Saving for college

I heard Dave Ramsey talkin' about this a few days ago.

His favorite is ESA - education savings account.

Next is 529 plans.

He does not like pre paid plans.
 
Both my kids have a 529 through our state. I get a 20% tax credit on everything I put in so that is like earning about a 20% return as long as I put that money back in when I get my tax return.
 
Because this is a long term goal (more than 5 years down the road) I would be hard pressed NOT to put that money in a mutual fund!

I know it's scary risking a sizable amount of cash, but the stock market fluctuates. It will always go up, and it will always go down. Over time, however, it tends to go up.
 

We have 529's for our four kids. If I'm not being too nosy can I ask how much each of you contribute. I try to contribute $100 per kid each month (so $400 per month. We've definately had months (and even one whole bad year) where we did not contribute at all. We do what we can but I often wonder if this is enough.

I put in 50 a week in a 529 for the past 12 years but am going to up it next year as college is coming quick! But my brother has a 529 fund for my daughter also that he puts in between 50-75 each week so she should have in excess of 100,000 by the time she goes to college as long as we keep putting in what we are. Hopefully that will be enough or at least cover 2-3 years depending upon where she ends up going. I would prefer she didn't come out of college owing a ton of money if I can help it!
 
I put in 50 a week in a 529 for the past 12 years but am going to up it next year as college is coming quick! But my brother has a 529 fund for my daughter also that he puts in between 50-75 each week so she should have in excess of 100,000 by the time she goes to college as long as we keep putting in what we are. Hopefully that will be enough or at least cover 2-3 years depending upon where she ends up going. I would prefer she didn't come out of college owing a ton of money if I can help it!
Disclaimer first: It's great that you're able to save that much money. There's no downside to saving more than you need. But a lot of people will say, "I can never put that much away for college, so I won't even bother."

In our area, for a mid-tier university that most kids attend, $100,000 is overkill -- we have a little more than that for BOTH our children's education (and we're planning to buy them each a car halfway through college). Our oldest is going to her first-choice school, a good state university. Her tuition and fees, meal plan and dorm are going to cost $12K/year. I'm sure that price will increase every year, but she's going to be able to attend college for about $55K total.

When you read the magazine articles that talk about needing $$$$$$$ for college, look at what they include in their "needs". They often include the purchase of a car for transportation, a clothing budget that's more than we spend in our family, and generous allowances for other items. While you're stuck with the tuition cost, many other costs can be altered by making less expensive choices. Remember why these magazines publish these articles: They want to encourage you to use their financial planning services.

The point: Save what you can. If it's not $100,000 per child, that's not the end of the world.
 
Disclaimer first: It's great that you're able to save that much money. There's no downside to saving more than you need. But a lot of people will say, "I can never put that much away for college, so I won't even bother."

In our area, for a mid-tier university that most kids attend, $100,000 is overkill -- we have a little more than that for BOTH our children's education (and we're planning to buy them each a car halfway through college). Our oldest is going to her first-choice school, a good state university. Her tuition and fees, meal plan and dorm are going to cost $12K/year. I'm sure that price will increase every year, but she's going to be able to attend college for about $55K total.

When you read the magazine articles that talk about needing $$$$$$$ for college, look at what they include in their "needs". They often include the purchase of a car for transportation, a clothing budget that's more than we spend in our family, and generous allowances for other items. While you're stuck with the tuition cost, many other costs can be altered by making less expensive choices. Remember why these magazines publish these articles: They want to encourage you to use their financial planning services.

The point: Save what you can. If it's not $100,000 per child, that's not the end of the world.


Hi Mrs. Pete. I see you over on the CC boards :)

To the poster saving over $100,000 HOW WONDERFUL!
I can tell you that my dd is starting college in the fall in PA with a price of $51,000 per year. She did get the tuition exchange scholarship, which gives her $36,500 a year but if your dd/ds doesn't get any merit or finanical aid money, the $100,000 will most definately be used depending on what college they end up going to. Like Mrs. Pete said, it just really depends on the circumstances and schools.

