Whats the best way to pay for college tuition

[mommy2allyandaveri]

It's time for us to start thinking about this. We would really like to put our kids through college. Not sure where our sophomore will go yet, likely a UC or state college, with room and board. I'm pretty sure she will not qualify for financial aid.

We have saved a bunch but likely not enough to pay in full with what we have.

I really don't know what our options are. I have contacted our mortgage broker and tax person in hopes they will have some ideas.

I was thinking about a home equity line of credit, where we only draw on it when it's time to pay tuition.

Hit me with all your advice/ideas!

 

[Nebraska_Disney]

pay what you can and then she can do the rest with loans. No harm in doing so, just choose a degree which the investment is going to pay off. A parent should never derail their own retirement/savings plans to foot the full bill to college unless money is not an object, in that case we would not be having this talk

 

[easyas123]

I have a 23 & a 21 year old - here's what we'd recommend:

The value of community college can't be dismissed.
Dual enrollment for high school students -
Time in the ARMY/NAVY/AIR FORCE/MARINES or National Guard My youngest took a break after first year of school to join National Guard, you wouldn't believe the education benefits and opportunities been able to take advantage of and/or will have access to.
Trade schools - a great alternative to traditional colleges for those kids who aren't interested in college but are interested in a career.
Anything you can do in order to avoid your kids being saddled with huge amounts of debt.
Eldest has a bit of debt leftover from school, and it's what is standing between him & being able to buy a house. Luckily he's decided to try to get it down as aggressively as possible, which he's doing by living at home vs. paying rent somewhere - well, he pays us a bit of rents, but nothing near what he'd be paying elsewhere.
Good luck! I see the amounts some kids are taking on and think it's just a sin they've been sold on the need for the most expensive version of the schooling they needed but are without the means to get out from under it anytime soon.

 

[mommy2allyandaveri]

I'm not dismissing community college/trade school/military. If that's what they want to do, awesome! I don't think that's what dd has planned and I don't want to discourage her dreams. We have certainly had conversations that you can get a great education at a variety of places. DH and I both went to Sac State (that was local to us, and A LOT cheaper and pretty affordable when we went) and we are doing well. Our intention is to pay for their college education, I do not want them taking out loans. If loans need to be done, it will be on us. I'm just trying to find the most cost effective way to do that if we do need to borrow.

 

[Nebraska_Disney]

I'm not dismissing community college/trade school/military. If that's what they want to do, awesome! I don't think that's what dd has planned and I don't want to discourage her dreams. We have certainly had conversations that you can get a great education at a variety of places. DH and I both went to Sac State (that was local to us, and A LOT cheaper and pretty affordable when we went) and we are doing well. Our intention is to pay for their college education, I do not want them taking out loans. If loans need to be done, it will be on us. I'm just trying to find the most cost effective way to do that if we do need to borrow.

There are not a lot of options for parents who want to take loans out, so you will be limited and the interest rates are not as favorable for parents as they are for kids. The month both my kids were born (now 17 and 13 respectively) I started at 529 College Savings plan for each of them. We have added to this consistently from birth and even that will only cover about 2 1/2 years of everything for each of them, but better than nothing and more than what I or my wife had when we went. My thinking, I'd like my kids to have some "skin in the game" too, so they take it seriously and get done in 4 years with a marketable degree. My wife and I had close to $30K in loans when we got done with school and graduate school and took 5 years to pay that off while we bought a house and started a family. It is possible.....

 

[Mrs. Ciz]

I have two in college at Virginia state schools now, a sophomore and a senior. Both kids will graduate with no loans. This is what we did:

1) Opened 529 Prepaid Tuition accounts for each child when they were little (elementary school). We bought 2 years of tuition & fees outright for each child with tax returns, gift money and savings, The other two years we paid for monthly through their senior years in high school. This has been a lifesaver! Their tuition and mandatory fees are 100% paid for. We only have to worry about room, board and books.

2) Limited our kids' college searches to in state universities. We have some top rated schools in Virginia!

3) Saved all our tax returns while the kids were in high school to cover room, board and books.

4) I went from part time to 3/4 time at work when the first one started college and then to full time when the second one started college. The extra monthly income goes toward room, board and books.

5) Both kids applied for every scholarship they could through their universities. DS received $20,000 over the last 2 years, which really helped when the two were in college at the same time.

6) Kids both have summer jobs and sometimes a campus job (no more than 10 hours a week) to cover all their personal expenses beyond room, board, books, phone and car insurance. DS (senior) played guitar in a band and had paying gigs for some of his college years. DD (sophomore) works with rec sports at the university gym.

