College Costs

[optimist]

I want to get everyone's opinion about how much college we can afford (think Suzy Orman).

I am a single parent and have one child, who is a senior in HS. As we decide where to apply, it would be good to set a limit on how much I'm willing to pay. So let me give you the numbers:

I make about $175K per year.
I save about $50K per year.
I have about a $1.1M net worth, of which about $700K is in 401k, $100K in primary residence equity, $300K in various investments, and $55K in a designated college fund.
My FAFSA EFC is $66K.

How much can I afford to pay for college?

Thanks to everyone for your opinion!

[disneysteve]

How much do you currently contribute each month to the college fund?

Let's say it's $150/month. Your kid is a senior so will graduate in May 2022 and then graduate college in May 2026. That is about 56 months from now.
56 x $150 = $8,400. Add that to the 55K you already have. That brings you to $63,400. So I'd say at least that much (or whatever the number is with your actual monthly college savings figure).

If you want to and can afford to contribute more than that is entirely up to you. You listed assets but didn't mention your expenses, your age, any other goals like how much you'll need for retirement, etc.

[optimist]

I make $175K and spend $125K of that, including taxes. I put about $50K into my savings each year, including retirement. Of that I contribute about $250/mo to the college fund.
I expect that college will cost more than what I'll have in the designated college savings account. Probably much more. Hence my concern and my question.

[disneysteve]

I contribute about $250/mo to the college fund.
I expect that college will cost more than what I'll have in the designated college savings account.

Even better, so $250/mo x 56 months is $14,000, bringing you up to $69,000. Will that cover 4 years? Probably not, but it could be close depending on the school and scholarship money. Is your kid a good student with good grades? How much will your kid be contributing? Have they been working and saving for college? Will they work during college? Will they take any loans? Are you in a position to continue putting that $250/month toward college costs even after they've graduated either in the form of helping them repay their loans or taking a parent loan of your own?

Do you feel you are saving adequately for retirement? It sounds like you are. You save 50K total minus 3K for college. That's 47K which is almost 27% of your gross. Do you want to back off on personal savings a bit to help fund college? It sounds like you have the flexibility to do that. Let's say for 4 years you drop your savings rate to 20%. That would free up an additional 12K/yr that you could direct to college costs. 48K plus the 69K above brings you to 117K total. Even more if you make that change now rather than when college starts next year. They would certainly have a broad selection of schools with that budget plus whatever they can contribute on their own and maybe a modest amount of borrowing.

[Fishindude77]

At $175k income, most folks could cash flow college expenses (at a reasonable university) for one child without impacting their lives too badly.

Just a couple comments / suggestions:
1. Don't you or your Child borrow anything for college expenses.
2. Insist the Child works hard during summers and / or during school to pay a significant part of the costs so they have some skin in the game.
3. Don't let a Childs education jeopardize your retirement savings. Attending college is a privledge, not a necessity.

[optimist]

At $175k income, most folks could cash flow college expenses (at a reasonable university) for one child without impacting their lives too badly.

Just a couple comments / suggestions:
1. Don't you or your Child borrow anything for college expenses.
2. Insist the Child works hard during summers and / or during school to pay a significant part of the costs so they have some skin in the game.
3. Don't let a Childs education jeopardize your retirement savings. Attending college is a privledge, not a necessity.

There's no way I could afford to cash flow college tuition - I have a mortgage, live in a high-tax state, and I have no intention of pausing my retirement contributions. I could probably cash flow up to $25K/year, but that's it.

I certainly have no intention of letting him borrow anything. And he does work, although the amount he earns is tiny compared to the potential college expenses.

[Fishindude77]

There's no way I could afford to cash flow college tuition - I have a mortgage, live in a high-tax state, and I have no intention of pausing my retirement contributions. I could probably cash flow up to $25K/year, but that's it.

$25k per year can get you a good college education.
It may not be the college experience you or he have always thought about, but you can certainly get well educated for that, and get yourself on the way to a well paid career.

[optimist]

$25k per year can get you a good college education.
It may not be the college experience you or he have always thought about, but you can certainly get well educated for that, and get yourself on the way to a well paid career.

You could be right. Everything I look at except our own state school has a price tag of over $50K, excluding living expenses. That does not factor any merit aid, of course, but the price tag alone is frightening.

[disneysteve]

I could probably cash flow up to $25K/year, but that's it.

I think you just answered your own question.

$55,000 currently saved for college
$25,000/year x 4 years
$155,000 total contribution

That is more than enough for college at nearly every school.