GOOD LUCK to all!
 
Yes, my goal is $5000/year, so far I'm on track but DD IS only 20 months!! That's a good point too Mrs. Pete about the articlles and what they tell you to save, but for now I'm going to stuff any what I can! Thanks again to everyone for all of the advice!
 
Just so you know, OP, we would have been better off keeping our college funds in a Savings Acct instead of the 529 we've had them in. When the market went south in 2008, we lost A LOT. Just this year we finally came ahead of what we'd actually put in, to the tune of $180. We started by putting in $100 a month/each, and have upped it over time and now have been at $300 a month/each for the last few years.
 
According to Clark Howard my state has the best 529 plan.

He is taking into account the tax benefits in that state. Many of the ones he listed use Vanguard, which is where we hold the 529 for another. It does not matter what state you are in to use Vanguard. I know #3, NY, is a Vanguard account and the honor roll has many that say "invest only in Vanguard options).

We do not get a tax benefit for the deposits but that money will also not be counted in financial aid. Money in the student's name counts more than money in the parent's name but even money in the parent's name counts against financial aid.

Vanguard has some great funds that take into account how much risk you want to take and the age of the child.
 
We have 529's for our four kids. If I'm not being too nosy can I ask how much each of you contribute. I try to contribute $100 per kid each month (so $400 per month. We've definately had months (and even one whole bad year) where we did not contribute at all. We do what we can but I often wonder if this is enough.

I have found myself asking "how much is enough" lately with DD starting high school next year:scared1: So, I started researching it to the best of my ability. I've read a bunch of articles on colleges, FAFSA, loans, scholarships, grants.....you get the idea. The best thing I found was that some colleges have estimators right on their website that will tell you what you are likely to receive in "help" based on your income and assets. I stayed up one night messing around putting higher or lower income, higher or lower savings, etc., etc.

In the end, I came up with this conclusion. I think if you have a high income, lots of other savings, assets, etc.,plan on putting at least 100K away per child if you think it is likely they will go to anything more than a community college. If your income is lower, do the best you can and learn the most you can about how to get any and all kinds of financial aid! The most interesting thing I read was about how much financial assistance is available at the more expensive private colleges. Interesting because I know I would have just assumed we could not afford it.

My DH went to a tech school (paid for ourselves) and I to a community college, so this is all new to us. I knew at 16 that my family wouldn't be able to contribute at all to my education. I enrolled in the local community college without even visiting a counselor / financial aid office. I graduated in the top 5-10% from a very good high school and somehow never knew there was so much help available! I'm kind of mad right now!:rotfl2:
 
I'm sorry I am a little confused. Do 529's impact your child's ability to get financial aid because it is considered assests? If that is true, saving in a Roth is better right? Maybe even splitting the savings bewteen a Roth and a 529?
 
In the end, I came up with this conclusion. I think if you have a high income, lots of other savings, assets, etc.,plan on putting at least 100K away per child if you think it is likely they will go to anything more than a community college. If your income is lower, do the best you can and learn the most you can about how to get any and all kinds of financial aid! The most interesting thing I read was about how much financial assistance is available at the more expensive private colleges. Interesting because I know I would have just assumed we could not afford it.

Two things to know...the combination of good school and good endowment creates a lot of demand...so while there is aid available, some of the schools that provide the best aid are very difficult to get into. Second, even if you get in, aid becomes competitive. Two students with similar financial profiles can get offered very different aid packages depending on which student the school wants. And it isn't necessarily academically based... The school may want more kids from the South, or may need more gender balance, or want kids that will round out its diversity. Or kids from rural areas. Or kids with leadership backgrounds....schools tend to skew their web calculations to look appealing - best case aid.

