Should We Ever Save for Children's College?

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chipperd
Posts: 791
Joined: Sat Sep 24, 2011 5:58 am

Re: Should We Ever Save for Children's College?

Post by chipperd »

Walkure wrote: Thu Oct 08, 2020 1:34 pm
Broken Man 1999 wrote: Wed Oct 07, 2020 1:12 pm No argument from me! We told daughters repeatedly that we would pay 100% for an in-state public university. And, we would do our best to pay for an out of state public university or a private university. Having multiple children in college simultaneously can really put a hurting on a parents budget. Still, we muddled through. Each DD attended the university that was their first choice, and no one ended up with student loans.

One option we guaranteed, one option we did not.

Broken Man 1999
Interestingly, having multiple children in college simultaneously is potentially the cheapest way to do it. Example: family has a FAFSA annual "EFC" of 90,000 per year. They will be expected to cash flow / sell assets up to that amount before qualifying for any aid. Supposing they have two children aged four years apart who each attend a school with $60k tuition, they would pay full freight for eight years. 8 x 60,000 = total cost of $480,000. Now suppose the children are 1 year apart. During the years both are in school, the EFC gets divided by two so for each child the family is expected to pay $45,000 and the school chips in $15,000 of need-based aid. 60k oldest's first year + (3 x 90k) combined + 60k youngest's last year = $390,000 total.

That's a savings of $90,000 by swapping three years of pain for six of slow drip, drip, drip. Of course, by the time folks consider this their childrens' ages are a given...
As one who currently has two in college, and will have three in college next year, the math you cite is accurate with regards to the EFC calculation. However, the reality of what college or university costs net, is a separate issue all together.
While the EFC can be a handy calculator, how a school uses (or doesn't use) that calculation is individual based on the school.
IF (and it's a big IF), a school chooses to "meet full need" ( the difference between the family's EFC and full cost of attendance or COA. Only about two dozen in the country do meet full need), the school can choose how to make up that delta. Could be scholarship, could be grant, a combination of the two, or more likely, loans and work study, are a big part of that package to make up that difference between the EFC and full COA.
Hence, while the net cost to attend for each student is less if you have more than one in college simultaneously, it's definitely more than half for each vs if if only one were in at a time. Also, it's way more than a third if three are in school simultaneously. In our case, with two in school, the 'COA for our oldest went down about 30% when our middle one entered college. When I spoke with my oldest ones financial aid counselor, she said when our third is in at the same time, we can only expect about another 5-10% decrease in his costs. So he won't even get to half with three in school. When I had a conversation with our middle ones financial aid counselor, I was told to expect about a 30-40% decrease. Go figure.
Most schools aren't "full need" schools, and many are a far cry from full need schools.
Here is the list (all 21 of them) of schools in the country that will meet full need, but with loans as part of the aid package: https://blog.collegevine.com/schools-th ... cial-need/
A few more (7) meet full need without loans if certain low income threshold is met ( some are really low: ie: family's income of $40k-$60k/yr. See same link for those schools).
Paying for higher education has become a financial game. One really needs to examine the wording and drill down to specifics of each school, to figure out what each school will cost in the end. Hence, I will continue to recommend anyone considering the chore of figuring out the cost of school for planning purposes, to plug your anticipated financial numbers and family situation at the time each child will enter school, into each potential schools' net price calculator.
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
KlangFool
Posts: 18240
Joined: Sat Oct 11, 2008 12:35 pm

Re: Should We Ever Save for Children's College?

Post by KlangFool »

Folks,

For others with more financial resources, they may care about actual college costs and so on. As for me, it is very simple.


A) I would pay for a college education if my net worth excludes the house is 1 million or more.


B) I would only pay for 30K per year per kid. With 2 kids, this comes to about 2 X 4 X 30K = 240K.

C) If my kids want to spend more on their college education, they would have to find their own way to pay for it.

So, to me, it is a financial ratio thing.

1 million net worth = 240K of college education's cost.

I know the amount that I am willing to pay.

KlangFool
BogleDan
Posts: 28
Joined: Sun Jun 03, 2018 5:49 pm

Re: Should We Ever Save for Children's College?

Post by BogleDan »

dogagility wrote: Mon Oct 05, 2020 7:06 pm It's also nice to have a sufficient amount of money saved/on hand so that the decision of which university to attend is not impacted by financial considerations.
This is the biggest thing for me. You see it all the time in these threads: "I'm saving x amount, anything beyond that my kids can pay themselves." "I'm saving y amount, because a public in-state university is good enough."

If your kid gets accepted into a top 10 school, with all that likely means for their entire future, are you going to want money to be a factor in whether they go or not? Even a little bit?

The risk of "saving too much" in a 529 plan seems like such a small trade-off compared to feeling the pressure for your kid to turn down that kind of future.

But to each their own.
KlangFool
Posts: 18240
Joined: Sat Oct 11, 2008 12:35 pm

Re: Should We Ever Save for Children's College?

Post by KlangFool »

BogleDan wrote: Thu Oct 08, 2020 6:59 pm
dogagility wrote: Mon Oct 05, 2020 7:06 pm It's also nice to have a sufficient amount of money saved/on hand so that the decision of which university to attend is not impacted by financial considerations.
This is the biggest thing for me. You see it all the time in these threads: "I'm saving x amount, anything beyond that my kids can pay themselves." "I'm saving y amount, because a public in-state university is good enough."

If your kid gets accepted into a top 10 school, with all that likely means for their entire future, are you going to want money to be a factor in whether they go or not? Even a little bit?

The risk of "saving too much" in a 529 plan seems like such a small trade-off compared to feeling the pressure for your kid to turn down that kind of future.

But to each their own.

BogleDan,

<<If your kid gets accepted into a top 10 school, with all that likely means for their entire future, are you going to want money to be a factor in whether they go or not? Even a little bit?
>>


1) I don't believe that to be true. There are multiple millionaires in my family. Their formal education range from elementary school to graduate degree.


2) If my kids are smart and capable, their employers will pay for the graduate degree in the top schools.


To each its own. If you believe it is worth your money, then, go ahead. But, I do not share the same opinion.


KlangFool
stoptothink
Posts: 8509
Joined: Fri Dec 31, 2010 9:53 am

Re: Should We Ever Save for Children's College?

Post by stoptothink »

BogleDan wrote: Thu Oct 08, 2020 6:59 pm If your kid gets accepted into a top 10 school, with all that likely means for their entire future, are you going to want money to be a factor in whether they go or not? Even a little bit?
This is exactly where some of the disconnect is coming from, there is hardly consensus (by the data) that going to a top-10 school means that much for their future compared to attending a lower ranked school. And then it gets even murkier when you are talking about spending extra for a not top-10 school (compared to cheaper local U).

If my kids get into MIT/Stanford, we'll have some talks (and I do not know what will happen). Otherwise, there is no chance I am paying several times more for them to attend some random private or OOS instead of local U. It is their choice where to go, but that doesn't mean I have to pay for it when there is no clear ROI.

If in 10-15yrs when we are making these decisions, we are Boglehead wealthy (right now we're just real world upper-middle-class); yeah I'd rather spend our resources on wherever they want to go as opposed to a bigger house or boat.
Last edited by stoptothink on Thu Oct 08, 2020 7:55 pm, edited 1 time in total.
Normchad
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Joined: Thu Mar 03, 2011 7:20 am

Re: Should We Ever Save for Children's College?

Post by Normchad »

stoptothink wrote: Thu Oct 08, 2020 7:44 pm
BogleDan wrote: Thu Oct 08, 2020 6:59 pm If your kid gets accepted into a top 10 school, with all that likely means for their entire future, are you going to want money to be a factor in whether they go or not? Even a little bit?
This is exactly where some of the disconnect is coming from, there is hardly consensus (among the data) that going to a top-10 school means that much for their future compared to attending a lower ranked school. And then it gets even murkier when you are talking about spending extra for a not top-10 school (compared to cheaper local U).

