your home room by room, shelf by shelf, drawer by drawer to identify items no longer used, no longer needed and no longer loved to be sold on FB sell page, Craigslist, Kijiji or other electronic seller's sites in your community. It requires taking a picture and posting a small, descriptive ad. The secondary benefit is to rid yourself of items no longer used or needed...a definition of clutter.

The sum gained can go directly to the 16% CC or 50:50 to DSs university fund. When our DSs were young gifts for birthdays, Christmas, holidays, special celebrations included money for their 'College Fund.' Grandparents and close relatives were so helpful and cooperative to help with our goal. Our DKs usually got either one major gift or an inexpensive gift to open plus cash to add to their investment fund.

[apology, so wordy]

**css33** · 09-07-2014, 03:27 AM

Tax Advantages and College Savings

I didn’t read but are you saving for college using a 529 plan which is a tax-advantaged investment plan. Pretty much helping you out on your taxes and is tax free for students when used towards college. Example is if you put 10k into that plan then you also save on 25% of the taxes you would have paid.

The 2.5k in tax refunds per 10k of student loans could easily knock a dent in your CC balance

Saving for college vs paying down debt