My husband got a great deal for local, inner city underacheivers. Seriously, his grades weren't great, but they had special money set aside for a few kids each year who came from inside the Minneapolis st. Paul city limits, whose grades did not reflect their test scores. Being male helped as well, as the school has a gender balance issue, girls need better grades and scores to get in than boys.
 
While I agree that everyone should just save what they can, you can get a pretty good idea of how much you'll need to save using online calculators. If you think that your kids are going to need 20K to go to 4 years of state school while living at home, then divide that by the number of months you have left until school starts. (for a newborn 216 mos - 93 per month) By the same token, if you are hoping your kid will be MIT material and live on campus (55K PER YEAR - 1018 per month).

We are using a 529B that is administered by Vanguard. We are WY residents, so there is no state tax advantage for us anywhere - we went with NY purely for performance. We also had a Coverdell ESA for a while but maxed out of it income-wise. We KNOW we won't qualify for need-based aid but certainly hope that our kids will get merit based money, but we aren't counting on it. And our GI bill benefits are transferred to our kids, but if they do go to MIT, that's only 17K per year off the 55K tuition/room/board.:scared1:

Bonds suck - interest-wise they are worse than a savings account at this point and there are income limits on the tax exclusion.

In the end, save what you can for your kids education AFTER you have fully funded your own retirement. They can take out loans for college, but there are no financial aid programs for old age :thumbsup2
 
I'm sorry I am a little confused. Do 529's impact your child's ability to get financial aid because it is considered assests? If that is true, saving in a Roth is better right? Maybe even splitting the savings bewteen a Roth and a 529?

As I said in my previous post, it depends who holds the asserts.

A savings account, CD or mutual fund help in the name of the child counts the most against them.

Next is the asserts of the parents. This includes a 529 they have for the child. Since the ROTH would also be in the parents name, I believe, it counts the same. I am not sure exactly how 401Ks, IRA and the like count if they are in the parent's retirement account.

If the money is held by a grandparent, aunt, uncle, sibling or another person, the money does not count against the student.
 
In the end, I came up with this conclusion. I think if you have a high income, lots of other savings, assets, etc.,plan on putting at least 100K away per child if you think it is likely they will go to anything more than a community college. If your income is lower, do the best you can and learn the most you can about how to get any and all kinds of financial aid! The most interesting thing I read was about how much financial assistance is available at the more expensive private colleges. Interesting because I know I would have just assumed we could not afford it.
Depends upon where you live. It's up to each individual to do his or her own research. Like I said, for our area, we have not much more than 100,000K earmarked for college, and -- with our first college bill only months away -- we are set to pay all the basics AND a new car for two kids. Admittedly, we do have the lowest tuition in the US (though we also have the low salaries to match it). Somewhere else you might actually need the 100,000K.

Also, if the private schools interest you, look into them but don't assume that they're going to pony up lots of aid. That is an oft-repeated, but rarely found in real-life scenerio. My daugther looked into a couple schools who supposedly do this, and her situation was typical: One offered her 16K/year, which sounds great at first glance, but it would still leave us with 19K/year to pay . . . which is approximately 150% the cost of the state school that she really wants to attend. And the state school is much stronger academically. The moral: Investigate these possibilities, but also apply to the schools you can actually afford on your own.
And it isn't necessarily academically based... The school may want more kids from the South, or may need more gender balance, or want kids that will round out its diversity. Or kids from rural areas. Or kids with leadership backgrounds....schools tend to skew their web calculations to look appealing - best case aid.
Yes, and you have zero control over those things! Your kid can present himself in the best light possible, but if the school "already has enough" kids in his demographic, it might not do a bit of good. No use worrying over what you can't control.
If the money is held by a grandparent, aunt, uncle, sibling or another person, the money does not count against the student.
Well, not really. If you earned $150,000 last year and have essentially no savings, the financial aid people are going to say, "Too bad -- you had it, and you should've saved some." They won't be fooled by hiding the money in someone else's account. Unless you are genuinely poor, don't count on financial aid -- and then it's not going to pay everything.