If my kids get into MIT/Stanford, we'll have some talks (and I do not know what will happen). Otherwise, there is no chance I am paying several times more for them to attend some random private or OOS instead of local U. It is their choice where to go, but that doesn't mean I have to pay for it when there is no clear ROI.
+1. I don’t think it matters that much where you go to school. It’s what you do when you are there that matters.

Having said that, the kid applied to Stanford and was certainly qualified to go. We were sweating that decision, because it might actually be worth that premium. But paying a bunch to go to out of state for something lesser, makes zero sense to me.

But I still say people should save up. Life is easier with options, and having more money gives you more options. Maybe you’ll get lucky and not need to use the savings, that’s all the better.
chipperd
Posts: 791
Joined: Sat Sep 24, 2011 5:58 am

Re: Should We Ever Save for Children's College?

Post by chipperd »

Normchad wrote: Thu Oct 08, 2020 7:54 pm
stoptothink wrote: Thu Oct 08, 2020 7:44 pm
BogleDan wrote: Thu Oct 08, 2020 6:59 pm If your kid gets accepted into a top 10 school, with all that likely means for their entire future, are you going to want money to be a factor in whether they go or not? Even a little bit?
This is exactly where some of the disconnect is coming from, there is hardly consensus (among the data) that going to a top-10 school means that much for their future compared to attending a lower ranked school. And then it gets even murkier when you are talking about spending extra for a not top-10 school (compared to cheaper local U).

If my kids get into MIT/Stanford, we'll have some talks (and I do not know what will happen). Otherwise, there is no chance I am paying several times more for them to attend some random private or OOS instead of local U. It is their choice where to go, but that doesn't mean I have to pay for it when there is no clear ROI.
+1. I don’t think it matters that much where you go to school. It’s what you do when you are there that matters.

Having said that, the kid applied to Stanford and was certainly qualified to go. We were sweating that decision, because it might actually be worth that premium. But paying a bunch to go to out of state for something lesser, makes zero sense to me.

But I still say people should save up. Life is easier with options, and having more money gives you more options. Maybe you’ll get lucky and not need to use the savings, that’s all the better.
Relatively old study/info, but interesting and germane to the discussion above: https://www.vox.com/2014/8/5/5968681/ex ... e-worth-it
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
EnjoyIt
Posts: 5000
Joined: Sun Dec 29, 2013 8:06 pm

Re: Should We Ever Save for Children's College?

Post by EnjoyIt »

aerosurfer wrote: Wed Oct 07, 2020 7:32 am
Dontridetheindexdown wrote: Tue Oct 06, 2020 8:09 pm You need to retire comfortably, you also want to help your offspring complete college.

Here is my advice:

First: Fund all available retirement accounts - tax-deferred and Roth, every year.

Second: Fund your own taxable accounts with whatever you do not spend, every year.

Third: Assist your offspring by cash-flowing college expenses from your income, to the extent possible, when they are attending college.

Fourth: Assist your offspring by co-signing loans and helping to re-pay them, to the extent possible, if your income does not cash-flow college expenses.
This seems the simplest concept for the majority of higher earners.

I would add a step 2.5 or in concurrence with step 2...

Fund 529 up to state tax breaks (if any) then reassess about over funding. Its what we are doing presently.

I appreciate Klangs perspective. But we have long term disability, term life, low cost mortgage, no other debt. I dont know the future either but many of the variables are accounted for.

My job is as stable as the industry is crazy right now, so having a cash buffer allows us to further weather the unexpected, as well as a high total savings rate, fully funding tax advantaged and contributong to taxable. I dont ever see myself being unemployed, however underemployed could happen should something happen.

I dont hope its a good plan, but i feel total picture is reasonable to direct money to 529s in addition to our own savings. Even if we break it or dont need it all for both kids, the state tax savings will still exceed the penalties.
Can I ask? Why not save right up to the state tax break and the rest towards retirement. Then when kids are closer to college age evaluate your retirement savings and if things are going well start saving for college. I just don’t understand why saving early when so much is unknown when one can save up later in life.

The future is unknown, one can always lose their job and be unemployed for many years. Even a “secure“ government job can go down the drain. I would rather have the security of money saved we can live on as opposed to a paid for college education if that scenario arose.

I’m definitely of the camp of “save for retirement first.” Once we knew that our retirement was in the right direction. We started a 529.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
EnjoyIt
Posts: 5000
Joined: Sun Dec 29, 2013 8:06 pm

Re: Should We Ever Save for Children's College?

Post by EnjoyIt »

Broken Man 1999 wrote: Wed Oct 07, 2020 8:38 am I believe funding a 529 plan (or even a prepaid tuition plan) reduces any ambiguity of funding being saved/invested for college expenses. Both plans are declarations that paying for a college education is taking place. Doesn't mean there will be enough to pay all expenses, but at the least there is evidence the effort is being made.

When the children ask about college, which answer has more credence?
- Don't worry at all, we are going to pay for it as you go!
- Don't worry at all, take a look at what we have already put aside for you!

And, I believe parents honestly do mean to cash-flow the expenses, but hope is not a strategy. You can't pay college expenses with hope.

Broken Man 1999
If one can’t cash flow college expenses, then one may also not be able to cash flow living expenses either. Hope is not a strategy.

Who cares how you show your intentions. If one is broke and needs money to eat, there is no reason not to pay a penalty and cash in that 529 even if it is earmarked for education, living expenses will always take a priority.

We saved for many years and fortunate enough to have retirement set. We funded a 529 thereafter. I predict it may not be enough for Ivy League prices, but luckily our finances are such so that we can cash flow the rest. If not, yeah, a loan will be in order. If we can’t cash flow education we did not save enough money globally for all our expenses.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
KlangFool
Posts: 18240
Joined: Sat Oct 11, 2008 12:35 pm

Re: Should We Ever Save for Children's College?

Post by KlangFool »

EnjoyIt wrote: Fri Oct 09, 2020 7:59 am
aerosurfer wrote: Wed Oct 07, 2020 7:32 am
Dontridetheindexdown wrote: Tue Oct 06, 2020 8:09 pm You need to retire comfortably, you also want to help your offspring complete college.

Here is my advice:

First: Fund all available retirement accounts - tax-deferred and Roth, every year.

Second: Fund your own taxable accounts with whatever you do not spend, every year.

Third: Assist your offspring by cash-flowing college expenses from your income, to the extent possible, when they are attending college.

Fourth: Assist your offspring by co-signing loans and helping to re-pay them, to the extent possible, if your income does not cash-flow college expenses.
This seems the simplest concept for the majority of higher earners.

I would add a step 2.5 or in concurrence with step 2...

Fund 529 up to state tax breaks (if any) then reassess about over funding. Its what we are doing presently.

I appreciate Klangs perspective. But we have long term disability, term life, low cost mortgage, no other debt. I dont know the future either but many of the variables are accounted for.

My job is as stable as the industry is crazy right now, so having a cash buffer allows us to further weather the unexpected, as well as a high total savings rate, fully funding tax advantaged and contributong to taxable. I dont ever see myself being unemployed, however underemployed could happen should something happen.

I dont hope its a good plan, but i feel total picture is reasonable to direct money to 529s in addition to our own savings. Even if we break it or dont need it all for both kids, the state tax savings will still exceed the penalties.
Can I ask? Why not save right up to the state tax break and the rest towards retirement.
EnjoyIt,

This is simple math. Please do the calculation.

A) Why not enjoy the bigger Federal Income Tax break by contributing to the Tax-deferred account first? If you like a tax break, why choose a small tax break (state) versus a big one (Federal)?


B) If you like tax-free growth, why choose 10 to 20 years (529) versus tax-advantaged accounts (20 to 30 years)?


C) If you have a choice to pay the same amount of taxes now (529) versus 20 years later (cash flow the college)? Why would you choose to pay the taxes now? Due to inflation, the money will worth much less later.


KlangFool
smitcat
Posts: 6656
Joined: Mon Nov 07, 2016 10:51 am

Re: Should We Ever Save for Children's College?

Post by smitcat »

KlangFool wrote: Fri Oct 09, 2020 8:13 am
EnjoyIt wrote: Fri Oct 09, 2020 7:59 am
aerosurfer wrote: Wed Oct 07, 2020 7:32 am
Dontridetheindexdown wrote: Tue Oct 06, 2020 8:09 pm You need to retire comfortably, you also want to help your offspring complete college.

