College savings for kids?

[DVCcurious]

We're talking about perception, and in terms of perception nearly 90% of Americans think of/call themselves "middle class".

So you're saying a large chunk of Americans are ignorant about the definition of the word "middle".

 

[Colleen27]

So you're saying a large chunk of Americans are ignorant about the definition of the word "middle".

No, what I'm saying is that even experts can't agree on one fixed definition of "middle" to use for discussions of class so it is no wonder you run into the same problem on message boards.

TO use an extreme to illustrate the point, look at Brazil. The top 20% of households earn more than 70% of the country's income. The "middle" accounts for about 25% of the country's income and the official poverty rate is high enough that it encroaches into the quintile-based middle. But by a strict statistical standard, the top 5% or so of impoverished Brazilians are members of that country's middle class simply because they don't fall into the poorest-of-the-poor bottom 20%. Inequality in the US isn't that extreme, of course, but it is increasing and measures of the middle class that rely strictly on income distribution can mask that fact as the lower end of the "middle" begins to experience more and more traits traditionally associated with poverty.

 

[tikitorie]

We have 3 children who attended private schools, which was hard enough enough for us to manage. The nice thing about private school is we have so much put aside each month for tuition which we continue now that our oldest is in college. We pay for car insurance, cell phone, books, food and other things that come up. We figure we will be able to manage about 1/3 of his tuition, the rest he will have to do what my husband and I did, and get student loans. He graduated valedictorian of his class last year in high school and has always done very well. The problem is his major is in Astrophysics, which is not even offered at a lot of schools, especially smaller schools that offer a lot of scholarships. He choose a large state school that has a great Astrophysics dept. When we met with the financial office in the beginning of the year we were told that he would not be receiving any scholarships, and of course we questioned that. We were told that "your son is the worse thing to be...He's white, male and middle class". Extremely frustrating! We have always told him that if he worked hard enough it would pay off. Now he's watching all these kids that goofed off in school and had what he would consider bad grades, get scholarships for sports. I have nothing against sports, my second son is a good football player and hopes to get a scholarship someday. It's just sad that academics does not get the same attention.

 

[imsayin]

I have nothing against sports, my second son is a good football player and hopes to get a scholarship someday. It's just sad that academics does not get the same attention.

Overall, there are more academic scholarships given out than athletic scholarships.

 

[2TxAgs]

Overall, there are more academic scholarships given out than athletic scholarships.

And there are many more students who are non-athletes! Very few of whom get full rides, which any football player does at a D1 school.

I see tikitorie's point. Schools brag about all the scholarship $$ they give out, but a couple thousand, while nice, hardly puts a dent in most kids total cost. And state universities, with thousands of kids admitted each year, spread the money out among those thousands, with the reality that lots of smart kids don't get much at all.

 

[georgina]

Many large state schools don't give merit scholarships. I know kids at private schools who have full tuition scholarships. They did A LOT of research and chose good (not the very best) schools that would offer them a lot of aid. There are compromises. Hard for tikitorie's son because his major is mostly at larger schools. Both my DDs were offered full tuition scholarships to Pitt (neither chose to attend there). Money is out there; there are several schools that offer guaranteed full rides for National Merit scholars also.

 

[crisi]

Many large state schools don't give merit scholarships. I know kids at private schools who have full tuition scholarships. They did A LOT of research and chose good (not the very best) schools that would offer them a lot of aid. There are compromises. Hard for tikitorie's son because his major is mostly at larger schools. Both my DDs were offered full tuition scholarships to Pitt (neither chose to attend there). Money is out there; there are several schools that offer guaranteed full rides for National Merit scholars also.

But not every kid has the grades to do that, or tests well enough. Congrats, you raised two apparently exceptional children. But your are exceptional, not ordinary. Ordinary kids don't get full rides to good schools or national merit scholarships. If we did live in Lake Woebegone, there wouldn't be enough money because every kid would be exceptional.

 

[Colleen27]

But not every kid has the grades to do that, or tests well enough. Congrats, you raised two apparently exceptional children. But your are exceptional, not ordinary. Ordinary kids don't get full rides to good schools or national merit scholarships. If we did live in Lake Woebegone, there wouldn't be enough money because every kid would be exceptional.

True enough, but it does make a point that it is worth looking around at all the options. I can't believe how many parents I know who are discouraging their kids from even looking beyond the public university system because "public is all we can afford". Sure, not all of those kids will have the grades to get into or get merit aid from private universities but some do, and without knowing what's out there they don't necessarily think to look at schools that, on paper, are way above their price range. IME, the guidance counselors in our public schools need to do a better job with this. Unfortunately at our local HS each counselor serves about 300 kids and that doesn't leave a lot of time for one-on-one help with the college selection and financial aid process.

