"Soft" question on student loans

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Greenman72
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"Soft" question on student loans

Post by Greenman72 » Tue May 28, 2019 9:20 am

In the very recent past, I have met with multiple clients who all say some variation of the same thing. The details differ somewhat, but the basic message is the same.

"I bought my daughter a car and financed it. Later my daughter bought a house and she financed it. But when she went to college, I paid 100% of the costs out of my own pocket. I even stopped contributing to 401k and started a side gig so that she could get out of college debt-free. I wanted her to graduate college without the burden of student loan debt."

I fundamentally do not understand this, and I wish that I could change my clients' attitude toward it.

First, why do you feel that your child (who has 25-30 more years than you have to accumulate assets) deserves your money more than you do?

Second, if you feel like they are more entitled to your assets than you are, then why do you feel they are entitled to it now? From a strictly economic point of view, wouldn't you be better off earning 7-8% on your money for the next ten years (until she is old enough to be out of the party stage), and then pay the student loans that are accumulating at 3.4%? Instead of giving several small "gifts" from age 18-22, why not just give her one big "gift" on her 30th birthday?

Third, why is student loan debt somehow more evil or oppressive than automobile debt or mortgage debt? Yes, the state can garnish wages. But cars and houses can also be repossessed. And when you die, student loan debt dies with you. Car debt and mortgage debt lives on.

Fourth, since when is teaching your kids financial discipline a bad thing? Why do you think that forcing your daughter to choose between beer & cigarettes and paying your student loan payment is a bad thing? I was young and stupid once. I had to make that decision. Sometimes I chose poorly. But I learned from it, and now that I'm almost 40, I can definitely see how that hardship helped shape character.

* * *

So my question to the BH community is this: Am I 100% wrong on this? It seems that so many people want to "snowplow parent" their kid through college. I just don't think that's a good idea.

Or are there a lot of parents like me? I just don't notice them because the subject never comes up?

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leeks
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Re: "Soft" question on student loans

Post by leeks » Tue May 28, 2019 9:33 am

Greenman72 wrote:
Tue May 28, 2019 9:20 am
"I bought my daughter a car and financed it. Later my daughter bought a house and she financed it. But when she went to college, I paid 100% of the costs out of my own pocket. I even stopped contributing to 401k and started a side gig so that she could get out of college debt-free. I wanted her to graduate college without the burden of student loan debt."
Many bogleheads would say that the "stopped contributing to 401k" is a potential concern (without knowing full picture for your hypothetical client). Most advocate fully-funding one's own retirement before saving for/paying for child's college. If both can't be done, yes better to let the child take loans (or go to cheaper school) than to risk retirement insecurity.

For those who have the means, the desire to fully fund undergraduate education for their children seems to be prevalent among bogleheads. Although some will say they want their children to have "skin in the game" meaning part-time work or partial loans even if the parents could pay for it all.

Jack FFR1846
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Re: "Soft" question on student loans

Post by Jack FFR1846 » Tue May 28, 2019 9:36 am

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smitcat
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Re: "Soft" question on student loans

Post by smitcat » Tue May 28, 2019 9:43 am

"First, why do you feel that your child (who has 25-30 more years than you have to accumulate assets) deserves your money more than you do?"
We can currently save at 20 - 25X the rate that our daughter can.

"Second, if you feel like they are more entitled to your assets than you are, then why do you feel they are entitled to it now?"
It has allowed her to max out her Roth savings during HS and college years.

"Third, why is student loan debt somehow more evil or oppressive than automobile debt or mortgage debt? "
The student loans were at a low % (3.4) and did not accrue interest until 9 month after graduating. She does not have a loan for a car or home.

"Fourth, since when is teaching your kids financial discipline a bad thing? Why do you think that forcing your daughter to choose between beer & cigarettes and paying your student loan payment is a bad thing?"
We do not see a decision here that is binary. In our case financial teaching and discipline are/were taught while supplying most funds for College. The savings that occurred in her name were mostly her doing by having multiple jobs and a fairly good plan. Since she does not smoke and rarely drinks the 'lost' expenses typically go to travel and running marathons.
YMMV

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FlyAF
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Re: "Soft" question on student loans

Post by FlyAF » Tue May 28, 2019 9:45 am

People are loco, that's all there is to it. Just read threads on this site about how much money people are willing to spend on college for their kids (100k+), it's absolute insanity. I went to a great school, less than a decade ago, for under 40k.