Here is my advice:

First: Fund all available retirement accounts - tax-deferred and Roth, every year.

Second: Fund your own taxable accounts with whatever you do not spend, every year.

Third: Assist your offspring by cash-flowing college expenses from your income, to the extent possible, when they are attending college.

Fourth: Assist your offspring by co-signing loans and helping to re-pay them, to the extent possible, if your income does not cash-flow college expenses.
This seems the simplest concept for the majority of higher earners.

I would add a step 2.5 or in concurrence with step 2...

Fund 529 up to state tax breaks (if any) then reassess about over funding. Its what we are doing presently.

I appreciate Klangs perspective. But we have long term disability, term life, low cost mortgage, no other debt. I dont know the future either but many of the variables are accounted for.

My job is as stable as the industry is crazy right now, so having a cash buffer allows us to further weather the unexpected, as well as a high total savings rate, fully funding tax advantaged and contributong to taxable. I dont ever see myself being unemployed, however underemployed could happen should something happen.

I dont hope its a good plan, but i feel total picture is reasonable to direct money to 529s in addition to our own savings. Even if we break it or dont need it all for both kids, the state tax savings will still exceed the penalties.
Can I ask? Why not save right up to the state tax break and the rest towards retirement.
EnjoyIt,

This is simple math. Please do the calculation.

A) Why not enjoy the bigger Federal Income Tax break by contributing to the Tax-deferred account first? If you like a tax break, why choose a small tax break (state) versus a big one (Federal)?


B) If you like tax-free growth, why choose 10 to 20 years (529) versus tax-advantaged accounts (20 to 30 years)?


C) If you have a choice to pay the same amount of taxes now (529) versus 20 years later (cash flow the college)? Why would you choose to pay the taxes now? Due to inflation, the money will worth much less later.


KlangFool
Klang - i have always found your posts on these strategies to be excellent. Thank you
KlangFool
Posts: 18240
Joined: Sat Oct 11, 2008 12:35 pm

Re: Should We Ever Save for Children's College?

Post by KlangFool »

smitcat wrote: Fri Oct 09, 2020 8:19 am
KlangFool wrote: Fri Oct 09, 2020 8:13 am
EnjoyIt wrote: Fri Oct 09, 2020 7:59 am
aerosurfer wrote: Wed Oct 07, 2020 7:32 am
Dontridetheindexdown wrote: Tue Oct 06, 2020 8:09 pm You need to retire comfortably, you also want to help your offspring complete college.

Here is my advice:

First: Fund all available retirement accounts - tax-deferred and Roth, every year.

Second: Fund your own taxable accounts with whatever you do not spend, every year.

Third: Assist your offspring by cash-flowing college expenses from your income, to the extent possible, when they are attending college.

Fourth: Assist your offspring by co-signing loans and helping to re-pay them, to the extent possible, if your income does not cash-flow college expenses.
This seems the simplest concept for the majority of higher earners.

I would add a step 2.5 or in concurrence with step 2...

Fund 529 up to state tax breaks (if any) then reassess about over funding. Its what we are doing presently.

I appreciate Klangs perspective. But we have long term disability, term life, low cost mortgage, no other debt. I dont know the future either but many of the variables are accounted for.

My job is as stable as the industry is crazy right now, so having a cash buffer allows us to further weather the unexpected, as well as a high total savings rate, fully funding tax advantaged and contributong to taxable. I dont ever see myself being unemployed, however underemployed could happen should something happen.

I dont hope its a good plan, but i feel total picture is reasonable to direct money to 529s in addition to our own savings. Even if we break it or dont need it all for both kids, the state tax savings will still exceed the penalties.
Can I ask? Why not save right up to the state tax break and the rest towards retirement.
EnjoyIt,

This is simple math. Please do the calculation.

A) Why not enjoy the bigger Federal Income Tax break by contributing to the Tax-deferred account first? If you like a tax break, why choose a small tax break (state) versus a big one (Federal)?


B) If you like tax-free growth, why choose 10 to 20 years (529) versus tax-advantaged accounts (20 to 30 years)?


C) If you have a choice to pay the same amount of taxes now (529) versus 20 years later (cash flow the college)? Why would you choose to pay the taxes now? Due to inflation, the money will worth much less later.


KlangFool
Klang - i have always found your posts on these strategies to be excellent. Thank you

Thanks.


KlangFool
getthatmarshmallow
Posts: 685
Joined: Mon Dec 04, 2017 9:43 am

Re: Should We Ever Save for Children's College?

Post by getthatmarshmallow »

BogleDan wrote: Thu Oct 08, 2020 6:59 pm
dogagility wrote: Mon Oct 05, 2020 7:06 pm It's also nice to have a sufficient amount of money saved/on hand so that the decision of which university to attend is not impacted by financial considerations.
This is the biggest thing for me. You see it all the time in these threads: "I'm saving x amount, anything beyond that my kids can pay themselves." "I'm saving y amount, because a public in-state university is good enough."

If your kid gets accepted into a top 10 school, with all that likely means for their entire future, are you going to want money to be a factor in whether they go or not? Even a little bit?

The risk of "saving too much" in a 529 plan seems like such a small trade-off compared to feeling the pressure for your kid to turn down that kind of future.

But to each their own.
I don't want it to be a factor, but I don't make enough to pay for retirement and eight years at an Ivy at sticker price. If our fortunes change such that we can, we will. Right now, I can ensure they can go anywhere in state or anywhere that wants to give them a discount to bump up their school's academic numbers.
EnjoyIt
Posts: 5000
Joined: Sun Dec 29, 2013 8:06 pm

Re: Should We Ever Save for Children's College?

Post by EnjoyIt »

KlangFool wrote: Fri Oct 09, 2020 8:13 am
EnjoyIt wrote: Fri Oct 09, 2020 7:59 am
aerosurfer wrote: Wed Oct 07, 2020 7:32 am
Dontridetheindexdown wrote: Tue Oct 06, 2020 8:09 pm You need to retire comfortably, you also want to help your offspring complete college.

Here is my advice:

First: Fund all available retirement accounts - tax-deferred and Roth, every year.

Second: Fund your own taxable accounts with whatever you do not spend, every year.

Third: Assist your offspring by cash-flowing college expenses from your income, to the extent possible, when they are attending college.

Fourth: Assist your offspring by co-signing loans and helping to re-pay them, to the extent possible, if your income does not cash-flow college expenses.
This seems the simplest concept for the majority of higher earners.

I would add a step 2.5 or in concurrence with step 2...

Fund 529 up to state tax breaks (if any) then reassess about over funding. Its what we are doing presently.

I appreciate Klangs perspective. But we have long term disability, term life, low cost mortgage, no other debt. I dont know the future either but many of the variables are accounted for.

My job is as stable as the industry is crazy right now, so having a cash buffer allows us to further weather the unexpected, as well as a high total savings rate, fully funding tax advantaged and contributong to taxable. I dont ever see myself being unemployed, however underemployed could happen should something happen.

I dont hope its a good plan, but i feel total picture is reasonable to direct money to 529s in addition to our own savings. Even if we break it or dont need it all for both kids, the state tax savings will still exceed the penalties.
Can I ask? Why not save right up to the state tax break and the rest towards retirement.
EnjoyIt,

This is simple math. Please do the calculation.

A) Why not enjoy the bigger Federal Income Tax break by contributing to the Tax-deferred account first? If you like a tax break, why choose a small tax break (state) versus a big one (Federal)?


B) If you like tax-free growth, why choose 10 to 20 years (529) versus tax-advantaged accounts (20 to 30 years)?


C) If you have a choice to pay the same amount of taxes now (529) versus 20 years later (cash flow the college)? Why would you choose to pay the taxes now? Due to inflation, the money will worth much less later.


KlangFool
Klangfool,
I completely agree with you. I’m all for making out retirement accounts prior to 529 savings. I’m all for making sure one’s retirement is set before shelling out for college.

