College savings for kids?

[csmommy]

I think you need to be poor enough to qualify for free school lunches in order to qualify for need based financial aid.

Ha, ha, no! In no way would we qualify for free lunch, but as I previously stated DS gets 10K a year in need based aid. There is a misconception that need based aid is given to you by the government - it is not. The government gives the aid to the school & the school gives it out. The school chooses who gets it so if they want your kid they give you the aid. Period. There were schools DS was accepted at who did not offer us any need based aid. That is how it works in small LAC's.

The ones DD is looking at said they give both merit & need based to those they want who also demonstrate need. The need is based on EFC, but as far as I know they do not publish what they give based on what the persons EFC is.

 

[crisi]

Ha, ha, no! In no way would we qualify for free lunch, but as I previously stated DS gets 10K a year in need based aid. There is a misconception that need based aid is given to you by the government - it is not. The government give the aid to the school & the school gives it out. The school chooses who gets it so if they want your kid they give you the aid. Period. There were school DS was accepted at who did not offer us any need based aid. That is how it works in small LAC's.

The ones DD is looking at said they give both merit & need based to those they want who also demonstrate need. The need is based on EFC, but as far as I know they do not publish what they give based on what the persons EFC is.

Yep, that's what I meant by private aid. But if you get $10k a year for a $40k a year school, you still need to come up with quite a bit of money either out of savings or in loans.

 

[csmommy]

Yep, that's what I meant by private aid. But if you get $10k a year for a $40k a year school, you still need to come up with quite a bit of money either out of savings or in loans.

As I mentioned earlier in this thread he receives 20k in merit & 10k need based each yr.

 

[Colleen27]

On the other end, though, both you and I have seen the people who have come in here with no college savings, shocked at their EFC - who have a signature line full of cruises and Deluxe resort stays.

You should save enough for your retirement and prioritize that, and an emergency cushion. And you shouldn't save for college and retirement to the point where you eat beans and toast and never leave the house. But Poly concierge and no college savings? But there are plenty of people who are choosing to drive matching BMWs rather than saving for college (and often retirement) and crying poverty, shocked that someone else won't take responsibility for getting their kids educated.

True enough. We try to walk the line, but certainly there are those who simply don't think about tomorrow or who make luxury in the present a higher priority than saving for the future. And I'm guilty of that myself to a certain degree; not Poly concierge or BMWs, but we would certainly have more saved if we didn't travel so much or kept the girls in public school (although I like to think my 11 year old car and fixer-upper home make up for it to some extent!). We strive for balance and for a good variety of experiences while the kids are young without breaking the bank, but there are certainly cutbacks we could make to save more. I have a good idea of what our EFC will be, though, and we are prepared to meet it; our focus is on how to make up the difference between our EFC and cost of attendance without taking out loans for the whole of that gap.

 

[Tink-aholic]

Because if you are looking at federal aid, there are only four kinds of grants.

Pell grants are only given out to the neediest students - there are few of us on this board who are going to see a Pell grant. If we can afford Disney, our incomes tend to be too big - regardless of savings. They max at $5000 a year.
Supplemental Opportunity grants are given out to even more needy students to supplement the Pell. They max at $4000 a year.
There are also TEACH grants and grants for returning military.

Everything else the federal government hands out is in the form of loans or work study. Work study is great, but it isn't going to pay tuition. And loans - well, why pay the U.S. government interest because you didn't save. Besides, the limit on them is rather tight as well - you'll max out federal student loans for undergrad at $27,000 - that's total, not per year - that isn't a lot of money. That's the for the kid.

You, as the parent, can take out a PLUS loan. Its currently 7.21% interest. Me, I'd rather save now and make interest than take out a loan for college and pay it.

All other funding will be private or come out of your own pocket. Now there is a lot of private money out there. But there is far from plenty of private money out there. For every kid that got a free ride scholarship there are hundreds who didn't. For every kid that goes to a good school with a good aid package, there is a kid who has to turn it down because their parents can't make up the difference. Or one that takes out onerous private loans and graduates under a cloud of debt.