 

[angierae]

If I had another child (which I won't), I would do the pre-paid instate tuition plan through the State of Michigan. We have multiple very good universities here, and if that child wanted to go out of state, that child would have to work to make up the difference in scholarships and loans.

 

[imsayin]

But not every kid has the grades to do that, or tests well enough. Congrats, you raised two apparently exceptional children. But your are exceptional, not ordinary. Ordinary kids don't get full rides to good schools or national merit scholarships. If we did live in Lake Woebegone, there wouldn't be enough money because every kid would be exceptional.

If you don't have great grades, test scores, or money, Junior/Community College is a great affordable option. Not everyone has to start out at a 4 year school.

Also, you don't have to be exceptional to qualify for academic scholarships. As a previous poster noted, you have to do your research and find the schools that give out money. I've seen schools that offer scholarships for an ACT score of 21. It won't be a full ride, but it can be a big help.

 

[crisi]

If you don't have great grades, test scores, or money, Junior/Community College is a great affordable option. Not everyone has to start out at a 4 year school.

Also, you don't have to be exceptional to qualify for academic scholarships. As a previous poster noted, you have to do your research and find the schools that give out money. I've seen schools that offer scholarships for an ACT score of 21. It won't be a full ride, but it can be a big help.

Yes, I know someone who got one of those. $40k a year in tuition, pretty much every student got a scholarship for $10k. Which brought the tuition down to $30k - which was still in excess of the $20k tuition at a state school. But by then, the lure of the smaller private school was overwhelming.

You SHOULD have your kids look at options, there is a chance they'll get a better package from a private school than they can pull together from a public one. But at the same time, be cautious. Teenagers get the idea that $10k a year is not a lot of money and get their hearts set on a school - then the package isn't there.

Also, pay attention to four and five year graduation rates for the path you've chosen. A lot of schools don't have great graduation rates. And the rate of graduation with a four year degree if you start at a community college is pretty dismal. Not that it can't be done, but the odds aren't in your favor.

 

[MrsPete]

Coming in late to this thread, but these are my comments as a teacher of high school seniors and the mom of two college students:

We started saving for our children's educations before they were conceived; it was important to us. Most of our friends lived in nicer houses, went on nicer vacations, and ate out more often -- but we valued knowing that we'd be able to write the checks for our kids' college educations, so we saved. Turns out, we over-saved. I have no regrets on that subject!

Our oldest will graduate in one more semester, and IF we'd paid "sticker price" for her education, it would've been just a hair over 50K. It's a state school, her first choice, and she has thrived from Day 1. You don't have to save a quarter of a million! However, we are in a cost of living area, which means that our salaries are low too, so 50K is more here than it would be in other parts of the country.

It's fine to put limits on how much you're willing/able to spend on college. With rare exceptions, your kids won't be better off in a private school or an out-of-state school, so don't splurge on big ticket schools unless you have a really solid reason for doing so.

Don't feel that you have to save the whole cost of tuition. You'll probably still be working and will be able to supplement your savings with current earnings. For example, if you expect your child's costs to be 15K per year, and you've saved 40K, you can probably swing the 5K out of current earnings -- that sounds a whole lot more do-able.

Too many people count on scholarships swooping in to save the day; for the vast majority of our students, this doesn't happen -- and if it does happen, it's more likely to be tuition-only than a full-ride. Yes, a decade ago, full-rides were more common, but today colleges have decided that it's better to give tuition-only to five students instead of a full-ride to one student. From a business point of view, it's a valid choice.

In all fairness, I should say that as many times as I've said, "SAVE! Don't assume your kids will get scholarships!", I'm pleased (and a little surprised) to say that BOTH of mine are currently in college ... on full scholarship. I paid a total of $330 for BOTH of them to attend school this fall semester, most of it going for my freshman's books. It does happen, but for BOTH kids to "win" is incredibly rare. I personally know only a handful of other people who can say this same thing. Scholarships aren't JUST about academics: The biggest scholarship winner is likely to be a well-rounded kid with good grades, leadership experience, financial need, who is entering a scholarship-heavy major.

People sometimes think that if they don't save, they'll "win" by being awarded financial aid. Yes, this is true: However, what you need to realize is that the aid these people are offered is NOT grants -- it's loans. Essentially, you can save now or make payments (with interest) later.

