The only thing about a 15 year mortgage that will be paid off when your child is in school is that it affects your expected contribution according to the FAFSA formulas. A mortgage, home equity loan, or the like ties up income and raises the amount of money that a student can recieve in grants and subsidized loans. If you have a $2000 a month mortgage, $24,000 a year might sound good for college, but it might only cover half a year's tuition soon. Your housing costs more or less stay constant over the life of the mortgage while the costs of an education will increase. In this case, you'd still need to find grants and loans to make up the balance. You should notice a serious drop off in the aid offer going into the sophomore year. My parents mortgage was paid off when I was a junior. The aid offer that year made our contribution extremely high for that year so I have a pretty big loan for that year. A home equity loan my parents took during the junior year actually resulted in me getting free money for my last year. Its an odd system but its something to keep in mind, particularly if costs continue to increase. The opportunity costs of saving while you pay a lower amount on a 30 year mortgage, despite the slightly higher rate, might exceed the benefit of having no mortgage and paying the bulk of college costs out your own pocket while having to take out loans to cover the difference.
Are there direct or indirect forms of saving for college that don't adversely affect qualifying for financial aid?
There's always that offshore slush fund in the Cayman Islands that people are always talking about...
You could just go to a public school instead. What's so great about the private school? What can you do there that you can't do at a public school?
Since I don't view this forum much, I just caught wind of this thread... I'm a sophomore in high school, and will probably be able to get into most schools (with the Ivy Leagues and a few others being heavy reach schools), but my parents are petrified about paying for some of the places I want to go to. I recently compiled a list of my top ten, and all of them had a tuition, not counting room and board, of at least $20,000. Due to a state-run program in Texas (which was such a good deal, it is now discontinued), I already have my tuition at a state school paid. However, my parents are still open to the idea of me attending a private school where I will get a more personalized, in-depth, and subsequently, better learning experience then a state school could provide. Yet many of my friends are not even allowed to consider out-of-state/private schools simply because of the cost. I find it ridicolous that the government doesn't try to do something about this, and does something to curtail the ludicrous amounts of money required for higher education.
Andy B-- As a current college student let me clarify something, barring a major change in the system, FAFSA will do virtually nothing for you if you are in the type of financial situation you claim to be (namely having $1,000 a month of discretionary income you can invest in your child's future). The government's financial aid is almost completley based upon need. FAFSA will probably throw a bone of a $1,500 anually renewable and interest bearing (although low interest) loan. Its cute, but it really doesn't do that much for anyone. The best advice I can give you is to encourage your child at school, need based financial aid will most likely be beyond your child, but academic based aid has become very important. Schools like Marquette (not where I go, but I know many friends who went there) will eat most of the sizeable tuition (in the way of scholarships) for strong academic students while charging in excess of $20,000 a year for students with weaker credentials. Also encourage them to fill out ANY scholarship form they can find when they get closer to the age (although this will be covered in length when you get closer), the tuition looks scary (and it is), but the majority of student have some sort of scholarship. More then likely your child will be paying at most 3/4 of that tuition, and it could easily be less. I'm paying 1/4 and I know many friends who are actually getting paid to go to school. Hope this has been some help. Feel free to throw questions at someone who has been through the process.
You should just go to the state school and get your tuition paid for. It's not worth the money you would have to pay for a private school ($30,000 per year for four years). Even if you got a better paying job from going to a private school, you probably would still be even or behind monetary-wise. Besides, it's what you put into it that counts. You can succeed at any school, if you put forth the effort.
Ask anyone who's tried the University of California system how hard it is to get into classes before they get closed out.
That's why I'd rather have my kid have some loans that they'll have to pay off, so they'll have a stake in their education, too. I know I worked a hell of a lot harder for my degree than the guys who were there on Dad's dime and spent 5 and 6 years partying.
Thanks B-Rock. I never even contemplated getting any financial aid. That is why I am hammering the 529 plan for as long as I am able to. I am 100% in disagreement with this. My parents worked their asses off to pay for my college education. I helped out where I could using the CO-OP program but in the end my parents ended up giving me as much of that money as they could that I earned back after I graduated. Not having any school loans to worry about along with a solid engineering degree put me at a huge financial advantage compared to most people my age. We are going to do what ever it takes to make sure our daughter has a little loans as possible to allow her the best start in life possible, just like we got. Life is hard enough with out burdening your children with loans that are not needed. I of course understand having the kids get loans if the parents can't afford it, that only makes sense. It was my experience in school that the lazy kids partied and the hard working kids studied. It had nothing to do with whether they were helping to pay for their own education or not as most kids in college have no understanding of what the loans will mean when they get out and don't really feel like they are "paying" for it yet. Any college kid who goes nuts with a credit card is a great example of this. Andy
I would prefer not to spend my first two years of college sitting in lecture halls with impersonal professors who are more interested in their own research then they are in teaching the class. I would rather go somewhere like here.
There is a lot of financial aid and scholarships out there. Especially since you know you have a decent and free option to fall back on, you shouldn't worry about price until you know for certain how much you will have to pay.
If any of you get a chance, check out Kiplinger's take on 529 plans in this month's issue. I tried locating the article on their website, but I don't think they have it posted yet. I was happy to see that Michigan's was one their favored plans. They really hammered Maine's, however. There was some really good info concerning fees and performance problems with several of the plans out there. Just thought I would give the heads up because many of you are invested in 529s for your children's education.