Saving for college

[Green Tea]

One thing about Savings Bonds that people might not know (or *believe* if you are my inlaws) Bonds in the child's name are NOT tax exempt even when spent for education. If they are in the the child and one parent name....same- not tax exempt. If they are in the parent's name, they are exempt for taxes when cashed in for education.

 

[Green Tea]

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


If the money is held by a grandparent, aunt, uncle, sibling or another person, the money does not count against the student.

The "hidden" assets would not come to light on the FAFSA, but if your child is going to a CSS Profile school, you have to disclose alternate sources of funding......

Most of the competitive liberal arts schools are profile schools.

 

[momfeez]

Hello, as soon as I found out we were having a baby I started a saving account for my now DD who is 20 months. I keep depositing whatever I can a month and now have a nice little savings account built up earning next to no interest! Can someone recommend what the best way is to get more interest earned on a college savings other than a savings account? A 529? CDs? Thank you for any help.

Does your state have a prepaid college program? We did that with all 3 here in FL when they were babies. DD starts in the fall and has chosen UCF - - more disney time for us, er, I mean, more opportunities to visit her . Because we chose tuition only, (at the time that's all we could afford), it doesn't cover all tuition due to "extra fees", but it covers a good portion. With that and the scholarships she is receiving, we will have very little out of pocket cost.

 

[a1tinkfans]

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.[/QUOTE]


I bolded.........
we just went thru this, and it ALL depends on the school that your child wishes to attend. If your child is/will do top tier, everything, every penny in/out etc is used to evaluate the "need" fafsa, css, Idoc, taxes, mountains of paperwork etc etc etc
and you are specifically asked who if anyone is helping or has money available or planned for your child...believe me when I tell you they leave out nothing, and you'll be signing off on everything..
so be prepared.
as far as 401 and 457 ...YES, they are counted..and if withdrawn for college, that $$ is then counted as More INcome thus reducing the schools Aid...just went thru this...so again, be prepared........
IMHO, it really depends on the school, some counted things, some did not...someone else mentioned that the schools need to meet certain stats and they "fit" kids in to that statistic....Its not what I wanted to hear....and we had a rough few months..........but in the end we are THRILLED with the final results of it all...a Merit Based FREE 4 year RIDE, so all the angst of possible student debt, other loans, etc gone......

 

[Colleen27]

I have found myself asking "how much is enough" lately with DD starting high school next year 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.

Would you mind sharing some links? I've started researching a little more on college savings because I think we need to be putting more away, but the calculators I've found assume conditions that just aren't relevant for us - we're an average-income family of 5, so I'm more interested in financial aid information/projections than tax advantages.

One of our kids has her sights set on a private university that will far exceed the prepaid tuition contract her grandparents purchased for her and where the annual cost of attendance exceeds our household income, so I'm trying to figure out a realistic strategy for making that "sky's the limit" dream less impossible if she does actually manage to get in.

 

[MrsPete]

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.

Ah, I'm talking about the FAFSA. If you try to "hide" money in a relative's accounts, they're still going to see what you earned . . . and they're going to question why a high wage earner hasn't saved much. They may not ask you directly whether you have alternative sources of revenue available to you, but they will notice your income-to-savings ratio.

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.

I don't think it's a mistake to look into a school that's outside your price range -- but it is a mistake to assume that mega-aid's going to appear and make it affordable. It's wise to recognize it for what it is: A long shot.

Scholarships of all types have really dried up over the last two years. My students are receiving considerably less now than they did in the recent past.

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!

We always assumed that we'd fund the basics for four years at a state school, and we started saving for that goal actually before they were conceived. We started talking to them as high school freshmen about the realities of college costs, and we explained exactly what we could pay: Tuition and fees, meal plan and dorm room for four years at a state school. We explained that if they wanted to attend a more expensive school, if they wanted an apartment, or if they needed an extra semester, they'd be on their own for those extra costs.

Over-saving isn't a bad thing -- it's certainly preferable to under-saving -- but we haven't found it all that hard to keep an eye on the costs of college as the years've gone by.

 

[thebeesknees]

We have 529's for each of our kids. Performance the last few years hasn't been great, but still better than our retirement accounts. We have only been able to put in 2K/year per child. I joke to DH that it might pay for a week's worth of meals by the time they get to college! I assume my kids will have to do what we did when we were that age: attend a local school to save on housing costs, apply for every grant and scholarship they can, and plan on working all through school so they graduate with as little in student loans as possible.

 

[imsayin]

Would you mind sharing some links? I've started researching a little more on college savings because I think we need to be putting more away, but the calculators I've found assume conditions that just aren't relevant for us - we're an average-income family of 5, so I'm more interested in financial aid information/projections than tax advantages.

All colleges are required to have an estimator on their site (new rule this year). You can go to each colleges site & plug in your numbers for an idea.