Some other tips that may work to reduce or eliminate the need for debt:
1) Go to a local university and live at home
2) Dual enrollment in high school (DD did this. She entered college with an associates degree - 60 credits. She's changed her major a couple of times though, so she will not be graduating early although some of her high school classmates are able to finish in 2 years.)
3) Apply to schools that are academically beneath you. These lower tier schools want to raise their profile and attract high quality, smart kids. They offer lots of scholarship money to get them to attend. (Neither of my kids chose to attend the schools that gave them lots of money unfortunately. They had worked really hard in HS to get into the best college they could. Since we had the 529 accounts, we let them chose. If we didn't have that money set aside, we'd have pushed them to attend the schools that gave them the most money.)

 

[Cruising Engineer]

Start out with a plan, that I had with my parents and now as we did for DH's son. Choose a degree they can get a job right out of college (no art history, anthropology, psych, etc.). Two years at a local community college with good grades (3.0+) and finish at a university of your choice in two years. On that day, the Bank of Parents closed. So far it has worked for all of us and with great jobs. Heck, my step-DS makes more money than us !!!!!!

 

[TwoMisfits]

It's time for us to start thinking about this. We would really like to put our kids through college. Not sure where our sophomore will go yet, likely a UC or state college, with room and board. I'm pretty sure she will not qualify for financial aid.

We have saved a bunch but likely not enough to pay in full with what we have.

I really don't know what our options are. I have contacted our mortgage broker and tax person in hopes they will have some ideas.

I was thinking about a home equity line of credit, where we only draw on it when it's time to pay tuition.

Hit me with all your advice/ideas!

So, I looked up the UC-Berkley cost of tuition, fees, and board, and it seems the goal for no financial aid is $30-35K/year (dropping $15K if you live at home)...So, then it's a matter of seeing how much you have saved vs how much you can find from your available funds/year before you look for loans. For example, if you've saved $60K, you have $15K for the year and then only need to find $15K-$20K out of your yearly funds...that might mean you can manage to find it all, or you get a Home equity and draw on it for whatever you can't find...

If you have some savings and are planning on encouraging your child to find a reasonable option like UC, you might not need to go any further. For undergrad, I always encourage folks to stay reasonable, b/c they may have grad school/professional school (law/med) to pay for, too...and if your loan-free coming out of college, that gives you way more options for grad school, than if you already have the baggage of the undergrad loans...

 

[Starwind]

When the time comes, have the student apply for financial aid (early in the eligible timeframe, don't wait until near the deadline) as you may be surprised at what is available, from grants to work study to loans. I know when I did (many years ago) I was expecting to only be eligible for loans, but I was also offered a small grant each year. About enough to cover most of the cost of textbooks each semester, but every little bit helps, and even better when it is a grant.

Also have the student apply for scholarships every year. Even small ones help.

Look into what the general degree requirements are. In Texas, to graduate with one's first bachelor's from a Texas public university, there are some specific state required courses you have to take which amount to about a year and a half of courses [think a liberal arts/general education core in subjects like math, science, english, US/state history, US/state political science, wellness, art appreciation, etc]. Most or even all of those courses can be taken at a (cheaper) junior college and transferred in, and some of them can be tested out of through CLEP or given credit for through AP courses. Different states and schools have different requirements, but start researching NOW while there is still time to "do something" towards the requirements while in high school. Even knocking out a semester of courses that way is a tremendous cost savings, and the potential is there for more than that if allowed and planned well.

SW

 

[bjscheel]

The down side to a HELOC is if something would happen to your ability to pay it back, you've put your house on the line. There are Parent PLUS loans for college but I am not familiar with them.

I hear that California has a really good Community College to University program where credits transfer easily and the CC's are good quality.

 

[AlohaNow]

I could have been the OP of this thread! This has been a hot topic in my house this week. Even though we are two years away from starting to pay college tuition, I can state the following as fact. Do not eschew private schools due to initial sticker shock. Privates have endowments and very often more money to give out. Throw your net wide and see what comes in as far as offers!

One thing I have been wondering about is exactly how do most people draw down their 529s? We started one for each of our sons, my parents did the same, and my in-laws started one for my oldest but then passed before setting one up for my youngest. Each account will have a balance of roughly $10,000 when each son begins college. Do people withdraw at a rate of 25% per school year? I think I read that somewhere but was curious about what people actually do in reality. And for the grandparent ones I assume we would need to ask them to initiate a transfer for each year/semester, as they are the account owner.

Definitely visit your library to get your hands on a couple of financial aid guides. I read the Petersons one and it was eye opening to say the least! Each school also has an EFC calculator so play with those too. Hours of fun…..

 

[Southernmiss]

The best thing we did was to encourage our kids to take the Sat and ACT tests early and often. Study for them, attend prep courses, take on line sample tests.

The higher the scores, the more merit scholarships colleges offer.

3 kids have completed a total of 11 years of college and no debt due to substantial scholarships based on their scores. 2 boys got $back from their colleges. Other son is in an expensive program. We've paid out of pocket $1000 the last 2 years per semester for him. His first 2 years, he got $ back in his pocket.