You're better off working and saving from a young age, like the OP is doing.
 
Well, not really. If you earned $150,000 last year and have essentially no savings, the financial aid people are going to say, "Too bad -- you had it, and you should've saved some." They won't be fooled by hiding the money in someone else's account. Unless you are genuinely poor, don't count on financial aid -- and then it's not going to pay everything.

You're better off working and saving from a young age, like the OP is doing.

We are talking about the money in a 529. I researched this and I am correct. You are mixing what the parents earn, the $150,000 above, and what I was saying.

If a person has $100K in an account for a student. When they fill out the freshman FAFSA none of the $100K is reported. If the student does not get enough financial aid, then they can draw from the 529. In their sophomore year they will report what they got "as a gift" on their FAFSA.

http://www.savingforcollege.com/grandparents/answer.php?grandparent_faq_id=10

"Simply owning a 529 account for your grandchild will not affect your grandchild’s eligibility for need-based financial aid, but actually using the account could have a negative impact in the subsequent year."
 
Also, if the private schools interest you, look into them but don't assume that they're going to pony up lots of aid. That is an oft-repeated, but rarely found in real-life scenerio. My daugther looked into a couple schools who supposedly do this, and her situation was typical: One offered her 16K/year, which sounds great at first glance, but it would still leave us with 19K/year to pay . . . which is approximately 150% the cost of the state school that she really wants to attend. And the state school is much stronger academically. The moral: Investigate these possibilities, but also apply to the schools you can actually afford on your own.

One of my girlfriends let her daughter make this mistake. She applied for private schools assuming that she'd get an awesome financial aid package. She is a really bright, exceptional girl. Fortunately, her "safety school" was a public college, which even after private school aid, is still $10k a year cheaper than the private schools' best package.

These are not wealthy people - her Mom is a teacher and her Dad is a stay at home parent.
 
Depends upon where you live. It's up to each individual to do his or her own research. Like I said, for our area, we have not much more than 100,000K earmarked for college, and -- with our first college bill only months away -- we are set to pay all the basics AND a new car for two kids. Admittedly, we do have the lowest tuition in the US (though we also have the low salaries to match it). Somewhere else you might actually need the 100,000K.

You're right, everyone should do their own research. It's kind of hard when you're starting to plan when your kids are just babies/little. How do you know what their college plans will be? So, I was basing that number off the last article I read that stated the average state college tuition was around 17K per year (68K for 4yrs). In 18 years, that number may very well be over 100K for 4 years. I just meant that if you can swing it, you probably should shoot for at least that. You can't really look at todays prices and set that as your goal for that many years down the road. I think when my first DD was born the average tuition was around 9-10K per year, but I don't remember exactly.

I am grateful that I will only have one in college at a time!
 
You're right, everyone should do their own research. It's kind of hard when you're starting to plan when your kids are just babies/little. How do you know what their college plans will be? So, I was basing that number off the last article I read that stated the average state college tuition was around 17K per year (68K for 4yrs). In 18 years, that number may very well be over 100K for 4 years. I just meant that if you can swing it, you probably should shoot for at least that. You can't really look at todays prices and set that as your goal for that many years down the road. I think when my first DD was born the average tuition was around 9-10K per year, but I don't remember exactly.

I am grateful that I will only have one in college at a time!


It also depends on how old your kids are. Mrs. Pete's are going to school now (or practically now) If your kids are still in diapers, you are going to need to save more than she did even to send your kids to the same inexpensive state school.

I'd also expect some other things to happen to the cost of college....aid is based on what the federal government can provide and endowments. The federal government is a mess - expect cuts to aid there. Endowments are dependent on the stock market, if you went to school in the 90s, expect less available from schools. At the same time, many schools are trying hard to keep college affordable - a few have had significant cuts in tuition in the past year or two, so that might take some pressure off. The cost of state schools is wrapped into state budgets - if your state is having a budget pinch, expect tuition to go up (most are).
 














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