I honestly think it's an ego thing. The more it costs me, the better it must be.

stoptothink
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Re: "Soft" question on student loans

Post by stoptothink » Tue May 28, 2019 9:46 am

This has been rehashed, in countless ways, a million times on this board. My wife and I, and all 6 of my siblings, strongly believe that the financial responsibility placed upon us as young adults (combined, we received $0 in parental assistance for college) was maybe the single greatest learning experience of our lives. And all but 2 of us got through it with no or minimal debt. That being said, we are fortunate enough to not have to make decisions about whether to continue maxing retirement contributions or paying the mortgage down early or assisting the kids with school, with have the resources to cover it all. Our kids, 7 and 4, have about 1/2 the amount in 529s to cover 4yrs of tuition at the local U (at current rates), and we have no issues continuing to contribute up to state deduction limits. I don't think we are going to tell our kids college is covered until they start though, I don't want to set that expectation.

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bligh
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Re: "Soft" question on student loans

Post by bligh » Tue May 28, 2019 9:46 am

In my case I plan to pay for my kids university because I can afford to do both.

One difference between a car loan and mortgage vs student loans is that in my mind the other two are optional. At the very least the costs are far more under our control. A university degree is no guarantee of financial success in life, but lack of one greatly stacks the odds against you. My kid didn’t ask to be born, I brought it into this world, the least I can do is help set it up on a path where the odds aren’t pointing to a life full of toil and struggle.

I do agree though. Like all debt, if you can borrow at a rate that is lower than the expected returns on your investment, it makes sense to do it.

I also feel that the assistance I provide will not be a blank check. If they want to pursue a non economically rewarding degree, or pay full freight at a private university, then yes I will pull back on the reins there. In those types of situations I will expect them to bear part or all of the cost of their decisions.
Last edited by bligh on Tue May 28, 2019 9:51 am, edited 1 time in total.

stoptothink
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Re: "Soft" question on student loans

Post by stoptothink » Tue May 28, 2019 9:47 am

FlyAF wrote:
Tue May 28, 2019 9:45 am
I honestly think it's an ego thing. The more it costs me, the better it must be.
I also think this has a lot to do with it.

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teen persuasion
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Re: "Soft" question on student loans

Post by teen persuasion » Tue May 28, 2019 9:57 am

I did the math - we were better off putting as much as possible into retirement accounts while the kids are filing FAFSA. Reducing our AGI allowed us to be eligible to skip the asset tests (until this year), reducing our EFC, and sometimes were eligible for auto EFC = $0 (until the target AGI was retroactively dropped $9k), thus increasing their aid.

They don't have hundreds of thousands in loans, under $30k. DD1 paid hers off in 3 or 4 years. DS2 is working for Americorps for a year, and should be eligible for a chunk of loan forgiveness when he completes the year.

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Greenman72
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Re: "Soft" question on student loans

Post by Greenman72 » Tue May 28, 2019 9:58 am

bligh wrote:
Tue May 28, 2019 9:46 am
In my case I plan to pay for my kids university because I can afford to do both.
For the vast majority of Americans, especially the financially illiterate ones, they'll be lucky if they can do either one.

And please don't focus on the specifics of the example. It's just an anecdote that represents the mentality of many of my clients--most of which can't do both.

Dottie57
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Re: "Soft" question on student loans

Post by Dottie57 » Tue May 28, 2019 9:59 am

I think it also has to do with the cost of college vastly outstripping inflation. My parents paid for my education with current cash flow ( tuition, room and board). Comparing a parents costs to today’s costs .... well in my time students could work full time in the summer and have money for tuition and books for the next year ( state university).