I was asking, why save for college right away, one can save once the kids are older and you know their abilities as well as your own retirement savings trajectory. We did not start shaving for college until we knew our retirement is set. We max out all our retirement accounts and then instead of taxable have put cash into 529 plans.

If we are still employed when our kids are working we may help fund a Roth for them instead of a 529 due to increased flexibility.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
EnjoyIt
Posts: 5000
Joined: Sun Dec 29, 2013 8:06 pm

Re: Should We Ever Save for Children's College?

Post by EnjoyIt »

smitcat wrote: Fri Oct 09, 2020 8:19 am
KlangFool wrote: Fri Oct 09, 2020 8:13 am
EnjoyIt wrote: Fri Oct 09, 2020 7:59 am
aerosurfer wrote: Wed Oct 07, 2020 7:32 am
Dontridetheindexdown wrote: Tue Oct 06, 2020 8:09 pm You need to retire comfortably, you also want to help your offspring complete college.

Here is my advice:

First: Fund all available retirement accounts - tax-deferred and Roth, every year.

Second: Fund your own taxable accounts with whatever you do not spend, every year.

Third: Assist your offspring by cash-flowing college expenses from your income, to the extent possible, when they are attending college.

Fourth: Assist your offspring by co-signing loans and helping to re-pay them, to the extent possible, if your income does not cash-flow college expenses.
This seems the simplest concept for the majority of higher earners.

I would add a step 2.5 or in concurrence with step 2...

Fund 529 up to state tax breaks (if any) then reassess about over funding. Its what we are doing presently.

I appreciate Klangs perspective. But we have long term disability, term life, low cost mortgage, no other debt. I dont know the future either but many of the variables are accounted for.

My job is as stable as the industry is crazy right now, so having a cash buffer allows us to further weather the unexpected, as well as a high total savings rate, fully funding tax advantaged and contributong to taxable. I dont ever see myself being unemployed, however underemployed could happen should something happen.

I dont hope its a good plan, but i feel total picture is reasonable to direct money to 529s in addition to our own savings. Even if we break it or dont need it all for both kids, the state tax savings will still exceed the penalties.
Can I ask? Why not save right up to the state tax break and the rest towards retirement.
EnjoyIt,

This is simple math. Please do the calculation.

A) Why not enjoy the bigger Federal Income Tax break by contributing to the Tax-deferred account first? If you like a tax break, why choose a small tax break (state) versus a big one (Federal)?


B) If you like tax-free growth, why choose 10 to 20 years (529) versus tax-advantaged accounts (20 to 30 years)?


C) If you have a choice to pay the same amount of taxes now (529) versus 20 years later (cash flow the college)? Why would you choose to pay the taxes now? Due to inflation, the money will worth much less later.


KlangFool
Klang - i have always found your posts on these strategies to be excellent. Thank you
Agreed. Klangfool appreciates that the future is not certain. Too many people think they will be employed forever or hardship may not reach their doorsteps.

It’s better to respect the unknown and be wrong compared to hoping things will go as planned.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
ncbill
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Re: Should We Ever Save for Children's College?

Post by ncbill »

griswoldfamilyxmas wrote: Wed Oct 07, 2020 7:43 pm
KlangFool wrote: Mon Oct 05, 2020 6:30 pm Why do you need to save for your kids' college education? Your annual savings is big enough to pay for a college education.
My worry is that future life changes could change that. As you've mentioned in other posts, I could be unemployed or underemployed when my children attend college.
Don't forget the military options...ROTC scholarships have already been mentioned, but in many states Guard members have tuition waived at in-state public schools.

Had one of my kids not received a campus-based ROTC scholarship they would have moved to another state & joined that state's National Guard to avoid paying the $30,000+ annual tuition charged to out-of-state residents.

Keep in mind states set their own requirements as to how long one has to be a Guard member before qualifying for educational benefits.

For that particular state it would have meant spending the summer after high school graduation & fall semester going through Basic and Advanced training, deferring enrollment until the spring.
stoptothink
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Re: Should We Ever Save for Children's College?

Post by stoptothink »

ncbill wrote: Fri Oct 09, 2020 9:32 am
griswoldfamilyxmas wrote: Wed Oct 07, 2020 7:43 pm
KlangFool wrote: Mon Oct 05, 2020 6:30 pm Why do you need to save for your kids' college education? Your annual savings is big enough to pay for a college education.
My worry is that future life changes could change that. As you've mentioned in other posts, I could be unemployed or underemployed when my children attend college.
Don't forget the military options...ROTC scholarships have already been mentioned, but in many states Guard members have tuition waived at in-state public schools.

Had one of my kids not received a campus-based ROTC scholarship they would have moved to another state & joined that state's National Guard to avoid paying the $30,000+ annual tuition charged to out-of-state residents.

Keep in mind states set their own requirements as to how long one has to be a Guard member before qualifying for educational benefits.

For that particular state it would have meant spending the summer after high school graduation & fall semester going through Basic and Advanced training, deferring enrollment until the spring.
Paid for the education of two uncles, my brother and his wife. SIL got her RN (and citizenship) thanks to the military' and now is applying for CRNA schools (which, if she gets in, will be partially paid for by the GI bill).
trueblueky
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Re: Should We Ever Save for Children's College?

Post by trueblueky »

KlangFool wrote: Fri Oct 09, 2020 8:13 am
EnjoyIt wrote: Fri Oct 09, 2020 7:59 am
aerosurfer wrote: Wed Oct 07, 2020 7:32 am
Dontridetheindexdown wrote: Tue Oct 06, 2020 8:09 pm You need to retire comfortably, you also want to help your offspring complete college.

Here is my advice:

First: Fund all available retirement accounts - tax-deferred and Roth, every year.

Second: Fund your own taxable accounts with whatever you do not spend, every year.

Third: Assist your offspring by cash-flowing college expenses from your income, to the extent possible, when they are attending college.

Fourth: Assist your offspring by co-signing loans and helping to re-pay them, to the extent possible, if your income does not cash-flow college expenses.
This seems the simplest concept for the majority of higher earners.

I would add a step 2.5 or in concurrence with step 2...

Fund 529 up to state tax breaks (if any) then reassess about over funding. Its what we are doing presently.

I appreciate Klangs perspective. But we have long term disability, term life, low cost mortgage, no other debt. I dont know the future either but many of the variables are accounted for.

My job is as stable as the industry is crazy right now, so having a cash buffer allows us to further weather the unexpected, as well as a high total savings rate, fully funding tax advantaged and contributong to taxable. I dont ever see myself being unemployed, however underemployed could happen should something happen.

I dont hope its a good plan, but i feel total picture is reasonable to direct money to 529s in addition to our own savings. Even if we break it or dont need it all for both kids, the state tax savings will still exceed the penalties.
Can I ask? Why not save right up to the state tax break and the rest towards retirement.
EnjoyIt,

This is simple math. Please do the calculation.

A) Why not enjoy the bigger Federal Income Tax break by contributing to the Tax-deferred account first? If you like a tax break, why choose a small tax break (state) versus a big one (Federal)?


B) If you like tax-free growth, why choose 10 to 20 years (529) versus tax-advantaged accounts (20 to 30 years)?


C) If you have a choice to pay the same amount of taxes now (529) versus 20 years later (cash flow the college)? Why would you choose to pay the taxes now? Due to inflation, the money will worth much less later.


KlangFool
I received a state tax break (marginal 8%) for contributing to 529 in the same years I was withdrawing. Free money. Only wish the state max had been higher.

Check the rules for your state before you dismiss 529.
KlangFool
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Re: Should We Ever Save for Children's College?

Post by KlangFool »

trueblueky wrote: Fri Oct 09, 2020 10:12 am
I received a state tax break (marginal 8%) for contributing to 529 in the same years I was withdrawing. Free money. Only wish the state max had been higher.

Check the rules for your state before you dismiss 529.

trueblueky,

A) Only make sense if you max up your tax-advantaged accounts first while contributing to the 529. Or else, you are paying a bigger Federal Income Tax in order to save a smaller state tax break.


B) You are not saving for college via the 529. You are "cash flowing" the college education while using 529 for tax break.