This is exactly correct. As a single mom without any help or any child support, I make too much for financial aid. I am paying my son's college with cash, and have taken the few subsidized loans out (in his name) while he is in college simply because it is interest-free for the duration of his education and it helps build his credit, and I'll pay them back in full at the 6-month mark after graduation. I am lucky that he has a partial scholarship and has agreed to be an RA this year, which helps with expenses. But, he will graduate college without any debt...and he knows that I am giving him a gift.

His annual educational costs are roughly $52K, I pay between $16-20K (less now that he is an RA).

As for my retirement, I am a public school teacher and I am required to put away 11% of my income into the Teachers' Retirement Fund. When I retire, I will receive a percentage every month (depending upon my age and years teaching) of my last annual salary.

 

[crisi]

I wonder if you can use the 529 money for grandkids, not that you're there yet lol. It's not about the penalty (I don't even know what it is). It about a wonderful gift for both your children (it would take a huge burden off their shoulders, or they could save for THEIR grandkids college) and for your grandchildren.

And I think a pipefitter is a great career, I think trades will always be in demand. I'm glad you supported him, many parents would have been 'disappointed', ugh.

Neither of my kids is likely to have kids.

 

[pjlla]

I have one that isn't, and its turning out well. His sister will likely use the 529 for grad school and if she doesn't, we can pay the penalty, its still cheaper than loans! (We've saved enough in HER 529 that if she goes to a really pricey school, we'd have to put $15k a year towards it outside of college savings, which we can do, her brother has a similar amount in his 529).

He wants to be a pipefitter. A year of school at $6k, starts an apprenticeship at $30k a year with the rest of school paid for, gets a 10% raise each year until he's a journeyman when his salary doubles, and five years out of high school he'll be making $80k with a pension and awesome benefits. Plus, his grades went up when we said "you don't have to go to college, it isn't for everyone." I'm far more excited about that than I'd be if he wanted to go to a private four year school for theatre.

If my biggest problem in life is paying the penalties on a 529 because I oversaved (and it isn't), I think I'd lie in bed at night without a worry in the world.

Are you aware of the scholarships that Mike Rowe's foundation (the guy from Dirty Jobs) gives out for students going into trades (versus college)? It seems pretty easy overall to apply and your chances of getting the scholarship seem high. You might want to have your son look into it.

Here's a link to get him started......

http://profoundlydisconnected.com/

HTH............P

 

[LoveBWVVBR]

We bought Florida Prepaid for each child when she was born, so their undergrad is covered. We have 529 plans for both for things like books and grad school, but I also wonder about over-contributing. The older one in particular has what seems like a large amount in hers, and I wonder if I can reshuffle some of that to the younger one who has less without penalties? Also, what happens if they don't need all that money...can they use it to buy a house or something when they are older?

 

[mommy2allyandaveri]

We have done $100 per month per kid when I got pregnant, plus an extra $5k per child from grandparents. We chose not to do a 529 and have the money with an investor. It's in moderate risk accounts and are doing well. If I can't pay for their whole education, I want to at least make a large dent. I would like for them to start their adult lives without a mountain of debt. I'm also hoping for scholarships.

 

[crisi]

Are you aware of the scholarships that Mike Rowe's foundation (the guy from Dirty Jobs) gives out for students going into trades (versus college)? It seems pretty easy overall to apply and your chances of getting the scholarship seem high. You might want to have your son look into it.

Here's a link to get him started......

http://profoundlydisconnected.com/

HTH............P

Thanks, I am, and I'm really happy its available. Awesome program, and I'm happy its helping raise the profile of trades. But he'll have $6,000 in tuition total - which we can easily afford, and leave Mike Rowe's scholarships to kids whose parents don't have enough money saved to send their kid to a private liberal arts college for four years when their kid says "hey, trade school!"

 

[disfanforlife]

Our two daughters are junior and senior in college right now. They both go to SUNY schools. One daughter has $4000 per year scholarship and the school is about $20K for in state students. We started saving when they were very young and transferred to 529's when they became available. Grandparents are helping with school too so they are both covered. Whatever is left will be transferred to our son who is still in high school. We are very fortunate.