 

[cornflake]

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.

I think the poster was talking about schools like Harvard and Yale and etc., at which the packages below a certain parental income level don't differ and aren't specific or competitive. Once you're in, you're in for free.

 

[crisi]

I think the poster was talking about schools like Harvard and Yale and etc., at which the packages below a certain parental income level don't differ and aren't specific or competitive. Once you're in, you're in for free.

Yep, addressed in my first point - schools with good aid packages are highly competitive.

I don't think many people realize how hard it is to get into Harvard or Yale. I have a cousin who was just waitlisted for the easier to get into Princeton. Straight As. 2100+ SAT score. Talented musician. Speaks three languages besides English, including Ancient Greek. Black Belt in some martial art or another. Student leader. Published writer. Don't put all your eggs into the "my kid will go to Harvard" basket. Downsides - she's female, white and from the East Coast - Ivy League schools get to cherry pick white girls from the East Coast.

 

[ilovemk76]

Ah, I'm talking about the FAFSA. If you try to "hide" money in a relative's accounts, they're still going to see what you earned . . . and they're going to question why a high wage earner hasn't saved much. They may not ask you directly whether you have alternative sources of revenue available to you, but they will notice your income-to-savings ratio.

What a leap you are taking. How is that "hiding money" if I opened the 529, I made the deposit, I claimed it on my income taxes and it is tied to my account? I have the money to do this, so nobody will doubt it was MY deposit and not the parents.

 

[cornflake]

Yep, addressed in my first point - schools with good aid packages are highly competitive.

I don't think many people realize how hard it is to get into Harvard or Yale. I have a cousin who was just waitlisted for the easier to get into Princeton. Straight As. 2100+ SAT score. Talented musician. Speaks three languages besides English, including Ancient Greek. Black Belt in some martial art or another. Student leader. Published writer. Don't put all your eggs into the "my kid will go to Harvard" basket. Downsides - she's female, white and from the East Coast - Ivy League schools get to cherry pick white girls from the East Coast.

Of course they are, they're insanely competitive - and were even before they were offering the free ride. Being a girl puts you at a disadvantage applying to college pretty much across the board too, currently.

I thought you were saying both things about the same schools - that they were competitive and the aid they give was then doled out here and there and hard to get some of.

 

[crisi]

Of course they are, they're insanely competitive - and were even before they were offering the free ride. Being a girl puts you at a disadvantage applying to college pretty much across the board too, currently.

I thought you were saying both things about the same schools - that they were competitive and the aid they give was then doled out here and there and hard to get some of.

Both are true for many schools. A very few (last I looked it was around 25) aren't competitive in terms of aid once you get in, but those are still the exception. And of those 25, last I looked, about half had income caps that - while they made it free for many middle class families, are capped relatively low if you have a two income family.

 

[MrsPete]

Yep, addressed in my first point - schools with good aid packages are highly competitive.

I don't think many people realize how hard it is to get into Harvard or Yale. I have a cousin who was just waitlisted for the easier to get into Princeton. Straight As. 2100+ SAT score. Talented musician. Speaks three languages besides English, including Ancient Greek. Black Belt in some martial art or another. Student leader. Published writer. Don't put all your eggs into the "my kid will go to Harvard" basket. Downsides - she's female, white and from the East Coast - Ivy League schools get to cherry pick white girls from the East Coast.

To add a tangent to this topic, kids who will be admitted to Harvard or Yale tend come from "enriched backgrounds". They tend to be the kids who've had all the benefits: Supportive families, educational and travel opportunities, books and computers and other educational items, positive after-school activities and summer camps . . . and they have these things at a high level for all their lives in addition to off-the-charts intelligence. Most families who fit into the low wage-earner category aren't able to provide these things.

I'd be surprised if half a dozen kids per year are able to take advantage of that often-mentioned Harvard deal. After twenty years of teaching, I personally know one kid who had financial difficulties and got into an ivy league school, and her situation wasn't typical: She came from a family that would've been that typical wealthy-educational-opportunities-for-the-kids type, but they suffered two substantial losses: Her father was killed in some sort of accident when she was still very young, and then her mother became disabled. She was an amazing student, and she had the nurturing help from lots of supportive extended family -- but her immediate family had no income whatsoever. Lots of unusual things came together for her to fit this mold. She's not at Harvard; she's at Cornell. She didn't finish high school all that long ago, so she should still be a student now.

What a leap you are taking. How is that "hiding money" if I opened the 529, I made the deposit, I claimed it on my income taxes and it is tied to my account? I have the money to do this, so nobody will doubt it was MY deposit and not the parents.

I am not talking about 529s; I have never commented about 529s here or ever on any post -- we looked into them, determined that they weren't a good option for us, and now I ignore that topic.

I'm talking about trying to hide savings on the FAFSA.