KlangFool
trueblueky
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Re: Should We Ever Save for Children's College?

Post by trueblueky »

KlangFool wrote: Fri Oct 09, 2020 10:19 am
trueblueky wrote: Fri Oct 09, 2020 10:12 am
I received a state tax break (marginal 8%) for contributing to 529 in the same years I was withdrawing. Free money. Only wish the state max had been higher.

Check the rules for your state before you dismiss 529.

trueblueky,

A) Only make sense if you max up your tax-advantaged accounts first while contributing to the 529. Or else, you are paying a bigger Federal Income Tax in order to save a smaller state tax break.


B) You are not saving for college via the 529. You are "cash flowing" the college education while using 529 for tax break.


KlangFool
Just recommend everyone check their state's rules. YMMV. Plus, you may find that the grandparents will contribute to 529 while they would never contribute to your 401k.

At the same time, we cash-flowed enough each year to max the federal education tax breaks. Assuming child makes it thru undergraduate in four school years, that's five tax years.
Four years can get the American Opportunity Credit of up to $2500 (dollar-for-dollar for the first $2000 and 25% of the next $2000). Fifth or later tax years can get the Lifetime Learning Credit (20% of up to $10,000 in qualified expenses).

It's higher math, but in some cases, you could be better having some of Junior's scholarships be taxable income to Junior because it was used for living expenses, while you claim enough of the tuition and other expenses to qualify for the federal tax credits.
KlangFool
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Re: Should We Ever Save for Children's College?

Post by KlangFool »

trueblueky wrote: Fri Oct 09, 2020 10:50 am
KlangFool wrote: Fri Oct 09, 2020 10:19 am
trueblueky wrote: Fri Oct 09, 2020 10:12 am
I received a state tax break (marginal 8%) for contributing to 529 in the same years I was withdrawing. Free money. Only wish the state max had been higher.

Check the rules for your state before you dismiss 529.

trueblueky,

A) Only make sense if you max up your tax-advantaged accounts first while contributing to the 529. Or else, you are paying a bigger Federal Income Tax in order to save a smaller state tax break.


B) You are not saving for college via the 529. You are "cash flowing" the college education while using 529 for tax break.


KlangFool
Just recommend everyone check their state's rules. YMMV. Plus, you may find that the grandparents will contribute to 529 while they would never contribute to your 401k.

trueblueky,


A) In my culture, the elders give CASH to the children every year. The kids could use the CASH for any purposes. I invested the money for my kids and give back to them when they are old enough. My kids graduated college with 20K to 30K worth of investment each in their taxable and Roth IRA accounts.


B) For financial aid purposes, it is better for the grandparent to pay the tuition directly as opposed to the 529.


KlangFool


P.S.: If you like tax-free growth, the kids' Roth IRA with 40 to 50 years of growth is even better.
trueblueky
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Re: Should We Ever Save for Children's College?

Post by trueblueky »

KlangFool wrote: Fri Oct 09, 2020 10:57 am
trueblueky wrote: Fri Oct 09, 2020 10:50 am
KlangFool wrote: Fri Oct 09, 2020 10:19 am
trueblueky wrote: Fri Oct 09, 2020 10:12 am
I received a state tax break (marginal 8%) for contributing to 529 in the same years I was withdrawing. Free money. Only wish the state max had been higher.

Check the rules for your state before you dismiss 529.

trueblueky,

A) Only make sense if you max up your tax-advantaged accounts first while contributing to the 529. Or else, you are paying a bigger Federal Income Tax in order to save a smaller state tax break.


B) You are not saving for college via the 529. You are "cash flowing" the college education while using 529 for tax break.


KlangFool
Just recommend everyone check their state's rules. YMMV. Plus, you may find that the grandparents will contribute to 529 while they would never contribute to your 401k.

trueblueky,


A) In my culture, the elders give CASH to the children every year. The kids could use the CASH for any purposes. I invested the money for my kids and give back to them when they are old enough. My kids graduated college with 20K to 30K worth of investment each in their taxable and Roth IRA accounts.


B) For financial aid purposes, it is better for the grandparent to pay the tuition directly as opposed to the 529.


KlangFool


P.S.: If you like tax-free growth, the kids' Roth IRA with 40 to 50 years of growth is even better.
In my culture, they don't.

As mentioned earlier, my parents were the first generation to attend high school. I was first to attend college. I was morally obligated to see our children through with no debt.
KlangFool
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Re: Should We Ever Save for Children's College?

Post by KlangFool »

trueblueky wrote: Fri Oct 09, 2020 11:11 am

As mentioned earlier, my parents were the first generation to attend high school. I was first to attend college. I was morally obligated to see our children through with no debt.

trueblueky,

I come from a multi-generation business family. We look at formal education in term of return of investment. We have many self-made millionaires in my family. Their formal education ranged from elementary school to graduate degree. We believe that there are more than one way to be successful.


KlangFool
DesertDiva
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Re: Should We Ever Save for Children's College?

Post by DesertDiva »

oldfort wrote: Thu Oct 08, 2020 4:45 pm
Wrench wrote: Thu Oct 08, 2020 2:53 pm
oldfort wrote: Wed Oct 07, 2020 6:37 pm
Wrench wrote: Wed Oct 07, 2020 6:22 pm
nigel_ht wrote: Wed Oct 07, 2020 1:45 pm

Yep.

HYP along with MIT, Stanford, CalTech provides the next higher tier of potential social networking over the rest...for example Xi Jinping's daughter went to Harvard as is Malia Obama. Sure, JFK, Jr and others went to Brown, etc but in lower numbers than the top tier.

After that it's just quality of education and state schools can do an equally good job (depending on major) at a far lower cost. If they are academically inclined they can transfer to a top tier university for graduate school.
As a Quaker alum I take issue with UPenn being called "second tier". :happy If you want to go to Harvard, make sure your parents are famous, former presidents, or billionaire tech moguls like the late Steve Jobs (see his daughter's book about her Harvard interview - enlightening). More seriously though, I believe all the Ivies have need-blind admission and most (if not all) state something similar to this from UPenn: "Penn is committed to meeting 100% of your demonstrated need with grant-based aid". Princeton claims their average net cost is ~$13.5K per year for tuition, room and board, and all of their aid is also grant-based. My recommendation is if your son or daughter is a potential candidate for an Ivy, then apply. If he/she gets in you can see what package is offered and then make a choice based on financial and academic criteria combined. But don't rule out an Ivy just because the sticker price is high.

wrench
I disagree with this. With net price calculators, there should rarely be large surprises on what your package is. If you know your NPC shows the COA as $70k and you've already made the decision the max you're willing to pay for college is $30k/year, don't let your kid apply to and then potentially be accepted to a college they can't attend.
Agree to disagree. De gustibus non est disputandum.
This has played out before and it doesn't usually end well.

Kid: I got accepted to Princeton. Isn't it great?
Parent: We can't afford to send you there. You're going to state U. instead.
Kid: Then, why did you tell me I could apply.
Parent: I didn't think you would get admitted.
Kid: Storms off in anger.
MyFather: "If we let you go to college, what will we tell your brothers?" :|
Walkure
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Re: Should We Ever Save for Children's College?

Post by Walkure »

chipperd wrote: Thu Oct 08, 2020 5:42 pm As one who currently has two in college, and will have three in college next year, the math you cite is accurate with regards to the EFC calculation. However, the reality of what college or university costs net, is a separate issue all together.
While the EFC can be a handy calculator, how a school uses (or doesn't use) that calculation is individual based on the school.
IF (and it's a big IF), a school chooses to "meet full need" ( the difference between the family's EFC and full cost of attendance or COA. Only about two dozen in the country do meet full need), the school can choose how to make up that delta. Could be scholarship, could be grant, a combination of the two, or more likely, loans and work study, are a big part of that package to make up that difference between the EFC and full COA...