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bligh
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Re: "Soft" question on student loans

Post by bligh » Tue May 28, 2019 10:20 am

Greenman72 wrote:
Tue May 28, 2019 9:58 am
bligh wrote:
Tue May 28, 2019 9:46 am
In my case I plan to pay for my kids university because I can afford to do both.
For the vast majority of Americans, especially the financially illiterate ones, they'll be lucky if they can do either one.

And please don't focus on the specifics of the example. It's just an anecdote that represents the mentality of many of my clients--most of which can't do both.
In that case we are on the same page. If I had to pick between them, then yes, I would definitely focus on my retirement savings for all the reasons you stated.

Having said that, there are some cultures where the expectations between generations are different, especially among immigrants. The first generation pours their (sometimes limited) resources into educating and "setting up" the second generation. The wealthier/higher income second generation returns the favor and supports the prior generation in their old age. I'm not saying if it is better or worse, just that it is also an approach I have seen.

adamthesmythe
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Re: "Soft" question on student loans

Post by adamthesmythe » Tue May 28, 2019 10:20 am

This decision partly depends on the value parents give to giving children a good start. An advisor should realize this depends on many things, including cultural background.

My own opinion, as a non-parent, is that parents should get their children an undergraduate education if they can reasonably afford it.

deltaneutral83
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Re: "Soft" question on student loans

Post by deltaneutral83 » Tue May 28, 2019 10:57 am

adamthesmythe wrote:
Tue May 28, 2019 10:20 am
This decision partly depends on the value parents give to giving children a good start. An advisor should realize this depends on many things, including cultural background.

My own opinion, as a non-parent, is that parents should get their children an undergraduate education if they can reasonably afford it.
While more expensive than in the past, a 4 year degree at a state supported institution is not back breaking and gets you 85-90% of the undergraduate benefits that are present in society. In state tuition is much more feasible (and still a bargain down south) in different parts of the country but a kid working the summers and maybe even part time during the school year and having 2/3 roommates pretty much reduces the disaster that so many face today from student loan debt. Anything parents contribute is gravy. There just isn't much reason for a kid to be more than $20k in debt (down south at least) from undergraduate tuition. If you went to a private school and have $150k from undergraduate you're going to have had to justify it with some type of promised income (which I cannot think of) upon graduation to support it or you will have torpedo'd your first decade plus of your adult financial life.

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NYCPete
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Re: "Soft" question on student loans

Post by NYCPete » Tue May 28, 2019 11:01 am

Greenman72 wrote:
Tue May 28, 2019 9:20 am

Third, why is student loan debt somehow more evil or oppressive than automobile debt or mortgage debt? Yes, the state can garnish wages. But cars and houses can also be repossessed. And when you die, student loan debt dies with you. Car debt and mortgage debt lives on.
For me, you've mostly answered your own question here. You literally have to die to get out of paying it if you can't afford it. One can't get out from under student loan debt in any other way. It's not bankrupt-able.

Here's what I've said on this subject in the past. I still feel it's true today:
Here's what a student loan really is: debt that, if you can't afford to pay it, will never go away unless you die, can't be bankrupted, can't be refinanced (as of a recent law change), and lenders will never, ever do an "offer in compromise" or similar negotiated deal and accept a reduced amount upfront to wipe away the debt (something even the IRS does if they know someone can't afford to pay back taxes). Think about that last part for a moment. Even the IRS is more forgiving than student loans... :shock:
Reasonable people can have reasonable disagreements on how parents should teach their children about finances. But student loan debt is definitely not the same as a mortgage or car loan.

Best,
Peter
To the extent that a fool knows his foolishness, | He may be deemed wise | A fool who considers himself wise | Is indeed a fool. | | Buddha

Lee_WSP
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Re: "Soft" question on student loans

Post by Lee_WSP » Tue May 28, 2019 11:08 am

While I don't think everyone should get to go to college, I don't think the opportunity should burden students with crippling debt for life either.

I agree with you on 1-3, but I don't think the question of taking on student loans teaches anyone a good lesson. I mean what's the alternative. Okay sweetie, take out these loans or you don't get to go to college? What type of lesson is that? There's no real choice involved. And yes, sure, in theory they could go get a bunch of scholarships, but if everyone did that, that money would dry up real quick.