Dd is a junior and has earned higher scores now than her brothers. So we are researching the best schools for her based on merit $.

 

[mommy2allyandaveri]

So we actually did not do a 529, we saved separately and used a financial advisor to help us. We didn't like the constraints of the 529. We started saving when we got pregnant and have been doing so consistently but with the rising cost of college it's just crazy!

I have looked into Parent Plus but their interest rates are 7+% plus a loan fee of 4%. Not awesome.

She will 100% be applying for every scholarship she can. She has to do her part too. I just don't want her to graduate with loans hanging over her head.

 

[Southernmiss]

OP, has your daughter taken the ACT or SAT?

It would be a good idea to take one now to see how she scores and how much she might need to prepare for future tests.

 

[StephMK]

We've put one through already, one is 1/2 through freshman year, and the last one will enter next year.

For our oldest and now middle, we have had them take out the max they qualify for at least 2x. They will have to pay it if they drop out or fail. Otherwise, the loan will bein th dr ur name but we'll make the payments on it when they graduate. We use DH's bonuses and tax returns to help pay. We use our 529s first, then the grandparents.

I agree not to discount privates. DS has applied to several who offer good packages according to the calculators. You can also find schools who offer free or discounted tuition based on scores.

If your kids ate interested in going far away, some schools give aid to entice out of state kids. D18's test scores were very average but with great grades, she was offered a scholarship to offset the higher out of state bills at 2 different schools.

Good luck, it is very stressful but there are ways to make it work.

 

[mommy2allyandaveri]

This is why I asked here, I'm learning so much!

 

[amcnj]

I had opened 529 accounts, and then opened a home equity line of credit. It had a ten year draw period, which covered the higher ed timeframe for my children. The heloc interest rate was significantly lower than other borrowing options available to me. The heloc was basically for short term borrowing. I used the 529 and current earnings to pay as much as possible, and opened the heloc to avoid having to withdraw from any investment accounts till it was a good time to do so. But overall I really mainly used current earnings to pay off the heloc over time. Investments were doing well over that period, so that seemed better than selling any investments.

 

[MomToOne]

Look into the middle class scholarship (a California government thing) - more people qualify than you would think. Here's a link: https://www.csac.ca.gov/middle-class-scholarship

Also, since you are in Sac, don't forget to look at Sac State and UCDavis - living at home saves you basically 50%. DD18 is going to Sac State now - turns out they actually had one of the strongest programs in her area of study in the state. Who knew. And it only took her a few weeks to realize living in the dorms isn't the heaven the kids think it is - she has a friend in one, and after hanging out in her room (and more importantly seeing the shared bathroom), she decided living at home was just fine LOL

To make living at home more attractive and to encourage her to finish in 4 years, I also told DD I would split whatever was left in her college fund with her when she graduates. She's all over that!

Finally, consider one of the community colleges for a year or two. The General Ed requirements in the CSU and UC systems are insane - and you can knock out a lot of those classes a whole lot cheaper at the communities. You can also get the classes easier at the community colleges - getting the classes you need can be a HUGE battle at the CSUs right now. (Luckily DDs major has a special program that guarantees she'll get the classes she needs to graduate in 4 years if she gives them complete control of her schedule. So far it's working out well.)

 

[MomToOne]

Also don't forgot to figure in the tax credit you may be able to take - if you pay $4K worth of qualified expenses (it's own topic) from "non tax advantaged accounts" (so not a 529 or Coverdell), then you can get up to $2500 back in taxes, depending on your income level, leaving you with a net expense of really only $1500. But run your numbers carefully - once you hit the income limits, it phases out quickly.

 

[mmmears]

Cal States are much, much less expensive than UCs, and that includes Cal Poly, which might be the best bargain in CA. UCs and CSUs tend to be impacted, though, which sometimes leads to a 5th year, and that doesn't help with finances.

I agree with posters who said don't discount privates with merit scholarships. My DD was offered substantial scholarships by several well known universities across the country.

You can do a CC then transfer to a UC, basically cutting the cost in half that way, although that means your child will need to live at home for the first 2 years.

Until you have PSAT scores (national merit means a lot of money at some schools) and SAT/ACT scores it's hard to advise you where to look for money.

Do your homework now, and let your kids know what is possible and what isn't, financially, and then don't have them apply to schools that you can't/won't pay for. Each college and university in the US has an NPC (net price calculator) on their website. You can anonymously enter in your financial info (and for colleges with merit they may ask for gpa and test scores) and they will tell you roughly what kind of merit or financial aid you can expect. Run them for every college you're looking at - the expected cost can vary dramatically from one college to another).

College confidential (it's kind of like the disboards but for college) can be a bit tough at times, but you will get good, solid advice regarding how to finance your kids' college educations. I honestly think it would help you to go over there and get some advice.

Hope this helps.