Here is the list (all 21 of them) of schools in the country that will meet full need, but with loans as part of the aid package: https://blog.collegevine.com/schools-th ... cial-need/
A few more (7) meet full need without loans if certain low income threshold is met ( some are really low: ie: family's income of $40k-$60k/yr. See same link for those schools).
Paying for higher education has become a financial game. One really needs to examine the wording and drill down to specifics of each school, to figure out what each school will cost in the end. Hence, I will continue to recommend anyone considering the chore of figuring out the cost of school for planning purposes, to plug your anticipated financial numbers and family situation at the time each child will enter school, into each potential schools' net price calculator.
All good points. I think the thing that stands out as actionable for the upper middle class Bogleheads' group is that a school's commitment to meeting full need is something you can shop for up front. I worry that many who think "I'm not even going to fill out a FAFSA because they're only going to give us loans" also don't care about the distinction between "need-based" and "full need" - when your example clearly shows that, once you start stacking multiple kids simultaneously, even higher-earning families may show some need on paper. In that situation, how each child's school will address that suddenly becomes crucial.
Tommy
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Re: Should We Ever Save for Children's College?

Post by Tommy »

I saved money in 529 but now I think I'd be better off if I invested those monies in retirement. The reason is that she attends public university in our state and tuition cost only ~$12K per year. Since all education remote ( and will stay remote for long time) she stays at home since February. If/when they resume in person she is planning to rent apartment (what is not covered by 529). So, I end up with money in 529 what I cannot spend.
delamer
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Re: Should We Ever Save for Children's College?

Post by delamer »

Tommy wrote: Fri Oct 09, 2020 1:42 pm I saved money in 529 but now I think I'd be better off if I invested those monies in retirement. The reason is that she attends public university in our state and tuition cost only ~$12K per year. Since all education remote ( and will stay remote for long time) she stays at home since February. If/when they resume in person she is planning to rent apartment (what is not covered by 529). So, I end up with money in 529 what I cannot spend.
You can cover the future apartment through the 529, up to the allowable amount of the cost of attendance as posted on the school’s website: https://www.kiplinger.com/article/colle ... -plan.html
ModifiedDuration
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Re: Should We Ever Save for Children's College?

Post by ModifiedDuration »

delamer wrote: Fri Oct 09, 2020 1:48 pm
Tommy wrote: Fri Oct 09, 2020 1:42 pm I saved money in 529 but now I think I'd be better off if I invested those monies in retirement. The reason is that she attends public university in our state and tuition cost only ~$12K per year. Since all education remote ( and will stay remote for long time) she stays at home since February. If/when they resume in person she is planning to rent apartment (what is not covered by 529). So, I end up with money in 529 what I cannot spend.
You can cover the future apartment through the 529, up to the allowable amount of the cost of attendance as posted on the school’s website: https://www.kiplinger.com/article/colle ... -plan.html
And food (up to allowable amount in school’s cost of attendance); books and supplies; computers and internet access; and required school fees.
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Harry Livermore
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Re: Should We Ever Save for Children's College?

Post by Harry Livermore »

dogagility wrote: Tue Oct 06, 2020 12:55 pm
TomatoTomahto wrote: Tue Oct 06, 2020 10:08 am
Wrench wrote: Tue Oct 06, 2020 9:58 am The money I spent for their education is the best investment I ever made, bar none.
Many thought I was a nutcase when I said that I wrote tuition checks with a smile. Well, perhaps I am nuts, but it remains the best investment I’ve made.
I smile every time I take money out of the 529 to pay for college expenses. :sharebeer

It's great knowing the diligence of saving has been rewarded by the utter relaxation of having sufficient money on hand to pay for all college expenses. Sort of like having enough money during retirement... only 10 years sooner.
+1. I feel so relaxed when I transfer the money, and PRIDE when I mail that tuition check. Driving used cars, eating peanut butter sandwiches, painting my house(s) myself, and many other very small sacrifices, paid off. Obviously, there are many paths.
Cheers
EnjoyIt
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Re: Should We Ever Save for Children's College?

Post by EnjoyIt »

I would hope that at least the main consensus is that one should not save for college of their own retirement is in jeopardy. Once retirement is covered, there are many ways to save and pay for college such as a 529, Roth, taxable, and cash flowing which are all viable options. Each and every family should evaluate which option is best for them.

I also think we can all agree on that a 529 is not the only way to save and pay for college.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
Starfish
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Re: Should We Ever Save for Children's College?

Post by Starfish »

DesertDiva wrote: Fri Oct 09, 2020 12:43 pm
oldfort wrote: Thu Oct 08, 2020 4:45 pm
Wrench wrote: Thu Oct 08, 2020 2:53 pm
oldfort wrote: Wed Oct 07, 2020 6:37 pm
Wrench wrote: Wed Oct 07, 2020 6:22 pm
As a Quaker alum I take issue with UPenn being called "second tier". :happy If you want to go to Harvard, make sure your parents are famous, former presidents, or billionaire tech moguls like the late Steve Jobs (see his daughter's book about her Harvard interview - enlightening). More seriously though, I believe all the Ivies have need-blind admission and most (if not all) state something similar to this from UPenn: "Penn is committed to meeting 100% of your demonstrated need with grant-based aid". Princeton claims their average net cost is ~$13.5K per year for tuition, room and board, and all of their aid is also grant-based. My recommendation is if your son or daughter is a potential candidate for an Ivy, then apply. If he/she gets in you can see what package is offered and then make a choice based on financial and academic criteria combined. But don't rule out an Ivy just because the sticker price is high.

wrench
I disagree with this. With net price calculators, there should rarely be large surprises on what your package is. If you know your NPC shows the COA as $70k and you've already made the decision the max you're willing to pay for college is $30k/year, don't let your kid apply to and then potentially be accepted to a college they can't attend.
Agree to disagree. De gustibus non est disputandum.
This has played out before and it doesn't usually end well.

Kid: I got accepted to Princeton. Isn't it great?
Parent: We can't afford to send you there. You're going to state U. instead.
Kid: Then, why did you tell me I could apply.
Parent: I didn't think you would get admitted.
Kid: Storms off in anger.
MyFather: "If we let you go to college, what will we tell your brothers?" :|

Forgive my ignorance, but what happens if the parents have (in school''s eyes) sufficient means but they don't pay - for whatever reasons - for their kid's school?
It seem to me that this is the only instance when an adult is officially judged by their parents income or savings.
oldfort
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Re: Should We Ever Save for Children's College?

Post by oldfort »

Starfish wrote: Fri Oct 09, 2020 3:33 pm
DesertDiva wrote: Fri Oct 09, 2020 12:43 pm
oldfort wrote: Thu Oct 08, 2020 4:45 pm
Wrench wrote: Thu Oct 08, 2020 2:53 pm
oldfort wrote: Wed Oct 07, 2020 6:37 pm

I disagree with this. With net price calculators, there should rarely be large surprises on what your package is. If you know your NPC shows the COA as $70k and you've already made the decision the max you're willing to pay for college is $30k/year, don't let your kid apply to and then potentially be accepted to a college they can't attend.
Agree to disagree. De gustibus non est disputandum.
This has played out before and it doesn't usually end well.

Kid: I got accepted to Princeton. Isn't it great?
Parent: We can't afford to send you there. You're going to state U. instead.
Kid: Then, why did you tell me I could apply.
Parent: I didn't think you would get admitted.
Kid: Storms off in anger.
MyFather: "If we let you go to college, what will we tell your brothers?" :|

Forgive my ignorance, but what happens if the parents have (in school''s eyes) sufficient means but they don't pay - for whatever reasons - for their kid's school?
It seem to me that this is the only instance when an adult is officially judged by their parents income or savings.
I'm not 100% sure what you're asking but the full COA at a place like Princeton is $75k/year for full pay. No kid is going to be able to get loans in this amount without a cosigner. If the parents won't pay their EFC and won't cosign a loan, then the kid can't go.
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TomatoTomahto
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Re: Should We Ever Save for Children's College?

Post by TomatoTomahto »

Starfish wrote: Fri Oct 09, 2020 3:33 pm Forgive my ignorance, but what happens if the parents have (in school''s eyes) sufficient means but they don't pay - for whatever reasons - for their kid's school?
It seem to me that this is the only instance when an adult is officially judged by their parents income or savings.
The times I’ve seen this happen has been when the parents are divorced. The school will consider both parents incomes and assets, but sometimes one of the parents will refuse to pay their part. Being deemed emancipated or independent is not an easy process.
I get the FI part but not the RE part of FIRE.
Broken Man 1999
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Re: Should We Ever Save for Children's College?

