Paying for [ivy league school]

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Topic Author
iCare
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Paying for [ivy league school]

Post by iCare »

Our son has been accepted into an Ivy League school. The expenses are estimated to be $80,000 per year, with an additional 4% inflation each year. We saved up $100,000 in his 529 plan over the last couple of years. I had invested his money in a conservative portfolio, which unfortunately lost around 6% last year. He may also qualify for a loan of $15,000 per year. To cover the remaining costs, we will need to pay approximately $3,750 per month from my after-tax paycheck for the next four years.

Would it be wise to invest his 529 plan money at this time or to continue making contributions to a conservative fund? Even conservative portfolios lost money last year. I am willing to take risks after my bad performance last year.

Any ideas to improve the investment plan for paying for his college?

Are there any ways to save on taxes? Paying after taxes is a significant burden.

I am puzzled about my old impression that NOBODY pays the full fee at IVY. Am I the only one paying to subsidize others?

disclaimers:
1) all $$ figures are rounded for the sake of simplification above.
2) The decision has been reached to go to ivy, so please avoid rants on value for money colleges.
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TomatoTomahto
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Re: Paying for IVY

Post by TomatoTomahto »

The generosity of various Ivy schools vary. Princeton is widely regarded as the most generous.

Many people pay full freight for Ivies and similar schools. You are not alone. Tbh, although it might be difficult at times, in my experience parents have not been asked to pay more than they can afford, just more than they want to spend. Usually, it means slowing down on retirement savings.

Fwiw, people think I’m crazy for smiling as I sent in the tuition. It was the highest ROI; off the charts.

If you want useful advice, you will have to tell us more about your situation.

Congrats to your student.
I get the FI part but not the RE part of FIRE.
SchruteB&B
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Re: Paying for IVY

Post by SchruteB&B »

iCare wrote: Mon Jan 23, 2023 12:56 pm Our son has been accepted into an Ivy League school. The expenses are estimated to be $80,000 per year, with an additional 4% inflation each year. We saved up $100,000 in his 529 plan over the last couple of years. I had invested his money in a conservative portfolio, which unfortunately lost around 6% last year. He may also qualify for a loan of $15,000 per year. To cover the remaining costs, we will need to pay approximately $3,750 per month from my after-tax paycheck for the next four years.

Would it be wise to invest his 529 plan money at this time or to continue making contributions to a conservative fund? Even conservative portfolios lost money last year. I am willing to take risks after my bad performance last year.

Any ideas to improve the investment plan for paying for his college?

Are there any ways to save on taxes? Paying after taxes is a significant burden.

I am puzzled about my old impression that NOBODY pays the full fee at IVY. Am I the only one paying to subsidize others?

disclaimers:
1) all $$ figures are rounded for the sake of simplification above.
2) The decision has been reached to go to ivy, so please avoid rants on value for money colleges.
Approximately 50-60% of students at Ivies are typically full pay. For example, see Harvard’s Common Data set section H2 where you see there are 1949 freshman in 2021 and only 797 of them were awarded any type of financial aid. https://oir.harvard.edu/files/huoir/fil ... 1-2022.pdf

The most conservative portfolio available in many 529 plans is an FDIC savings account and/or money market fund. While those funds lost to inflation, they did not nominally lose value like a bond fund. All the money I am planning to use for tuition in the next several years is in one of those sort of funds.
NYGiantsFan
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Re: Paying for IVY

Post by NYGiantsFan »

iCare wrote: Mon Jan 23, 2023 12:56 pm
Any ideas to improve the investment plan for paying for his college?

Are there any ways to save on taxes? Paying after taxes is a significant burden.

I am puzzled about my old impression that NOBODY pays the full fee at IVY. Am I the only one paying to subsidize others?
It is late to improve investment plan at this stage. Most of investment should be in cash (cash-like) at this moment as first bill of 40k will come due in July (even though semester starts in Sept).
Most of students pay full at IVY. Admission is competitive and schools don't have any motivation to offer financial aid/scholarship to anyone when admission rate is < 10% .
You are not counting inflation in the cost. Current 80k cost will be closure to 90-95k by the senior year.
For First year, dorm and meal plan may be mandatory. Once student moves to off-campus, you may be able to save little bit on housing/food cost.
LeftCoastIV
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Re: Paying for IVY

Post by LeftCoastIV »

Congratulations on your son's accomplishments thus far.

Just to clarify, you submitted the FAFSA and received no financial aid, correct?

Regarding your question on 529 spend timing, since your 529 will be exhausted after 1 1/2 years of expenses, I would personally let it sit until junior or senior year in the hopes of aiding more untaxed gains. That is of course a bet on a market recovery, which cannot be predicted.

Another speculative bet would be to add a lump sum into the 529 now (subject to gift tax restrictions), in the hopes of generating additional non-taxable gains for his later college years.

Do you have any unrealized losses in a taxable account that you could use to offset selling taxable investments to generate cash for college expenses without creating a tax bill?
DoubleComma
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Re: Paying for IVY

Post by DoubleComma »

Is an $80k/year Ivy the only option?

