Paying for college

I'm officially never having kids.

 

Especially when the cost of raising a kid, both on money spent and foregone opportunities is roughly $1 million.

On the other hand, you can't embarass money when it's a teenager.

Sachin

 

PELEDRE.. Please read your PMs.

Thanks,

Sachin

 

Yes, college costs will rise faster than the rate of inflation for the next two decades or so.

In other words, start saving now. Also, even if you get one year or two years's worth of costs under your belt, it will give your kid a fighting chance.

I had always thought that on-line courses and more electronic delivery means might eventually eat into the more traditional forms of higher education delivery, but in fact, it probably won't unless the technology gets much better.

Education, like most everything else, is an economic output, and if there is more demand than supply for that output -- which is certainly the case for the top 150 private schools -- well, we all know what happens to price then. Of course, we also have to keep in mind that the top educational institutions do a form of "product-scarcity-creation." Really Harvard could triple in size, and still have plenty to top applicants to choose from.

My experience with the children of friends is that most colleges will do what they can to make the 4 year experience happen for kids, even if you are not the richest. If you bring some dough to the table, they can work out grants, work-study, loans -- though a good rule of thumb is to have your kid borrow no more than 1.5 years times a salary they might get after college. In today's world, that means 40 grand tops, or one year's tuition room and board and even the most "presitigious" private school.

Also, I see a number of parents with really bright kids but limited resources apply to top schools, get in, but instead do a year or two at a cheaper public school, then transfer to the top and more expensive school later. But that requires excellent grades in your first couple of college years.

Finally, I see a number of kids doing postponements -- they apply, get in, defer admission, work a couple of years. Even the top colleges like that approach now.

In today's and tomorrow's society, college education borders on an absolute must. Make it happen for your 5 year old.

 

i couldnt afford college, and i didnt want debt till i was 40, so i am in the military.

to solve the problem for my children, we are going to move to a country with subsidized higher education

 

I am so thankful my wife works for a college. We will force our kids to go there.

 

You're doing it right. Keep it up.

 

This is the way to go. We are doing the same thing, but putting less money into our 529 because (for all sorts of idiosyncratic reasons), we are sending our kids to private schools now, which is sopping up most of our money.

We are using UPromise like crazy, though, which at least makes us feel like we're doing the right thing.

 

I'm curious: how much of the total cost are you saving for--just tuition plus books, or are you planning for room and board for the entire 4+ years?

I think you're planning extremely well. However, from the perspective of someone who paid most of his own way through college and all of his own way through graduate school, I think there is tremendous value in expecting your daughter to share some of the burden, at least for room and board after the first year or two and possibly for books and fees.

 

hell yes make the children share the burden.

nothing pissed me off more than the rich kids whose parents paid for everything and had no grasp of reality.

my favorite comment was along the lines of "********, my dad forgot to send me that $500 check this month".

 

Don't forget about possible tax credits:

http://biz.yahoo.com/brn/050316/474_1.html

Sachin

 

I used to hate them, too. Nothing annoyed me more that the prattling on about nonconformity. Yeah, it's great to grow your hair long and pierce your eyebrows and lips when you don't need to have a job. Stupid trustafarians.

Last spring, I moved in with the g/f and sublet my old place to a couple of trust-fund hippies at the UC. They were supposed to send me a check for the last month's rent, which I had pre-paid. When they were late with the check, I contacted them repeatedly, getting every story in the book before they finally stopped taking my calls. Even when I banged on the door of the place, I got excuses, most of which were along the lines of "my boyfriend's dad hasn't sent the money because the two of them are having an argument." They stiffed me in the end. I'm still livid about this.

What bugs me most is the belief I have that they (or at least the dude) came from wealth and will graduate with more connections and a better chance of landing a good job than I ever had.

 

I was a trustafarian. I had no grasp of reality - but I knew that so I didn't come off as an obnoxious jerk. I did have a job for 2 of my 5 college years.

These 529 plans - I think have heard of them. How do they differ from some of those state sponsored plans that mostly now don't exist that you may or may not have been able to use out schools out of state?

They were mostly for public schools correct?

Is it an automatic payroll deduction thing?

How does one enroll? I don't think I have seen that option here at work.

