What do you suggest for saving for college?

[chewysmom]

I'll just go ahead and tell you that I'm not too educated on the whole 529, stocks/bonds, etc thing. I have no idea what any of those are really. (I know I have a lot of reading to do!) Anyway, what type of "savings plan" do you suggest for college?

 

[aimerdoo]

I would go to Upromise.com, register with this site, and set up a 529 through them. It is free money that is invested into your 529 on a quarterly basis based upon your purchases. In 5 short years, we have received over $1000 of "free" money with our enrollment in this program. Also, it allows you to have money automatically invested on a monthly basis into this 529 account. I see no other way to go. Best of luck!

 

[dizcrazy]

My father-in-law (FIL) is a part-time financial consultant, and we also have a paid financial consultant to help us. Both have strongly encourgaed us to open a 529 plan for our daughter. In fact, FIL told me he wanted her social security number ASAP ON THE DAY SHE WAS BORN!!!

Thanks to these boards, I also have a upromise account, although a year later, I only have $75 saved.

 

[georgina]

It really depends on your personal circumstances. When colleges use the FAFSA to determine how much you can contribute to college costs, different types of savings are treated differently. From what I understand, 401K's and IRA's are not counted toward your contribution. The equity in your home is not counted either. Any money in the child's name is expected to go to the college, so that is assessed the highest. So if you might qualify for financial aid, most experts say not to save money in the child's name. If there are grandparents who can save money or open a 529 in their name instead, with the child as beneficiary, that is ideal. Do a lot of reasearch before you decide where to put your money!

 

[cruisnfamily]

It really depends on your personal circumstances. When colleges use the FAFSA to determine how much you can contribute to college costs, different types of savings are treated differently.

Any idea if the Fl prepaid plan is counted towards this? From what I read, it currently is NOT counted in your assets but there's the possibility of change before my kids hit college. Any thoughts?

 

[Kteacher]

When my kids were in preschool I opened up a mutual fund account . Every month I have money electronically transferred from my checking account into this fund , just as if I were paying a bill. My oldest is in his first year of college now, and that account is proving to be one of the best things I ever did!

 

[dcfromva]

I'll just go ahead and tell you that I'm not too educated on the whole 529, stocks/bonds, etc thing. I have no idea what any of those are really. (I know I have a lot of reading to do!) Anyway, what type of "savings plan" do you suggest for college?

chewysmom,

First off, I can not say enough good things about a 529 plan. It accomplishes so many things that can not be done with any other savings instrument. If you pay state income taxes, some states give you a break on the state taxes if you invest in one of its 529 plans. Some states (Michigan and Colorado come to mind) actually give you a match for your first contributions. Most states have a bunch of plans from which to choose. You should look and see what your own state offers first and then compare it to the others. My state allows you deduct $2000 per plan--our state tax is around 5%, so that's $100.00 off state taxes for each 2000. (and they allow you to rollover anything you contribute over 2000.00 per year to the next tax year until it is finished). It doesn't seem like much, but say you contribute $50,000 over the years, in our state--over the years you would get $2500 off your taxes.

A lot of states offer two types of 529 plans. One is the guaranteed pre-paid tuition which can be used for tuition and fees--it puts a lock on inflation for in-state public colleges. But, it is only going to cover about 1/2 the direct costs. Most financial planners hate the pre-paid tuition plans because if your child doesn't go to an in-state public college, the rate of return is dismal. But, if your child does end up going to an in-state public college, it might end up making you look wicked prescient. I have read that a couple of states have halted enrollment in the pre-paid plans because the rate of tuition has gone up so fast.

The other type of 529 plan is a savings plan that may or may not have a guaranteed rate of return (depends on the investment vehicle).

The 529 plan allows you to transfer assets over to your beneficiary and you do it over time--so you can avoid getting into a problem with the gift tax. You maintain control of the assets, so the beneficiary can not use it for some other purpose. You don't pay taxes on the gains if the funds are used for a qualified purpose. You can transfer the assets to a different beneficiary (has to be a close relative, the IRS has a list-) if your first beneficiary elects not to attend college. Your plan will give you a refund on contribuitons plus a reasonable rate of return if your beneficiary gets a scholarship--up to the amount of the scholarship (you just pay tax on the gains--no penalty)

Here are a couple of links for your for College Savings calculators. That is how we got started. We figured out how much we should be investing and then we sat down and figure out how much of that we could afford. Then we set up an automatic savings plan and tweaked it upwards whenever we received salary increases. Then everything was on auto-pilot.
Here is a link to Smart Money College calculator
I used average cost for 1 year from now for a 4 year public college and came up with $ 69,020 (assumes 5% inflation)

Link to college board College calculator
I used average cost for 1 year from now for a 4 year public college and came up with $ 58,114
(assumes 5% inflation)

(DS's specific school came out a little bit higher. We won't know until 4.5 years from now when DS graduates how well we did. )

Another calculator

-DC

 

[dcfromva]

PS. I forgot to mention that in addition to our own state 529 plan, we also have a UPromise account to get the rebates off purchases they offer (my philosopy is all the little nickels and dimes add up and I want to take advantage of every last cent!). Anyway, with UPromise you can send them a letter to withdraw the money. They will send you a check and you can then deposit in your own state 529 plan...so, you are not locked into only Upromise accounts.

-DC

 

[HaleyB]

Just be really aware of how schools treat assets in the childs name vs in the parents. Also do not only look at the FAFSA rules, if your child goes to private school there is a new more restrictive set of rules. They do count all your assets and all the money the child has in their name.

Last of all, the rules may change long before you get there. So keep your eye on things.