IMO a degree from an Ivy is impressive only if its with an appropriate major that will have the ROI from an IVY education and will benefit from the networking that comes from that school. Assuming that is the case, I would start dumping cash into a HY saving account and hold off on using the 529 in hopes of some recovery in the market for the latter years of expense. Its risk there will be some recovery, but since you will need money quickly I think the HY savings is you best option right now.
FinanceGeek
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Re: Paying for IVY

Post by FinanceGeek »

If your state allows income tax deduction for 529 contributions, you can keep contributing to 529 and then paying IVY with those funds. At least you get a state tax break on your full freight...even if the 529 itself is invested in a MMF.
livesoft
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Re: Paying for IVY

Post by livesoft »

The private university that one of my children attended had a simple no-interest monthly payment plan. That is, one didn't need $40,000 at the beginning of every semester in order to pay for the university. A $4,000 monthly bill was just another credit card bill as far as we were concerned.

We also had money in a 529 plan that was invested at the time in bonds and cash. Specifically, we used the Vanguard Income option of the Ohio collegeadvantage.com plan. We didn't need to go more conservative since it takes a while for the student to get a degree. Ours took 3 years, so saved a year's worth of expenses. In other words, don't bother going all cash.

And since you probably have a taxable account as well I expect you have some stock funds that you could use to pay expenses. It turned out for us that stock markets took off in 2010, so we had gains that paid for many years of college. We don't know what the next 4 years will hold, but coming off some of the worst years I am optimistic.
Last edited by livesoft on Mon Jan 23, 2023 1:35 pm, edited 1 time in total.
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NiceUnparticularMan
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Re: Paying for IVY

Post by NiceUnparticularMan »

We won't qualify for needs-based assistance anywhere. Any parents with a lot of savings by the time their kids go to college likely won't. There are worse problems . . . .

Anyway, our 529 strategy uses PA's Guaranteed Savings Plan (a sort of flexible pre-paid tuition plan) over the final few years and into the payment period for just this reason. There is really no such thing as a risk-free marketed investment that will be guaranteed to keep up with college tuition costs.

Barring that, something like a ST TIPS fund might be the closest marketed investment fund if you are about to start paying for four years of college next year. You'd want to ignore one-year losses and focus on total cash flows as you drew it down over the full spread of years.

Finally, you could also opt for an FDIC account, or a stable value fund if that is an option. That will minimize the risk of annual losses, although also be unlikely to actually keep up with (or even be particularly close to) college tuition inflation. Which over 4+ years can be non-trivial.
Last edited by NiceUnparticularMan on Mon Jan 23, 2023 2:19 pm, edited 2 times in total.
psteinx
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Re: Paying for IVY

Post by psteinx »

iCare wrote: Mon Jan 23, 2023 12:56 pm I am puzzled about my old impression that NOBODY pays the full fee at IVY. Am I the only one paying to subsidize others?
The level of parental income to which various Ivies are free or greatly reduced in cost is high RELATIVE to the average American household, but LOW(-ish) relative to the average accepted Ivy applicant. Thus, Ivies are seemingly cheap, but moreso to families whose kids seldom get accepted.

As for the merits of investing aggressively/conservatively with a 529 - in this given case (college cost much greater than 529 value, parents can/will bankroll beyond that), I would invest the 529 roughly in line with the aggressiveness of your overall portfolio. If you're, say, 80/20 in general, I see no reason that the 529 in particular should be conservatively invested.
NiceUnparticularMan
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Re: Paying for IVY

Post by NiceUnparticularMan »

FinanceGeek wrote: Mon Jan 23, 2023 1:30 pm If your state allows income tax deduction for 529 contributions, you can keep contributing to 529 and then paying IVY with those funds. At least you get a state tax break on your full freight...even if the 529 itself is invested in a MMF.
Yeah, if we end up "underfunded" in our 529, we plan to keep "flowing" our contributions through the PA GSP up to the gift tax exemption limits or until we are fully funded. There are some timing issues with how that would work, but basically since we get a state tax break, and the PA GSP is really better than anything we could do with savings for this purpose in a taxable account, there is no particular reason not to.
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Johnsson
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Re: Paying for IVY

Post by Johnsson »

I'm in the... is this the only option camp.

IMO, for a truly motivated student the benefit of an IVY is marginal. A student can gain an equivalent education with often greater opportunity at a good state school. AND often times state schools will give incentives to students who have excelled to get them to their campus... at a MUCH lower cost.

OTOH, for a not so motivated student, the IVY may be best... Having the IVY on the resume can give a step up to what could be an otherwise mediocre student.
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Topic Author
iCare
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Re: Paying for IVY

Post by iCare »

TomatoTomahto wrote: Mon Jan 23, 2023 1:04 pm

If you want useful advice, you will have to tell us more about your situation.

Congrats to your student.
Thanks! We are very thrilled despite the sticker shock. He is off to the one which is very selective and is considered the least generous of all.

What other situation should I describe that could help with the advice?

Let me guess and put some info (let me know if additional info will be needed):

Age = early 50s. I work full-time. Semi-stable job, every few years have been dealing with stress about job changes. Wife works to help with bills. Have a small investment rental condo that generates positive cash flows.

taxes: currently (adding all incomes)-
35% Federal tax, 9% State tax + Other overheads.

So paying $80K per year for college is almost like paying $160K of my salary!
CletusCaddy
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Re: Paying for IVY

Post by CletusCaddy »

DoubleComma wrote: Mon Jan 23, 2023 1:27 pm Is an $80k/year Ivy the only option?

IMO a degree from an Ivy is impressive only if its with an appropriate major that will have the ROI from an IVY education and will benefit from the networking that comes from that school. Assuming that is the case, I would start dumping cash into a HY saving account and hold off on using the 529 in hopes of some recovery in the market for the latter years of expense. Its risk there will be some recovery, but since you will need money quickly I think the HY savings is you best option right now.
Any major from an Ivy has the potential to have high ROI, indeed it is only at the top schools where that is the case.