Post by Broken Man 1999 »

Tommy wrote: Fri Oct 09, 2020 1:42 pm I saved money in 529 but now I think I'd be better off if I invested those monies in retirement. The reason is that she attends public university in our state and tuition cost only ~$12K per year. Since all education remote ( and will stay remote for long time) she stays at home since February. If/when they resume in person she is planning to rent apartment (what is not covered by 529). So, I end up with money in 529 what I cannot spend.
Any chance she goes to graduate school? That could soak up some dollars. Grandkids maybe? Nieces/nephews?

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
oldfort
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Re: Should We Ever Save for Children's College?

Post by oldfort »

TomatoTomahto wrote: Fri Oct 09, 2020 3:46 pm
Starfish wrote: Fri Oct 09, 2020 3:33 pm Forgive my ignorance, but what happens if the parents have (in school''s eyes) sufficient means but they don't pay - for whatever reasons - for their kid's school?
It seem to me that this is the only instance when an adult is officially judged by their parents income or savings.
The times I’ve seen this happen has been when the parents are divorced. The school will consider both parents incomes and assets, but sometimes one of the parents will refuse to pay their part. Being deemed emancipated or independent is not an easy process.
Parents don't have to be divorced to decide they're unwilling to pay the EFC.
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TomatoTomahto
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Re: Should We Ever Save for Children's College?

Post by TomatoTomahto »

oldfort wrote: Fri Oct 09, 2020 3:48 pm
TomatoTomahto wrote: Fri Oct 09, 2020 3:46 pm
Starfish wrote: Fri Oct 09, 2020 3:33 pm Forgive my ignorance, but what happens if the parents have (in school''s eyes) sufficient means but they don't pay - for whatever reasons - for their kid's school?
It seem to me that this is the only instance when an adult is officially judged by their parents income or savings.
The times I’ve seen this happen has been when the parents are divorced. The school will consider both parents incomes and assets, but sometimes one of the parents will refuse to pay their part. Being deemed emancipated or independent is not an easy process.
Parents don't have to be divorced to decide they're unwilling to pay the EFC.
I didn’t say they did; what I said was that was the situation I had seen. More than once.

Probably parents who are still together keep the issue “in the family.”

ETA: one of the times I saw it was with my oldest and my ex. First year, ex paid her 1/3. Thereafter, paid nothing. Given the choices available to me, I made up the difference.
I get the FI part but not the RE part of FIRE.
AnEngineer
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Re: Should We Ever Save for Children's College?

Post by AnEngineer »

TomatoTomahto wrote: Fri Oct 09, 2020 3:46 pm
Starfish wrote: Fri Oct 09, 2020 3:33 pm Forgive my ignorance, but what happens if the parents have (in school''s eyes) sufficient means but they don't pay - for whatever reasons - for their kid's school?
It seem to me that this is the only instance when an adult is officially judged by their parents income or savings.
The times I’ve seen this happen has been when the parents are divorced. The school will consider both parents incomes and assets, but sometimes one of the parents will refuse to pay their part. Being deemed emancipated or independent is not an easy process.
You cannot be emancipated if you're already an adult.

There are only a few ways to become independent, and they involve getting older, getting married, and the like. Actually being independent from your parents does not count for financial aid purposes. My understanding is that it's pretty trivial for your parents to prevent you from going to college if you don't personally have the financial means.
Starfish
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Re: Should We Ever Save for Children's College?

Post by Starfish »

oldfort wrote: Fri Oct 09, 2020 3:45 pm I'm not 100% sure what you're asking but the full COA at a place like Princeton is $75k/year for full pay. No kid is going to be able to get loans in this amount without a cosigner. If the parents won't pay their EFC and won't cosign a loan, then the kid can't go.
I am trying to compare 2 similar, brilliant "kids" (adults, really):
1. one comes from a low income family
2. the other comes from a family with enough income to not be eligible for any type of financial support, but the family does not (want to) pay.


In my understanding they are treated very differently, although they are in similar positions. Neither of them has a co-signer.
oldfort
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Re: Should We Ever Save for Children's College?

Post by oldfort »

Starfish wrote: Fri Oct 09, 2020 5:03 pm
oldfort wrote: Fri Oct 09, 2020 3:45 pm I'm not 100% sure what you're asking but the full COA at a place like Princeton is $75k/year for full pay. No kid is going to be able to get loans in this amount without a cosigner. If the parents won't pay their EFC and won't cosign a loan, then the kid can't go.
I am trying to compare 2 similar, brilliant "kids" (adults, really):
1. one comes from a low income family
2. the other comes from a family with enough income to not be eligible for any type of financial support, but the family does not (want to) pay.


In my understanding they are treated very differently, although they are in similar positions. Neither of them has a co-signer.
Yes, kid #1 gets financial aid and is able to go. Kid #2 doesn't get financial aid and can't go, unless they can find some alternative source of funding(do any of the Ivies have ROTC).
randomguy
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Re: Should We Ever Save for Children's College?

Post by randomguy »

Starfish wrote: Fri Oct 09, 2020 5:03 pm
oldfort wrote: Fri Oct 09, 2020 3:45 pm I'm not 100% sure what you're asking but the full COA at a place like Princeton is $75k/year for full pay. No kid is going to be able to get loans in this amount without a cosigner. If the parents won't pay their EFC and won't cosign a loan, then the kid can't go.
I am trying to compare 2 similar, brilliant "kids" (adults, really):
1. one comes from a low income family
2. the other comes from a family with enough income to not be eligible for any type of financial support, but the family does not (want to) pay.


In my understanding they are treated very differently, although they are in similar positions. Neither of them has a co-signer.
They aren't in remotely similar situations.
1) gets 75k of grants from princeton since they are a no loan school. It could very well turn out to cost less money than your public school.
2) gets 0k in grants and isn't eligible for pretty much all subsidized loans. If they want to go to school they need the parents to pay. And no. you probably not getting 300k of loans without a cosigner.

2 is going to find it hard to qualify as an Independent student in most cases so yes in some. ways their parental situation hurts them. The good news is that a kid that can get into Princeton has very good odds of getting merit based FA at schools one or two notches down the prestige scale so the kid should have no problem going to college. The kid will be fine.
oldfort
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Re: Should We Ever Save for Children's College?

Post by oldfort »

Starfish wrote: Fri Oct 09, 2020 5:03 pm
oldfort wrote: Fri Oct 09, 2020 3:45 pm I'm not 100% sure what you're asking but the full COA at a place like Princeton is $75k/year for full pay. No kid is going to be able to get loans in this amount without a cosigner. If the parents won't pay their EFC and won't cosign a loan, then the kid can't go.
I am trying to compare 2 similar, brilliant "kids" (adults, really):
1. one comes from a low income family
2. the other comes from a family with enough income to not be eligible for any type of financial support, but the family does not (want to) pay.


In my understanding they are treated very differently, although they are in similar positions. Neither of them has a co-signer.
To elaborate a little more, as far as colleges are concerned, you're not really an adult until you're 24+ for financial aid purposes. They believe it's the parent's job to pay for college and if the parents won't pay the EFC, the student should go somewhere else.
marcopolo
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Re: Should We Ever Save for Children's College?

Post by marcopolo »

Starfish wrote: Fri Oct 09, 2020 5:03 pm
oldfort wrote: Fri Oct 09, 2020 3:45 pm I'm not 100% sure what you're asking but the full COA at a place like Princeton is $75k/year for full pay. No kid is going to be able to get loans in this amount without a cosigner. If the parents won't pay their EFC and won't cosign a loan, then the kid can't go.
I am trying to compare 2 similar, brilliant "kids" (adults, really):
1. one comes from a low income family
2. the other comes from a family with enough income to not be eligible for any type of financial support, but the family does not (want to) pay.