Also never assume you make to much/have too many assets to qualify for finacial aid. My sons school is $42,000 a year. If you make $350,000+ or are a multi-millionaire never mind (you don't qualify) but the rest of us will qualify for at least something. Every penny helps.

 

[dcfromva]

Just be really aware of how schools treat assets in the childs name vs in the parents. Also do not only look at the FAFSA rules, if your child goes to private school there is a new more restrictive set of rules. They do count all your assets and all the money the child has in their name.

HaleyB,
I have read that under the FAFSA rules, the child is expected to contribute 35% of their assets to be used to pay for college, compared with a maximum of 5.64% of the parents' assets. But.... if it is in a 529 plan anyway, wouldn't you be expecting to spend 100% of the money towards qualified expenses? (Because otherwise, you pay a penalty on the earnings..)

I could see where this might be a problem if the child had other assets beyond the 529 plan that were earmarked for some other purpose... but, I can't see where the eligibilty would be impacted if the savings were solely in a 529 plan...

-DC

 

[BostonTink85]

Anyway, with UPromise you can send them a letter to withdraw the money.

Does anyone know the address that you mail this letter to, or who you address it to? I've been meaning to do this, but haven't found who you mail it to....

 

[disneychrista]

With Upromise it all depends on how much shopping you do with the participating stores/restaurants and if you purchase the participating brands. I have been a member of Upromise since 6/2004 and have less then $20 in the account.

 

[dcfromva]

Does anyone know the address that you mail this letter to, or who you address it to? I've been meaning to do this, but haven't found who you mail it to....

see post #23 (kfeuer) on this link:

"From your Upromise account:
a. To withdraw your contributions from your Upromise account and transfer them to a 529 account opened for a future college student, simply go to the Manage Investments section of your Upromise account and follow the steps there.
b. You can withdraw your Upromise contributions at any time during your membership. To withdraw company contributions from your Upromise account, submit a letter in writing to Upromise requesting a withdrawal from your Upromise account. The letter must state your full name and exact amount that you would like to withdraw, up to total amount available in your account, pending contributions are not eligible for withdrawal.

For the protection of our members, we require that your letter either be notarized or contain a Signature Guarantee if the withdrawal request is in excess of $200. A Signature Guarantee is a guarantee you can obtain from a financial institution, such as your bank, that your signature is yours and that it is genuine.

Withdrawal letters should be sent to:

Upromise
ATTN: Customer Care
P.O. Box 55555
Boston, MA 02205-5555

Checks are sent once per calendar quarter, so you should typically receive your check within 12 weeks of your request being received."

-DC

 

[disneysteve]

In 5 short years, we have received over $1000 of "free" money with our enrollment in this program.

I've been enrolled with Upromise for about 3 years and have accumulated a grand total of $19.89. How have you managed to get over $1,000?

 

[BostonTink85]

Thanks DC!

I've been enrolled with Upromise for about 3 years and have accumulated a grand total of $19.89. How have you managed to get over $1,000?

I can't speak for aimerdoo, and god knows we don't have anything close to 1000 bucks from upromise (I could only wish for the much ), but we do have a couple hundred over the past 3 years or so. Whenever we shop online if you click on the website through upromise you get a certain percentage of the purchase and we registered all the grocery store cards, credit cards, etc. It's not much but it's something.

 

[disneysteve]

Whenever we shop online if you click on the website through upromise you get a certain percentage of the purchase

We rarely shop online, so that wouldn't help us. I'm also not interested in getting a credit card linked to Upromise, so we've got just the supermarket purchases basically.

Of course, we already put $400/month into DD's 529 so the Upromise money is a minimal contribution to the total.

 

[dzneelvr]

We just finished the 18-year long process of getting DS admitted into a private college and I feel I can write a book!
If we had to do it all over again, we wouldn't change a thing in our savings plan for both DS and DD (we have 2 more years until kid 2 goes to college)--the key is to begin saving when they are born. No, I'm not crazy...figure out the best way to sock some money either annually or monthly through a federal plan, bank CD, or something. Then as your child enters high school, impress on them how important it is to have a high class rank AND high GPA and high ACT scores. Even though my DS didn't rank high enough to get into National Honors Society or be an Illinois State Scholar, he had a high enough combination of the three components to get half of his expenses free per year (he has to maintain a 3.0 GPA) in a small private college that was his first choice. You can save money but don't forget that what your child brings to the table (remember activities, sports, clubs, etc too) will determine how much free money private schools throw at him (sorry for being so literal, but that's what it is). Fortunately, the public colleges in Illinois were very affordable, but DS wanted to go private and now he can. Whew, glad that is over.

 

[Toots]

Education IRA ($2,000) annual limit and I-Bonds. Interest on bonds are tax free if used for education and income is within limits. We've considered 529plans but like the simplicity of above choices.

 

[TheRatPack]

What options are out their for parents who adopted older children and didn't start at birth? I keep running the calculators on what I think we can contribute to each plan and the ending result for 529 plans is really depressing....anything that has higher return and is fairly safe? Maybe I'll get more hours and just contribute more to make it up.....I would hate to leave them behind bio children.

 

[disneysteve]

What options are out their for parents who adopted older children and didn't start at birth? I keep running the calculators on what I think we can contribute to each plan and the ending result for 529 plans is really depressing....anything that has higher return and is fairly safe?

Contribute what you can - that's all you can do. An Education IRA lets you select the investments, but has a very low limit. A 529 has a much higher limit but offers more limited investment choices. But both have tax advantages that you can't get on your own.

All any of us parents can do is save what we are able to save. After that, the kids can get loans, grants, scholarships, work-study, etc. And be sure you are adequately funding your retirement before starting on college savings since there is no financial aid available for retirement.