Lots of Ivy league philosophy majors making bank as lawyers, bankers, and management consultants.

Hardly any from Cal State Fullerton in the same position.
Topic Author
iCare
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Re: Paying for IVY

Post by iCare »

SchruteB&B wrote: Mon Jan 23, 2023 1:17 pm


The most conservative portfolio available in many 529 plans is an FDIC savings account and/or money market fund. While those funds lost to inflation, they did not nominally lose value like a bond fund. All the money I am planning to use for tuition in the next several years is in one of those sort of funds.
lost 5%
https://investor.vanguard.com/accounts- ... mance-fees

lost 14%
https://investor.vanguard.com/accounts- ... mance-fees

Didn't know that kids going to college year 2-6 need everything in savings accounts. Lots of smart people like you are after all smart.
aristotelian
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Re: Paying for IVY

Post by aristotelian »

Do you have any other kids who might have a longer investment timeframe?

Aside from last year, I would assume the investments have gone up over time, so you are still coming out ahead vs cash or taxable investing. I would go ahead and use the 529 funds as intended to ensure you don't end up with excess funds in the account subject to penalty.

You might backload the withdrawals so that the majority of the funds have time to keep growing, something like 20k/20k/25k/35k.
Topic Author
iCare
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Re: Paying for IVY

Post by iCare »

NYGiantsFan wrote: Mon Jan 23, 2023 1:25 pm
It is late to improve investment plan at this stage. Most of investment should be in cash (cash-like) at this moment as first bill of 40k will come due in July (even though semester starts in Sept).


For First year, dorm and meal plan may be mandatory. Once student moves to off-campus, you may be able to save little bit on housing/food cost.
Thanks for pointing that tuition will be due in July instead of Sept. Let me confirm it as well.

Regarding Dorms = they require all 4 years dorm. Moreover off-campus seems more expensive housing than dorms?
Topic Author
iCare
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Re: Paying for IVY

Post by iCare »

LeftCoastIV wrote: Mon Jan 23, 2023 1:26 pm

Do you have any unrealized losses in a taxable account that you could use to offset selling taxable investments to generate cash for college expenses without creating a tax bill?
Thanks - this seems like a good idea to consider. I may be able to find some unrealized losses in taxable account.
stoptothink
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Re: Paying for IVY

Post by stoptothink »

iCare wrote: Mon Jan 23, 2023 1:53 pm So paying $80K per year for college is almost like paying $160K of my salary!
Without getting into whether or not it is "worth it", if this significantly impacts the overall financial situation of your family, you should absolutely have an open discussion about the possibility of other options or how they may be able to contribute more on their own. Only you can decide whether the cost is doable.
Pdxnative
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Re: Paying for IVY

Post by Pdxnative »

Congrats on the acceptance. It takes a special student to gain acceptance to those schools, and most find places where they can flourish academically and eventually professionally. Hopefully you’ve had time to reflect and celebrate despite the financial pressure.

Personally I wouldn’t take extra risk in the 529. The time frame is pretty short. Maybe you get lucky, but what if you don’t? Only you and your budget can answer that.

If you’re getting tax benefits from 539 contributions then, as others mention, you can keep cycling money through the 529 for that benefit.

A couple random thoughts:

-It’s a small thing and more of a mindset issue than financial, but I wouldn’t phrase it as you subsidizing anyone else. At most of those schools the endowments are subsidizing everyone to varying degrees. Generosity varies among the schools and so does the share of students receiving aid, but just over half of students receive need-based aid. Those that don’t are generally able to pay the costs and think it’s a worthwhile investment though they might prefer to pay less. Keep in mind your situation might change if you are near the threshold for FA and have additional kids entering college or your income changes. If you think you should be getting more FA based on the NPC, give the FA office a call. Mistakes do happen.

-the listed COA does often contain a bit of fluff in the personal expenses category. You might be able to knock a few thousand off between cutting those expenses, getting good deals on airline tickets, etc. You’ll also save some money at home—fewer groceries, etc.—with your child away at college. This might help the budget a bit.

-depending on academic interests it’s reasonable to expect good to unreal summer earnings from students at these schools. Netting 5k/summer on average is a reasonable expectation, though extremely conservative for some fields where earnings of 20k+/summer aren’t uncommon, especially in the last few years. (The numbers can get a lot bigger than that but that’s less typical and depends a lot on the student and the field).

-personally, given the benefits, I don’t see borrowing as a problem for families in your situation. You’ve done well to save 1/3 up front.

Good luck and enjoy the journey!
NiceUnparticularMan
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Re: Paying for IVY

Post by NiceUnparticularMan »

psteinx wrote: Mon Jan 23, 2023 1:32 pm would invest the 529 roughly in line with the aggressiveness of your overall portfolio. If you're, say, 80/20 in general, I see no reason that the 529 in particular should be conservatively invested.
To me, the trickiness is that college payments are large enough that they seriously change our expected spending in those particular years.

If you had your kids sufficiently early and still have a lot of expected accumulation years left after the kids are expected to be done with college, then this is not necessarily an issue.

However, if you end up planning for college payments around when you might be retiring (including somewhat before as well as after), it can make a significant difference in terms of what you should be doing with your savings around then. Which is what has happened with us.

Of course you can still think of your savings and spending holistically, but then part of the point of 529s is you get a specific tax benefit from spending them on certain expenditures.