The private-school-gives-so-much-money-that-it-is-cheaper-than-state-schools thing is basically dead. I've been teaching seniors for more than two decades, and the last time I saw a student get a deal like this was the year my oldest graduated: that was 2012. It's an urban myth. Here's what's typical: The private school costs 35K/year and the state school costs 15K/year ... the private school offers you 10K/year and the state school offers you nothing -- so, yes, the private school offered you more, but that still leaves you with 25K, which is 10K more than the state school! If you think you'll get a great deal -- apply! try! But also apply to a school you can afford if nothing comes through for you.

 

[Colleen27]

You SHOULD have your kids look at options, there is a chance they'll get a better package from a private school than they can pull together from a public one. But at the same time, be cautious. Teenagers get the idea that $10k a year is not a lot of money and get their hearts set on a school - then the package isn't there.

Also, pay attention to four and five year graduation rates for the path you've chosen. A lot of schools don't have great graduation rates. And the rate of graduation with a four year degree if you start at a community college is pretty dismal. Not that it can't be done, but the odds aren't in your favor.

I think those graduation stats are misleading... They're dismal, but how much of that is because community colleges serve a much higher percentage of non-traditional students who aren't attending full time to begin with? Commuter universities suffer from the same issue. When your students are adults with jobs and families, they aren't likely to take 16 credit hours per semester or take summer classes, so of course they're going to take longer to graduate. Plus community colleges also accept a lot of kids who aren't "college ready", which adds to the time it takes to finish a degree (as well as increasing the chances that they won't be able to handle college-level work even with remedial classes and support).

I personally took 8 years to finish at community college, from the time I first started until the time I transferred to university. That had nothing to do with the school and everything to do with me - at first, I attended part time around my kids' school schedules, then I took several years off to have my youngest and stay home with her until she started school. So the statistics count me as someone who didn't graduate in a timely fashion but the reasons for that have no bearing on the experience my son will have attending the same community college as a 19yo kid living at home and taking a full time course load.

I agree that private isn't always going to work out the best, and I can certainly see how it would be easier to avoid the whole issue of a kid possibly getting her heart set on a school that is financially out of reach. But at the same time, certain schools tend to offer more generous financial aid (both merit and need based) than others so limiting the options before even starting the search can be counterproductive.

 

[Colleen27]

Duplicate, sorry.

 

[mistysue]

And there are many more students who are non-athletes! Very few of whom get full rides, which any football player does at a D1 school.

I see tikitorie's point. Schools brag about all the scholarship $$ they give out, but a couple thousand, while nice, hardly puts a dent in most kids total cost. And state universities, with thousands of kids admitted each year, spread the money out among those thousands, with the reality that lots of smart kids don't get much at all.

You may want to do more looking into this- looking around online what I keep seeing is that aprox. 2% of athletes get scholarships while roughly 1/3 of students overall get some sort of academic scholarship. At the same time, the average athletic scholarship is HALF the average academic scholarship. So that's great that your school has an amazing record of athletic scholarships, but it's not the norm by any means.

 

[Brancaneve]

Does anyone know if 529 funds can be used to pay off campus housing and other living expenses?

 

[MissVeronica]

We doing the Florida pre-paid tuition plan for a 4 year university for both boys. We pay $370 a month. Florida is nice because you can take it out and use it out of state if they decide to go somewhere else.

 

[2TxAgs]

Does anyone know if 529 funds can be used to pay off campus housing and other living expenses?

Yes they can.

 

[runwad]

I have a different kind of question. I have some EEE savings bonds for my kids that were purchased in the 90's. I think if they're in my name w/the child as the beneficiary I can cash them in tax free to pay for tuition. But if the bond is in the child's name and they are under 24 they would have to pay the tax if they cashed them in for tuition. Can anyone confirm that?

And the second part of my question is can the bonds in my name w/the child as beneficiary and the bonds in the child's name be cashed in tax free to pay student loans? Does anyone know? I tried to google but not getting any useful information. Thanks.

 

[LoveBWVVBR]

We doing the Florida pre-paid tuition plan for a 4 year university for both boys. We pay $370 a month. Florida is nice because you can take it out and use it out of state if they decide to go somewhere else.

We also bought Florida Prepaid for both kids when they were born. It wasn't that expensive (17K and 26K respectively). We bought 4 years of everything but dorm (only 1 year of dorm) as we figured the kids might want to live off-campus after that. We do have 529 plans to pay for the remainder of housing, meal plans and books. Their college is 100% paid-for if they stay in-state, and Florida has some great universities. We are telling them that if they get Bright Futures, the money in the prepaid that gets refunded is theirs. The prepaid plan is awesome.