In my understanding they are treated very differently, although they are in similar positions. Neither of them has a co-signer.
Are you suggesting the University should treat both these students the same and give them both money to pay for school? If so, I think you would find a large number of parents "refusing" to pay for college.
Once in a while you get shown the light, in the strangest of places if you look at it right.
chipperd
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Re: Should We Ever Save for Children's College?

Post by chipperd »

Tommy wrote: Fri Oct 09, 2020 1:42 pm I saved money in 529 but now I think I'd be better off if I invested those monies in retirement. The reason is that she attends public university in our state and tuition cost only ~$12K per year. Since all education remote ( and will stay remote for long time) she stays at home since February. If/when they resume in person she is planning to rent apartment (what is not covered by 529). So, I end up with money in 529 what I cannot spend.
If your daughter has a merit scholarship, you can withdraw from the 529 penalty free, up to the amount of the scholarship, every year she is in school.
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
AnEngineer
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Re: Should We Ever Save for Children's College?

Post by AnEngineer »

chipperd wrote: Fri Oct 09, 2020 8:38 pm
Tommy wrote: Fri Oct 09, 2020 1:42 pm I saved money in 529 but now I think I'd be better off if I invested those monies in retirement. The reason is that she attends public university in our state and tuition cost only ~$12K per year. Since all education remote ( and will stay remote for long time) she stays at home since February. If/when they resume in person she is planning to rent apartment (what is not covered by 529). So, I end up with money in 529 what I cannot spend.
If your daughter has a merit scholarship, you can withdraw from the 529 penalty free, up to the amount of the scholarship, every year she is in school.
Yes, but now the money is in a taxable account, when it could have been in retirement account.
cshell2
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Re: Should We Ever Save for Children's College?

Post by cshell2 »

mmmodem wrote: Tue Oct 06, 2020 3:17 pm What Klangfool recommends is not a one-size-fits-all-blanket statement. It's math. Maxing out retirement before using a 529 saves more money for both retirement and college. If you disagree with the math, it's fine to argue that.

We are saving for our children's college by maxing out retirement before a 529 because the math shows that maximizes the amount we can help pay for them. This is also the lowest risk because we are not guaranteed to be at a high HHI when they go to college. This is not being pessimistic, it's managing risk.

Additional, has anyone considered the children's POV? As college graduates, we are both funding retirement for both sets of parents. Given the choice, I would 100% have preferred our parents fund their own retirement before college. College is nominally 4 years. Retirement is decades.
I'll argue the math in my situation. I have a negative tax liability and receive a 50% credit on 529 contributions. There's a lot of moving parts for low income folks and lumping us in with the "less than 150K/year" does not always work. Like, the maxing all tax preferred accounts before putting money in a 529. Between 401K, Roth and HSA I'd have to save like 40K when I gross about 50K. I don't max, but I save over 50% of my income for retirement (7K Roth, $7100 HSA and 15-17K or so 401K...I don't think my kids will be taking care of me in my old age. :happy
Zillions
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Re: Should We Ever Save for Children's College?

Post by Zillions »

Yes, IF the parent can afford it, not jeopardize their own retirement doing so, AND wants to help their adult offspring.

I want my daughter to be able to graduate debt free. Student loans suck, plus debt of any kind - even for an education - is an open invitation to Murphy to move into a spare bedroom at her house. Nahhhhhh... wouldn't want that. IF a parent can REASONABLY afford to fund a child's college education AND their own retirement, then they probably should. But if you can't afford it, then maybe the kid can attend community college (free in many states), then go to a local state University while living at home to save on expenses, and work part-time to pay for books and tuition. You can graduate debt free, even if your parents couldn't afford your tuition. JMO.
chipperd
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Re: Should We Ever Save for Children's College?

Post by chipperd »

AnEngineer wrote: Fri Oct 09, 2020 9:14 pm
chipperd wrote: Fri Oct 09, 2020 8:38 pm
Tommy wrote: Fri Oct 09, 2020 1:42 pm I saved money in 529 but now I think I'd be better off if I invested those monies in retirement. The reason is that she attends public university in our state and tuition cost only ~$12K per year. Since all education remote ( and will stay remote for long time) she stays at home since February. If/when they resume in person she is planning to rent apartment (what is not covered by 529). So, I end up with money in 529 what I cannot spend.
If your daughter has a merit scholarship, you can withdraw from the 529 penalty free, up to the amount of the scholarship, every year she is in school.
Yes, but now the money is in a taxable account, when it could have been in retirement account.
This poster said "So I end up with money in 529 what I cannot spend". I was just pointing out a way to get the funds out of the 529, penalty free, so that he/she could utilize those funds for other purposes.
True, taxes will be paid on the gains, and yes, hindsight is 20/20, but the poster acknowledged the mistake and is now in damage control mode.
Not the worst mistake I've ever made!
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mmmodem
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Re: Should We Ever Save for Children's College?

Post by mmmodem »

cshell2 wrote: Fri Oct 09, 2020 9:19 pm
mmmodem wrote: Tue Oct 06, 2020 3:17 pm What Klangfool recommends is not a one-size-fits-all-blanket statement. It's math. Maxing out retirement before using a 529 saves more money for both retirement and college. If you disagree with the math, it's fine to argue that.

We are saving for our children's college by maxing out retirement before a 529 because the math shows that maximizes the amount we can help pay for them. This is also the lowest risk because we are not guaranteed to be at a high HHI when they go to college. This is not being pessimistic, it's managing risk.

Additional, has anyone considered the children's POV? As college graduates, we are both funding retirement for both sets of parents. Given the choice, I would 100% have preferred our parents fund their own retirement before college. College is nominally 4 years. Retirement is decades.
I'll argue the math in my situation. I have a negative tax liability and receive a 50% credit on 529 contributions. There's a lot of moving parts for low income folks and lumping us in with the "less than 150K/year" does not always work. Like, the maxing all tax preferred accounts before putting money in a 529. Between 401K, Roth and HSA I'd have to save like 40K when I gross about 50K. I don't max, but I save over 50% of my income for retirement (7K Roth, $7100 HSA and 15-17K or so 401K...I don't think my kids will be taking care of me in my old age. :happy
I don't see how the math can show funding a 529 is better than tax preferred. But I'm no expert. You may be the rare exception with a 50% credit on a 529. If you think the lumping of those making under $150k "does not always work," I'd encourage you to show the math and educate us.

I knew I had to help my parents financially, eventually. I just didn't think I would be taking care of my parents this early and this much. :annoyed I wonder if they thought the same as you? With the amount we've already saved, I am 100% sure my children will not have to take care of our retirement. I am, however, cognizant that I am not clairvoyant. :twisted:
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Harry Livermore
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Re: Should We Ever Save for Children's College?

Post by Harry Livermore »

Starfish wrote: Fri Oct 09, 2020 3:33 pm
It seem to me that this is the only instance when an adult is officially judged by their parents income or savings.
It's so weird, isn't it?
It's like, if an 18 year old walked into a Honda dealership and said to the salesguy, "hey, I like that Accord... how much is it?" and he replied, "OK, I need to you fill out this lengthy questionnaire in which you need to tell me how much your parents make, what the value of their investments are, whether they own any real estate besides their primary home, what the highest degree they have achieved is, and if you are the first in your family to own an Accord. After you fill this in, I can give you an answer about how much it costs"
I think it's a little overboard. But it's their game, I just play it...
Cheers
trueblueky
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Re: Should We Ever Save for Children's College?

Post by trueblueky »

Harry Livermore wrote: Sat Oct 10, 2020 4:24 pm
Starfish wrote: Fri Oct 09, 2020 3:33 pm
It seem to me that this is the only instance when an adult is officially judged by their parents income or savings.
It's so weird, isn't it?
It's like, if an 18 year old walked into a Honda dealership and said to the salesguy, "hey, I like that Accord... how much is it?" and he replied, "OK, I need to you fill out this lengthy questionnaire in which you need to tell me how much your parents make, what the value of their investments are, whether they own any real estate besides their primary home, what the highest degree they have achieved is, and if you are the first in your family to own an Accord. After you fill this in, I can give you an answer about how much it costs"
I think it's a little overboard. But it's their game, I just play it...
Cheers
You can always pay sticker price.
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