So to me, it made sense to basically use 529s in the final years to lock down what we would have to spend in a tax-advantaged way, then do more "normal" retirement planning with our other savings.
afan
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Re: Paying for IVY

Post by afan »

I do not see the logic in investing aggressively funds that will be needed as early as this summer. I would follow the conventional wisdom of trying to make sure that money will be available when the bills come due.

You do not provide information about your overall financial picture. If you are capable of cash flowing the amount or doing a combination of cash flow and asset liquidation, then one could argue that the 529 is just another asset. One that you need to use for tuition to recognize the tax advantages but otherwise to be treated as anything else.

If you have to pull from investments to close the gap, you could invest them in line with the rest of your assets.

Since the Ivy did not offer any scholarship money, you presumably have a relatively high income. If you truly cannot afford the tuition, then you need a plan of how to cover it.
If you can just barely pay it, then I would be conservative with the college money. No time to earn it back if the market goes down further.

If you can afford to pay the tuition but it is just a lot of money, personally, I would treat the money I know I am going to spend on tuition conservatively. The aggressiveness of the rest of the portfolio would depend, as always on the rest of your financial picture.

Of course, we have no idea whether borrowing would be a good option.
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HereToLearn
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Re: Paying for IVY

Post by HereToLearn »

iCare wrote: Mon Jan 23, 2023 2:04 pm
NYGiantsFan wrote: Mon Jan 23, 2023 1:25 pm
It is late to improve investment plan at this stage. Most of investment should be in cash (cash-like) at this moment as first bill of 40k will come due in July (even though semester starts in Sept).


For First year, dorm and meal plan may be mandatory. Once student moves to off-campus, you may be able to save little bit on housing/food cost.
Thanks for pointing that tuition will be due in July instead of Sept. Let me confirm it as well.

Regarding Dorms = they require all 4 years dorm. Moreover off-campus seems more expensive housing than dorms?
I had assumed Cornell, based on your earlier comment "He is off to the one which is very selective and is considered the least generous of all" since Cornell's FA is often not as generous. However, Cornell does not require four years of campus housing. Off-campus living can cost more or less than on-campus depending on amenities and distance to campus. Off-campus food is often less expensive than on-campus dining, so you would be able to save there.

Many schools provide free housing to Residential Advisors (different title across schools, but an upperclassman who lives in the dorm in a support position for the first year students). These positions can be selective so no guarantee, but this could held reduce your child's total costs. Your child may also be able to work as a Teaching Assistant and earn money during the school year. I agree with Pdxnative about the possibility of summer earnings. Less likely after the first year but more likely thereafter. Obviously varies by industry.

In terms of the rate of increase, I saw an average of 3.75%/year during the seven years I was paying for my children to attend two different Ivies.

Congrats and enjoy the ride!
MarkRoulo
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Re: Paying for IVY

Post by MarkRoulo »

iCare wrote: Mon Jan 23, 2023 12:56 pm ...

I am puzzled about my old impression that NOBODY pays the full fee at IVY. Am I the only one paying to subsidize others?
...
My boss sent his son to Columbia. He/they paid full price.
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TomatoTomahto
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Re: Paying for IVY

Post by TomatoTomahto »

They are close to impossible to get until the summer after sophomore year, but STEM internships can be incredibly financially rewarding. Non-STEM are usually lower paying.

There are on-campus jobs that are often a gold mine; my son was a TA and had office hours where students seldom came, so he got to do problem sets while being paid. Apropos of that, advise your son to take full advantage of office hours; my son got close to professors and valued the after class time more than lectures.

ETA: The Ivy League is not an acronym, so only the first letter should be capitalized. But, you're a proud parent, so I don't blame you for shouting :beer
I get the FI part but not the RE part of FIRE.
WestCoastPhan
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Re: Paying for IVY

Post by WestCoastPhan »

CletusCaddy wrote: Mon Jan 23, 2023 1:56 pm
DoubleComma wrote: Mon Jan 23, 2023 1:27 pm Is an $80k/year Ivy the only option?

IMO a degree from an Ivy is impressive only if its with an appropriate major that will have the ROI from an IVY education and will benefit from the networking that comes from that school. Assuming that is the case, I would start dumping cash into a HY saving account and hold off on using the 529 in hopes of some recovery in the market for the latter years of expense. Its risk there will be some recovery, but since you will need money quickly I think the HY savings is you best option right now.
Any major from an Ivy has the potential to have high ROI, indeed it is only at the top schools where that is the case.

Lots of Ivy league philosophy majors making bank as lawyers, bankers, and management consultants.

Hardly any from Cal State Fullerton in the same position.
I was going to say the same thing. At the very top schools, study whatever you want. I once heard a state school grad say to an Ivy grad: "The difference is, people assume you're smart. I have to prove that I am." Certainly an Ivy grad can DISPROVE the assumption (I'm sure we've all seen examples) . . . but it's undoubtedly an advantage to start off with that assumption in your favor.
Mainlandjones
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Re: Paying for IVY

Post by Mainlandjones »

Congrats!!!
FinanceGeek wrote: Mon Jan 23, 2023 1:30 pm If your state allows income tax deduction for 529 contributions, you can keep contributing to 529 and then paying IVY with those funds. At least you get a state tax break on your full freight...even if the 529 itself is invested in a MMF.
Another vote for continuing to contribute to the 529 for future tuition payments if you get a state tax deduction. I would use stable fund/MMF. If you want to take on riskier investments, I would do it with your longer term (retirement) funds that have time to recover, not money that you need in a couple years.
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TomatoTomahto
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Re: Paying for IVY