 

[aprilchem]

The first poster ran out of savings by junior year for one child. If you have multiple children it's IMPOSSIBLE to save enough to pay the entire cost of 4 years for each child. That is a fact of life. At some point you will have no more money saved and still have kid(s) in college.

What?!?! I have three children, and we are on track for having all 3 of their colleges fully-funded by the time they're ready to go. We're not rich, we're solidly middle-class. We just make it a priority to save, by having a modest home, living well within our means, and putting money away every month. And we're also fully-funding our retirement at the same time and are on track to meet goal by age 65. So I think your statement is false.

 

[lurkernj]

I am the poster who has the Jr that is referenced above.

We did save, we have a modest home, and have driven old cars until the 16 yr old pickup truck died this year and we got something new. I suppose we could have fully pre-funded both kids college (have another one starting next year), if we went with a more reasonably priced state school. As mentioned, he goes to a pricey private school that is twice the state school rate (including housing). We made that choice with our eyes wide open, and have not regretted it for a single minute. It was the right choice for him.

As it is, we paid off our house when he was in freshman year and are now paying his tuition as if it was our mortgage. That was the plan all along. My other son isn't as good of a student and will be going to a state school that we can pay for without any loans (mortgage payment will go there). We have one year of overlap and will need to borrow for that year. We are very good with this choice. Granted if we had more kids, first son wouldn't be going to that school as it would need to be spread out among more. We should be all done with all loans before we are 53. Our retirement accounts are pretty good as well, and I'd love to retire at 55, but due to penalties etc, we'll probably wait til 59. Neither kid will have any loans from their undergraduate degrees. First DS plans to go for a PhD, but that's on him (though I'd probably still help with some of it).

I think each family makes the choice that's right for them. This works for us, though I'm sure others will disagree.

 

[neatokimmo]

I'm not saving anything for DDs college. We have an excellent school 30 min away that covers most degrees except engineering. The current cost is about $2700 a semester after our TN lottery grants. She will do dual enrollment starting her Sophomore year in high school and will knock out the basic classes before she is 18 (at a very reduced rate). I realize that the $2700 will go up quite a bit. She can get loans, and I will help her pay those off.

If she even decides to go. I know a lot of happy successful people who learned more of a trade, instead of getting a degree. I know a lot of people with good 4 year degrees that are struggling to get a decent paying job. So we will wing it

 

[Colleen27]

What?!?! I have three children, and we are on track for having all 3 of their colleges fully-funded by the time they're ready to go. We're not rich, we're solidly middle-class. We just make it a priority to save, by having a modest home, living well within our means, and putting money away every month. And we're also fully-funding our retirement at the same time and are on track to meet goal by age 65. So I think your statement is false.

Impossible is probably too strong a word, but it is worth noting that I've seen the phrase "solidly middle class" used on this board to refer to a household income of 50k and a household income of 250k. For those at the lower end of middle class it may very well be impossible. We live within our means in a modest home in order to be able to save something, but we still can't do it all.

 

[DVCcurious]

Impossible is probably too strong a word, but it is worth noting that I've seen the phrase "solidly middle class" used on this board to refer to a household income of 50k and a household income of 250k. .

250k income is top 3%. It's not even close to middle class, or even upper middle class for that matter. 250k is RICH.

http://www.nytimes.com/interactive/2012/01/15/business/one-percent-map.html?_r=0

The average family income in America is $50,000. So middle class (25%-75%) is more like 25,000 - 90,000 income. Any family who makes more than $100,000 household income is not middle class in any real sense of the term. A 100k family is in the top 21% of household income. 79% make less than 100k! So I stand by what I said. It is IMPOSSIBLE for a family who makes a middle class income (90,000 or less) to save enough for college for 2 or more kids even at a State school. $20,000 per year X 4 years X 2 kids = $160,000. With 18 years to save that's almost 10,000 per year. If you make 90,000 before taxes you probably get 70k after taxes (7.5% FICA + 15% Federal and State would be about 20k in taxes) are you really able to put 15% (or more) of your after-tax income away for college? Even after you've saved for your retirement? The math just doesn't work out.