I have a 7 year old and a 3 year old. I have some money in stocks and mutual funds - but am not sure if it will be enough. I am willing to foot the bill like my parents did and they can get a job for spending money.

 

I put what I can into a 529 for both of my girls. But it really is insignificant. I'm not anywhere near being capable of putting away the amount that Andy B puts in. But any extra income I get or monetary windfall, which is usually very infrequent, gets socked away for my girls education. If I'm lucky, I'll be able to help them buy their books for school.

The cold, hard truth is I don't believe my wife and I will be able to help them that much. But nobody helped me. I finish my undergrad this summer; it took me over ten years after graduating to do it. But I won't have any college debt. Granted I weight that agains't the possibility that had I gone to college right out of high school, I may be making more money. But that's working in the "what-if-zone."

I figure if my girls go to college, like most kids they're going to need to have a combination of parental support, loans, scholarships, grants, and money from side jobs. There's also the military route. Although I might try to steer them away from that. Ultimately it will be up to them to figure how to get through school. I wish I could help them more, but I'm not going to mortage my retirement to do so.

 

I've got a 529 plan for myself for graduate studies, and I just finished my undergraduate degree a couple of years ago, and I have a few basics to keep in mind.
Sorry if they're obvious.

1) The more your family makes, the less your children will get in "free", non-loan government aid.

2) Government loans apply more liberally (than grants) across income levels.

3) The more money you save, the less you will get from the government. You'll have to report what you've saved when you apply for financial aid. Saving and planning is obviously better, but there are some situations where your savings is small, that you could have gotten the same amount from the government if you hadn't saved.

4 a- Private schools. Don't automatically write them off as too expensive. In some situations, they can effectively double or triple your financial aid package with "institution-based" grants, loans, and scholarships.

4 b- Private schools. There will be a handful of administrators at any school who can "make things happen." They have the power to give more aid to those who ask for it. I did so successfully two times at my school.

 

IIRC, the gvt determines federal grants and loans based on your FAFSA information, which in turn, is based on your parents AGI on their previous years tax returns, among other things.

 

We got a 15 year mortgage when our daughter was 4. We will have our mortgage paid off during her freshman year. Then, the income most people have to use on housing (apart from local property taxes) we will have free to spend on her college. I realize this isn't the conventional plan, but it works for me!

Off topic, but ask yourself this question: how many people do you know who talked about getting a 15 year mortgage, but then got a 30 year mortgage "for the flexibility," promising to "make extra principal payments and pay it off early?" How many of them actually made those extra payments? Get the 15 year mortgage. As an added bonus, it even comes with a lower interest rate.

And don't tell me the fact Uncle Sam effectively pays 38% of the interest makes that financially worthwhile or emotionally satisfying, either!

 

You can still qualify for federal pell grants and federal student loan programs even if you are going to a private school.

I went to a private college to play soccer my freshman year. Annual tuition was 29,000/year not including books and other fees. I had a 3.75 GPA in high school with a 31 ACT score. My class rank was decent, you'd think it'd be top 10 with a 3.75 gpa, but I had a ridiculously smart class, so that hurt me a little bit. Anyways, I received a deans fellow scholarship that got me 6,000/year. In order to receive that, I had to go down in the summer before school started and go through an interview process and essay competition. In addition to that, I also received a standard 8,000/year scholarship that anyone with a ACT of 26 or higher and a gpa of 3.5 or higher received.

It was a D3 school, but the soccer team had a few benefactors and there were a couple endowed grants set up at the university for "student athletes volunteering in the community" so I basically got an additional 6,000/year for that grant as well. That left me with about 4,000/year not including books and other expenses, and my dad was more than happy to pick those up for me. My college expenses actually went up when I transferred my sophomore year to a large public university where scholarships were pretty much non-existent unless you had a 32 or higher act and a 4.0.

Private schools (non Ivy League) have tons of scholarship opportunities for good to very good students, otherwise no one would be able to afford to go there.

To answer your question, to qualify for private aid, you still have to fill out the fafsa form, even though you probably won't get any federal aid if your parents make a large chunk of change. My scholarships weren't based in any way on my parents finances, they were based on my academic ability, so I wouldn't know how they would calculate aid packages privately.