Post by TomatoTomahto »

Mainlandjones wrote: Mon Jan 23, 2023 2:39 pm Congrats!!!
FinanceGeek wrote: Mon Jan 23, 2023 1:30 pm If your state allows income tax deduction for 529 contributions, you can keep contributing to 529 and then paying IVY with those funds. At least you get a state tax break on your full freight...even if the 529 itself is invested in a MMF.
Another vote for continuing to contribute to the 529 for future tuition payments if you get a state tax deduction. I would use stable fund/MMF. If you want to take on riskier investments, I would do it with your longer term (retirement) funds that have time to recover, not money that you need in a couple years.
Yes, although some states are really stingy. Massachusetts, for example, lets us deduct a max of $2000, which at 5% means an additional $100 in our pocket. Still, a dollar is a dollar.

Only MMF for money needed in the next few years, unless you've got it covered elsewhere.
I get the FI part but not the RE part of FIRE.
er999
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Re: Paying for IVY

Post by er999 »

You might look at the private college 529 plan. If you child's school is in there you can pre-pay for the 4th year of college at current rates as you have to buy the tuition 36 months in advance. (http://www.collegewell.com/private-coll ... n-details/) My kids aren't in college yet (age 10 and 12) but I found this when researching 529 and seemed like a good deal to lock in the 4th year tuition rate once they are accepted.
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Wiggums
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Re: Paying for IVY

Post by Wiggums »

Congratulations to you son as well as your family. This is a big accomplishment and shows his dedication to excellence. There is probably little benefit to dumping more money into the 529 unless there is some tax benefit. Depending on your cash flow, why not buy Treasuries as you free up tuition money. Paying tuition each money maybe helpful.

It’s not a good idea to toss money in the market that is needed in the next few years. Think out of the box. For example, selling the condo. I’m not suggesting you do that. Merely saying that you evaluate any options you have and pick the one.
Last edited by Wiggums on Mon Jan 23, 2023 3:07 pm, edited 1 time in total.
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psteinx
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Re: Paying for IVY

Post by psteinx »

Wiggums wrote: Mon Jan 23, 2023 3:00 pm Congratulations to you son as well as your family. This is a big accomplishment and shows his dedication to excellence. There is probably little benefit to dumping more money into the 529 unless there is some tax benefit.
Well, that's the point - the tax benefit(s).

If one has other tax-preferred space (various retirement accounts), then there's an either/or decision (which is best).

But if OP has no remaining tax-preferred space (other than 529s) and is putting cash into regular old taxable accounts, then 529s can still be useful, even with a short time frame to college.

If OP's son matriculates ~Aug '23, then the last tuition payment is probably ca. Jan '27, about 4 years from now. That's still time for the benefits of tax-free growth to matter (potentially).
MMiroir
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Re: Paying for IVY

Post by MMiroir »

Congratulations on the Ivy acceptance. In the Ivy league, the amount of students who get need based financial aid will vary from school to school. Here is a quick list that provides the percent of first year students who received need based aid, as well as the average size of the award.

Columbia - 51% - $67,818
Cornell - 50% - $55,604
Brown - 45% - $59,479
Dartmouth - 47% - $64,588
Harvard - 57% - $62,252
Penn - 49% - $54,954
Princeton - 62% - $61,731
Yale - 52% - $67,473

We were in the same boat several years ago with our oldest getting an Ivy acceptance with no initial award for need based aid. After understanding how financial aid is calculated, shifting funds around, paying out lots of money in tuition, and having a second child attend college at the same time, we were able to negotiate with the FA office and achieved well over a 50% deduction for the last two years of tuition.

The key is understanding how the school calculates FA, and sheltering assets that are considered eligible for tuition payment. For example, if you have a $100,000 in taxable accounts, and a $100,000 mortgage, the $100,000 in the taxable account is eligible to tuition payment. However, if you use that $100,000 to pay off your mortgage, the funds get shifted to home equity, and are no longer eligible for tuition payment.
arcane
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Re: Paying for IVY

Post by arcane »

OP, you are in 35% Federal tax, which means there is NO way to get any "need-based" scholarships from any school.

Without knowing your other finance goals, but 100k 529 balance is just NOT enough for 4 years college. As now, after adding board and room, for 4 years college
  • In state flag public is around 140K
  • Out state public is around 200k to 250k
  • Private is around 280k to 320k
I agree with you that paying taxable cash for it is very pain. Unfortunately, it is kind of late now. 529 is the best tools for family in or above 35% Federal tax bucket. You just need to plan it thoroughly.
MMiroir
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Re: Paying for IVY

Post by MMiroir »

arcane wrote: Mon Jan 23, 2023 3:55 pm OP, you are in 35% Federal tax, which means there is NO way to get any "need-based" scholarships from any school.