But, yes, all you $250k "middle classers" out there can afford to save for college for your kids. You can also afford BMW's, a boat, and a summer house.

 

[supersnoop]

So middle class (25%-75%) is more like 25,000 - 90,000 income.

That's not the definition of middle class, but it's close. Middle is generally considered 20%-80%, with breaks for "lower middle" at 40% and "upper middle" at 60%. But that only considers income, not net worth.

Since income ranges can vary by area, it wouldn't be unheard of for $250k to be in the middle range in New York City, while $80k might be rich in Arkansas.

 

[branv]

Your math is forgetting a very very important aspect of saving for college: investing. While certainly some people just sock money away, others will put that savings in a 529 or similar investment plan. So you can't use your math without taking into consideration return on investment. For instance, DH has had a 401k since 2002. He has put away 6% of his salary, and his employer has matched 50%. His salary has grown from $50k to $75k incrementally in that time, with a year off due to layoff and contact work, and another year off in 2008-2009 when his company stopped contributing and we had to stop contributing to make up for temporary salary cuts. Additionally, he lost a chunk of change in 2008 like most did. That being said, today his 401k is worth around $135k. So roughly 14 years, minus some time, obviously a large chunk of that is certainly not just cash he/employer put in. Guesstimating that $90k was his and his employer match, that's $45k just from low to moderate risk investment return.

I mean, I get where you're coming from, but effective college savings is far more complicated than just socking it away, and definitely more attainable than that kind of math describes.

 

[Mrs. Ciz]

I did prepaid in VA. My ex and I have covered 8 semesters in state for both kids. I'm now working on room and board (I'd guess I have one year covered right now).

We did the same thing. Our DS is a college freshman now. We are paying room and board using the university's monthly payment plan. It's $1000 a month - just for room and board! We were paying about a third of that into his Prepaid 529 each month (we paid for a couple prepaid years in full vs using a payment plan), so we needed to come up with an extra $700 a month in the budget. I had to get a better job to afford it.

 

[Colleen27]

250k income is top 3%. It's not even close to middle class, or even upper middle class for that matter. 250k is RICH.

http://www.nytimes.com/interactive/2012/01/15/business/one-percent-map.html?_r=0

The average family income in America is $50,000. So middle class (25%-75%) is more like 25,000 - 90,000 income. Any family who makes more than $100,000 household income is not middle class in any real sense of the term. A 100k family is in the top 21% of household income. 79% make less than 100k! So I stand by what I said. It is IMPOSSIBLE for a family who makes a middle class income (90,000 or less) to save enough for college for 2 or more kids even at a State school. $20,000 per year X 4 years X 2 kids = $160,000. With 18 years to save that's almost 10,000 per year. If you make 90,000 before taxes you probably get 70k after taxes (7.5% FICA + 15% Federal and State would be about 20k in taxes) are you really able to put 15% (or more) of your after-tax income away for college? Even after you've saved for your retirement? The math just doesn't work out.

But, yes, all you $250k "middle classers" out there can afford to save for college for your kids. You can also afford BMW's, a boat, and a summer house.

I agree with most of what you're saying though I'd quibble with the math a bit (you ignore the time-value of money, for starters). However, we're not really in the realm of statistics here on the DIS. We're talking about perception, and in terms of perception nearly 90% of Americans think of/call themselves "middle class". Saving to fully fund college is very possible for the higher earning segment of the self-reported middle class.

Also, income is only one way to define middle class and one that is sort of falling out of favor because it doesn't accurately capture the reality of the shifting economy. Using income, a static 60% (give or take; the quintile method is what I've seen used most widely to define the middle class on an income scale) will always be middle class regardless of changes in buying power and standard of living. As wages continue to stagnate, it is becoming more helpful to define middle class as a set of expectations - the ability to buy a home, access healthcare when needed, send the kids to college, etc. And by that standard, 250K in very expensive areas may very well be middle class while most of the income-based statistical middle would be more accurately described as lower/working class.