Everything I look at except our own state school has a price tag of over $50K

Ignore the "sticker" price. 98% of students don't pay that. That's before any financial aid. Our daughter's school was just over 50K/year. She got a $19,500/yr merit scholarship based purely on her high school grades. She didn't even need to apply; it was just automatically granted. After her first year, she was also awarded a $3,000/yr departmental scholarship based on first year performance. Again, no application needed. She just got a message one day that $3,000 was applied to her tuition account. We actually didn't even know what it was for at first as they didn't explain it and we thought it might have been an error. So $19,500 x 4 yrs plus $3,000 x 3 years came to $87,000 she received off sticker price without doing a thing (other than being a good student).

Having him work some, even if just during breaks, should provide a few thousand more.

I think you're in great shape.

[optimist]

I think you just answered your own question.

$55,000 currently saved for college
$25,000/year x 4 years
$155,000 total contribution

That is more than enough for college at nearly every school.


Ignore the "sticker" price. 98% of students don't pay that. That's before any financial aid. Our daughter's school was just over 50K/year. She got a $19,500/yr merit scholarship based purely on her high school grades. She didn't even need to apply; it was just automatically granted. After her first year, she was also awarded a $3,000/yr departmental scholarship based on first year performance. Again, no application needed. She just got a message one day that $3,000 was applied to her tuition account. We actually didn't even know what it was for at first as they didn't explain it and we thought it might have been an error. So $19,500 x 4 yrs plus $3,000 x 3 years came to $87,000 she received off sticker price without doing a thing (other than being a good student).

Having him work some, even if just during breaks, should provide a few thousand more.

I think you're in great shape.

I hope so. My son is a good student, but of course merit aid is never a certainty. I guess we'll see once those acceptances (?) start rolling in...

[LivingAlmostLarge]

So $50k x 4 = $200k total for 4 years. Then you got $87k so $113k you needed to pay DS over 4 years or $29k/year.

With optimist having saved $55k that means $113k-$55k = $58k / 4 = $15k/year. That is definitely doable with your $25k/year budget.

I don't know you need more. Ideally though it would have been to save the entire amount so you don't have to cash flow? I don't know many people would but I think counting on cash flow is what most people would do.

[Fishindude77]

Could also get the cost down considerably by continuing to live at home and attending a nearby "drive to" community college, and hold down pretty steady employment while doing so.

People spend (and in many cases waste) a whole lot of money on room & board attending some universities for the "college experience".

[myrdale]

Just for a matter of scale:

Community Colleges in Alabama tuition $4.5k per year.
Auburn in-state tuition $11k per year.
Auburn out-of-state tuition $31k per year.
MIT tuition $53k per year.

If you're able to save $50k per year, I would think you could cash flow any school the two of you choose.

With $700k in retirement, and $300 in investments, I am not suggesting you are set for life, but if you don't invest another dollar, those numbers still stand to double every 7 to 10 years all depending.

Now, just because you can pay it, you should still ask the question should you pay it? That is to say, what is the return on the investment.

MIT just might be "worth it" if he's interested in a specific engineering degree, but if he is interested in an history major, may not. Honestly I am not convinced an engineer from MIT is any more capable that one from Auburn myself. I should imagine there are Starbucks baristas with history degrees from both.

[optimist]

Just for a matter of scale:

Community Colleges in Alabama tuition $4.5k per year.
Auburn in-state tuition $11k per year.
Auburn out-of-state tuition $31k per year.
MIT tuition $53k per year.

If you're able to save $50k per year, I would think you could cash flow any school the two of you choose.

With $700k in retirement, and $300 in investments, I am not suggesting you are set for life, but if you don't invest another dollar, those numbers still stand to double every 7 to 10 years all depending.

Now, just because you can pay it, you should still ask the question should you pay it? That is to say, what is the return on the investment.

MIT just might be "worth it" if he's interested in a specific engineering degree, but if he is interested in an history major, may not. Honestly I am not convinced an engineer from MIT is any more capable that one from Auburn myself. I should imagine there are Starbucks baristas with history degrees from both.

$50K a year in savings includes retirement. You take that out, you are closer to $30K. Then adjust for the fact that sometimes you need to reach into your savings to put in a new AC or replace an old car - and you are closer to $20-25K. Things don't stop breaking down just because you have a kid in college.

If my kid could get into MIT, I would pay whatever it took. But he can't. He is not a genius, just a bright kid with ADHD. I do, however, want to get him the best education I can, the one that would fit his needs.

We've been to our state flagship, and honestly, I'm not impressed. So impersonal, so crowded. He would get lost in all the paperwork and bureaucracy the first week and nobody would care. And all the smaller privates appear to charge $50K+. May be it's just the facade and they'll give us a discount, who knows . For now, I'm just trying to determine my own comfort level so that I know when to say "no."

[disneysteve]

And all the smaller privates appear to charge $50K+. May be it's just the facade and they'll give us a discount, who knows

As I said, don't be scared off by the sticker price. If you look at a school's website, you can probably find the % of students who get aid. It's typically above 95%. You may even find an average out of pocket cost if you search around. Don't avoid applying just because of the listed price.