Without knowing your other finance goals, but 100k 529 balance is just NOT enough for 4 years college. As now, after adding board and room, for 4 years college
  • In state flag public is around 140K
  • Out state public is around 200k to 250k
  • Private is around 280k to 320k
I agree with you that paying taxable cash for it is very pain. Unfortunately, it is kind of late now. 529 is the best tools for family in or above 35% Federal tax bucket. You just need to plan it thoroughly.
The threshold for the 35% income bracket is $216,000. Based on Harvard's net price calculator, a family with income of $216,000 and $100,000 in assets would get more than $30,000 in need based aid. Need based aid under those circumstances goes away after $280,000 of income.

https://college.harvard.edu/financial-a ... calculator
Topic Author
iCare
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Re: Paying for IVY

Post by iCare »

MMiroir wrote: Mon Jan 23, 2023 4:06 pm
The threshold for the 35% income bracket is $216,000. Based on Harvard's net price calculator, a family with income of $216,000 and $100,000 in assets would get more than $30,000 in need based aid. Need based aid under those circumstances goes away after $280,000 of income.

https://college.harvard.edu/financial-a ... calculator
What is "need-based aid"? Our elder son was offered financial aid but my understanding is that it was a loan with 6% interest rate at that time?
psteinx
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Re: Paying for IVY

Post by psteinx »

MMiroir wrote: Mon Jan 23, 2023 4:06 pm The threshold for the 35% income bracket is $216,000. Based on Harvard's net price calculator, a family with income of $216,000 and $100,000 in assets would get more than $30,000 in need based aid. Need based aid under those circumstances goes away after $280,000 of income.

https://college.harvard.edu/financial-a ... calculator

You're assuming the bottom of the 35% bracket.

And $100K in assets is pretty thin gruel for someone in their early 50s making >$200K/year. Yeah, there are probably a few folks who meet all those criteria, but not so many...
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SmileyFace
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Re: Paying for IVY

Post by SmileyFace »

iCare wrote: Mon Jan 23, 2023 4:11 pm
MMiroir wrote: Mon Jan 23, 2023 4:06 pm
The threshold for the 35% income bracket is $216,000. Based on Harvard's net price calculator, a family with income of $216,000 and $100,000 in assets would get more than $30,000 in need based aid. Need based aid under those circumstances goes away after $280,000 of income.

https://college.harvard.edu/financial-a ... calculator
What is "need-based aid"? Our elder son was offered financial aid but my understanding is that it was a loan with 6% interest rate at that time?
Need based aid would be if you filled out FAFSA and your income was low enough that you are said to "need" aid.
The loan could be either need based (and therefore subsidized) or non-need based (a nonsubsidized loan is generally offered to everyone). Non subsidized loans start sticking you with interest the day you take them out - subsidized loan are interest free during student years (interest accumulation starts after graduation - so a slightly better deal).

And yeah - the whole "no one pays full price" statement is a big myth.
Last edited by SmileyFace on Mon Jan 23, 2023 4:19 pm, edited 2 times in total.
MMiroir
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Re: Paying for IVY

Post by MMiroir »

psteinx wrote: Mon Jan 23, 2023 4:12 pm
MMiroir wrote: Mon Jan 23, 2023 4:06 pm The threshold for the 35% income bracket is $216,000. Based on Harvard's net price calculator, a family with income of $216,000 and $100,000 in assets would get more than $30,000 in need based aid. Need based aid under those circumstances goes away after $280,000 of income.

https://college.harvard.edu/financial-a ... calculator

You're assuming the bottom of the 35% bracket.

And $100K in assets is pretty thin gruel for someone in their early 50s making >$200K/year. Yeah, there are probably a few folks who meet all those criteria, but not so many...
You are assuming that $100K represents all of their assets. They could have a couple million in tax sheltered accounts, and a million in home equity, and the only part that the colleges will consider as assets eligible for tuition payments would be the amount in taxable accounts.
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ray.james
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Re: Paying for IVY

Post by ray.james »

MMiroir wrote: Mon Jan 23, 2023 4:06 pm
arcane wrote: Mon Jan 23, 2023 3:55 pm OP, you are in 35% Federal tax, which means there is NO way to get any "need-based" scholarships from any school.

Without knowing your other finance goals, but 100k 529 balance is just NOT enough for 4 years college. As now, after adding board and room, for 4 years college
  • In state flag public is around 140K
  • Out state public is around 200k to 250k
  • Private is around 280k to 320k
I agree with you that paying taxable cash for it is very pain. Unfortunately, it is kind of late now. 529 is the best tools for family in or above 35% Federal tax bucket. You just need to plan it thoroughly.
The threshold for the 35% income bracket is $216,000. Based on Harvard's net price calculator, a family with income of $216,000 and $100,000 in assets would get more than $30,000 in need based aid. Need based aid under those circumstances goes away after $280,000 of income.

https://college.harvard.edu/financial-a ... calculator
Isn't that for single tax payer? We are talking about colleges, so folks are usually in category married/head of household. For MFJ. 35% starts at 432k
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939
MMiroir
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Re: Paying for IVY

Post by MMiroir »

SmileyFace wrote: Mon Jan 23, 2023 4:17 pm
iCare wrote: Mon Jan 23, 2023 4:11 pm
MMiroir wrote: Mon Jan 23, 2023 4:06 pm
The threshold for the 35% income bracket is $216,000. Based on Harvard's net price calculator, a family with income of $216,000 and $100,000 in assets would get more than $30,000 in need based aid. Need based aid under those circumstances goes away after $280,000 of income.

https://college.harvard.edu/financial-a ... calculator
What is "need-based aid"? Our elder son was offered financial aid but my understanding is that it was a loan with 6% interest rate at that time?
Need based aid would be if you filled out FAFSA and your income was low enough that you are said to "need" aid.
The loan could be either need based (and therefore subsidized) or non-need based (a nonsubsidized loan is generally offered to everyone). Non subsidized loans start sticking you with interest the day you take them out - subsidized loan are interest free during student years (interest accumulation starts after graduation - so a slightly better deal).

And yeah - the whole "no one pays full price" statement is a big myth.
It is not just income that is considered but also assets. Student controlled accounts like 529's are "taxed" at 20 percent, while parent owned assets (outside of home equity and retirement accounts) are "taxed" at a 5.64 percent rate.

The following websites walks through the formula.

https://www.road2college.com/how-fafsa-calculates-efc/

Also, the Ivies have their own internal formulas for calculating aid which can be more or less generous than FAFSA depending on the situation.
psteinx
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Re: Paying for IVY

Post by psteinx »

MMiroir wrote: Mon Jan 23, 2023 4:18 pm You are assuming that $100K represents all of their assets. They could have a couple million in tax sheltered accounts, and a million in home equity, and the only part that the colleges will consider as assets eligible for tuition payments would be the amount in taxable accounts.
This isn't my forte, but my understanding was that the fancy privates (like Ivys) had a more sophisticated financial aid application that was less subject to asset-location games.
MMiroir
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Re: Paying for IVY

Post by MMiroir »

ray.james wrote: Mon Jan 23, 2023 4:21 pm
MMiroir wrote: Mon Jan 23, 2023 4:06 pm
arcane wrote: Mon Jan 23, 2023 3:55 pm OP, you are in 35% Federal tax, which means there is NO way to get any "need-based" scholarships from any school.

Without knowing your other finance goals, but 100k 529 balance is just NOT enough for 4 years college. As now, after adding board and room, for 4 years college
  • In state flag public is around 140K
  • Out state public is around 200k to 250k
  • Private is around 280k to 320k
I agree with you that paying taxable cash for it is very pain. Unfortunately, it is kind of late now. 529 is the best tools for family in or above 35% Federal tax bucket. You just need to plan it thoroughly.
The threshold for the 35% income bracket is $216,000. Based on Harvard's net price calculator, a family with income of $216,000 and $100,000 in assets would get more than $30,000 in need based aid. Need based aid under those circumstances goes away after $280,000 of income.

https://college.harvard.edu/financial-a ... calculator
Isn't that for single tax payer? We are talking about colleges, so folks are usually in category married/head of household. For MFJ. 35% starts at 432k
You are correct.
sureshoe
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Re: Paying for IVY

Post by sureshoe »

NYGiantsFan wrote: Mon Jan 23, 2023 1:25 pm It is late to improve investment plan at this stage. Most of investment should be in cash (cash-like) at this moment as first bill of 40k will come due in July (even though semester starts in Sept).
I was going to post a flavor of this. Trying to make investment changes to hit a goal inside of 1-2 years is a big investing mistake. Let's say Russia tosses a nuke at Ukraine or we default on debt or whatever... the market could go down 30% more in the next year or two.
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SmileyFace
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Re: Paying for IVY

Post by SmileyFace »

MMiroir wrote: Mon Jan 23, 2023 4:26 pm
SmileyFace wrote: Mon Jan 23, 2023 4:17 pm
iCare wrote: Mon Jan 23, 2023 4:11 pm
MMiroir wrote: Mon Jan 23, 2023 4:06 pm
The threshold for the 35% income bracket is $216,000. Based on Harvard's net price calculator, a family with income of $216,000 and $100,000 in assets would get more than $30,000 in need based aid. Need based aid under those circumstances goes away after $280,000 of income.

https://college.harvard.edu/financial-a ... calculator
What is "need-based aid"? Our elder son was offered financial aid but my understanding is that it was a loan with 6% interest rate at that time?
Need based aid would be if you filled out FAFSA and your income was low enough that you are said to "need" aid.
The loan could be either need based (and therefore subsidized) or non-need based (a nonsubsidized loan is generally offered to everyone). Non subsidized loans start sticking you with interest the day you take them out - subsidized loan are interest free during student years (interest accumulation starts after graduation - so a slightly better deal).

And yeah - the whole "no one pays full price" statement is a big myth.
It is not just income that is considered but also assets. Student controlled accounts like 529's are "taxed" at 20 percent, while parent owned assets (outside of home equity and retirement accounts) are "taxed" at a 5.64 percent rate.

The following websites walks through the formula.

https://www.road2college.com/how-fafsa-calculates-efc/

Also, the Ivies have their own internal formulas for calculating aid which can be more or less generous than FAFSA depending on the situation.
Correct- I gave an abbreviated answer (same with loans - watch out for the fees!).
MMiroir
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Re: Paying for IVY

Post by MMiroir »

psteinx wrote: Mon Jan 23, 2023 4:28 pm
MMiroir wrote: Mon Jan 23, 2023 4:18 pm You are assuming that $100K represents all of their assets. They could have a couple million in tax sheltered accounts, and a million in home equity, and the only part that the colleges will consider as assets eligible for tuition payments would be the amount in taxable accounts.
This isn't my forte, but my understanding was that the fancy privates (like Ivys) had a more sophisticated financial aid application that was less subject to asset-location games.
Yes and no. Many schools use the CSS which asks many more questions about other types of assets, and the schools who use the CSS are free to ignore the FAFSA EFC guidelines for their own guidelines. However, if you don't have assets that the CSS is meant to capture, the results will be similar.

Also, this board is full of people who happily give advice on methods to legally minimize or postpone paying income taxes (mega backdoor Roth IRA's anyone?). Changing one's asset allocation to minimize college tuition falls in the same camp. It is not a game, but a perfectly legal and moral strategy to keep more of your own money.
Pdxnative
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Re: Paying for IVY

Post by Pdxnative »

psteinx wrote: Mon Jan 23, 2023 4:28 pm
MMiroir wrote: Mon Jan 23, 2023 4:18 pm You are assuming that $100K represents all of their assets. They could have a couple million in tax sheltered accounts, and a million in home equity, and the only part that the colleges will consider as assets eligible for tuition payments would be the amount in taxable accounts.
This isn't my forte, but my understanding was that the fancy privates (like Ivys) had a more sophisticated financial aid application that was less subject to asset-location games.
You’re correct that they do have their own formulas (and sometimes their own forms) but I don’t think any of them consider retirement accounts, several of them don’t look at primary home equity, and I believe the rest cap the home equity they’ll count. Even the savings allowance (the first X amount of savings they don’t consider) is pretty high at a few of them. But you’re right that they are pretty sophisticated in identifying assets that can be used for college aside from those. For a couple in the 35% bracket and one child in school it’s probably a moot point though because income will likely drive them above the threshold anyway.
snowday2022
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Re: Paying for IVY

Post by snowday2022 »

Lots of people pay full price. Congrats on the acceptance. Honestly I don’t see the problem. You make plenty of money to afford it with cash flow and have decided to pay for it. Money will be tight for a few years and that is the price you will pay for not having saved more ahead of time, and for not saddling your child with debt.
Broken Man 1999
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Re: Paying for IVY

Post by Broken Man 1999 »

HereToLearn wrote: Mon Jan 23, 2023 2:20 pm
iCare wrote: Mon Jan 23, 2023 2:04 pm
NYGiantsFan wrote: Mon Jan 23, 2023 1:25 pm
It is late to improve investment plan at this stage. Most of investment should be in cash (cash-like) at this moment as first bill of 40k will come due in July (even though semester starts in Sept).


For First year, dorm and meal plan may be mandatory. Once student moves to off-campus, you may be able to save little bit on housing/food cost.
Thanks for pointing that tuition will be due in July instead of Sept. Let me confirm it as well.

Regarding Dorms = they require all 4 years dorm. Moreover off-campus seems more expensive housing than dorms?
I had assumed Cornell, based on your earlier comment "He is off to the one which is very selective and is considered the least generous of all" since Cornell's FA is often not as generous. However, Cornell does not require four years of campus housing. Off-campus living can cost more or less than on-campus depending on amenities and distance to campus. Off-campus food is often less expensive than on-campus dining, so you would be able to save there.

Many schools provide free housing to Residential Advisors (different title across schools, but an upperclassman who lives in the dorm in a support position for the first year students). These positions can be selective so no guarantee, but this could held reduce your child's total costs. Your child may also be able to work as a Teaching Assistant and earn money during the school year. I agree with Pdxnative about the possibility of summer earnings. Less likely after the first year but more likely thereafter. Obviously varies by industry.

In terms of the rate of increase, I saw an average of 3.75%/year during the seven years I was paying for my children to attend two different Ivies.

Congrats and enjoy the ride!
A DD received a full tuition scholarship to a small private university, but we had to cover dorm fees. They were eye popping to say the least. She covered her first year with her Florida prepaid plan. Then she was a dorm RA for two years, then her last year of her undergraduate program she was the RA for her sorority house. Saved us a lot of money.

She lived off campus for her graduate degree, splitting an apartment with a sorority sister.

If available, being an RA can save a lot of $$.

Broken Man 1999
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Plano
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Re: Paying for IVY

Post by Plano »

MMiroir wrote: Mon Jan 23, 2023 4:06 pm

The threshold for the 35% income bracket is $216,000. Based on Harvard's net price calculator, a family with income of $216,000 and $100,000 in assets would get more than $30,000 in need based aid. Need based aid under those circumstances goes away after $280,000 of income.

https://college.harvard.edu/financial-a ... calculator
OP is married, so the 35% threshold is $431,900.

OP, I recommend: (1) interest-free monthly payment plans available at most private schools; (2) cash flow the monthly payments, because the longer you leave the money in the 529, the better; (3) if you can, pre-pay for the fourth year using Private College 529, which requires you to hold the certificate for only 36 months https://www.collegewell.com/private-col ... -it-works/; and (4) work-study if available, so the kid has some skin in the game. Congratulations!
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Watty
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Re: Paying for [ivy league school]

Post by Watty »

If you have other kids then also be sure to consider what you will do if one of them also wants to go to an expensive college. Even if there are just older siblings one of them might decide that they want to go to grad school.

Reading way in between the lines it sounds like you think that this particular Ivy League school is worth it for this kid but also consider if there are other siblings they may want to go to expensive colleges too. You might not be able to pay for it or you might not think it would be worth it for them. There are lots of very reasonable situations where it can make sense to not financially treat your kids equally but if you do that then do that very carefully. Families and siblings have become estranged over less.

If you spend an extra quarter of a million dollars for this kid to go to an Ivy then some people would consider changing their will so that other siblings would get more from your estate someday to even things out some. That would in effect make the cost of the Ivy more of an early inheritance.

Now would also be a good time to review your life and disability insurance just in case something happens at a bad time.
iCare wrote: Mon Jan 23, 2023 12:56 pm Any ideas to improve the investment plan for paying for his college?
If this is the your only kid or the last one to leave the house then you might consider downsizing your house if you were planning on doing that someday anyway. Depending on your situation that could free up home equity or reduce your mortgage payment which could make paying for college easier.
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