It's a [bad - moderator prudent] choice either way.

cherijoh
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Re: "Soft" question on student loans

Post by cherijoh » Tue May 28, 2019 11:47 am

My parents basically told me they could afford to pay for my college at the state university, but if I wanted to go elsewhere I would need to get scholarships or loans. I went to the state school. I didn't work at a W-2 job in HS (just babysitting) but I did have summer jobs from my freshman year in college onward. I also had part-time jobs at college after my first semester. My younger brother pretty much had the same deal. We both graduated with degrees in STEM subjects and had no problems finding a job. I know this wasn't the case for some of my HS friends who had gone to more prestigious universities but didn't consider whether their choice of major led to viable employment opportunities.

I don't have kids but I believe I would have taken the same approach as my parents did - offer support at the level I could comfortably afford. But my friends with kids have definitely gone above and beyond that. One friend's daughter got a degree in English at a second tier university in England. She didn't do a semester abroad, she did the whole program! It is unlikely that she will ever get a decent-paying job related to her degree. Their son is getting a degree that should lead to a good salary but he's studying at an expensive private university because they have a niche program that he wanted. He could have gotten a similar degree (but without a handful of specialty classes) at a state university and likely would have qualified for merit scholarships. Based on what they have said, they are covering both kids full freight although their son may have qualified for some financial aid. They also send their kids to private school for middle and high school, which may explain why the state university wasn't "good enough" for either child.

Another friend continued working to put her eldest daughter through vet school. The daughter married as soon as she graduated, started a family and became a SAHM after the first child (she's up to 4 or 5). Somehow I think if these kids had some skin in the game they might have made different decisions. But they got what they wanted and didn't get stuck with the price tag.

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bottlecap
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Re: "Soft" question on student loans

Post by bottlecap » Tue May 28, 2019 11:57 am

Please parents want to pay for it because they think it's important and something that benefits their children for life. In that way, it makes perfect sense.

The education situation is unfortunate, but like most things, we have brought in on ourselves. In that sense, maybe the parents should pay...

JT

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Doom&Gloom
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Re: "Soft" question on student loans

Post by Doom&Gloom » Tue May 28, 2019 12:05 pm

Greenman72 wrote:
Tue May 28, 2019 9:20 am
In the very recent past, I have met with multiple clients who all say some variation of the same thing. The details differ somewhat, but the basic message is the same.

"I bought my daughter a car and financed it. Later my daughter bought a house and she financed it. But when she went to college, I paid 100% of the costs out of my own pocket. I even stopped contributing to 401k and started a side gig so that she could get out of college debt-free. I wanted her to graduate college without the burden of student loan debt."

I fundamentally do not understand this, and I wish that I could change my clients' attitude toward it.

First, why do you feel that your child (who has 25-30 more years than you have to accumulate assets) deserves your money more than you do?

Second, if you feel like they are more entitled to your assets than you are, then why do you feel they are entitled to it now? From a strictly economic point of view, wouldn't you be better off earning 7-8% on your money for the next ten years (until she is old enough to be out of the party stage), and then pay the student loans that are accumulating at 3.4%? Instead of giving several small "gifts" from age 18-22, why not just give her one big "gift" on her 30th birthday?

Third, why is student loan debt somehow more evil or oppressive than automobile debt or mortgage debt? Yes, the state can garnish wages. But cars and houses can also be repossessed. And when you die, student loan debt dies with you. Car debt and mortgage debt lives on.

Fourth, since when is teaching your kids financial discipline a bad thing? Why do you think that forcing your daughter to choose between beer & cigarettes and paying your student loan payment is a bad thing? I was young and stupid once. I had to make that decision. Sometimes I chose poorly. But I learned from it, and now that I'm almost 40, I can definitely see how that hardship helped shape character.

* * *

So my question to the BH community is this: Am I 100% wrong on this? It seems that so many people want to "snowplow parent" their kid through college. I just don't think that's a good idea.

Or are there a lot of parents like me? I just don't notice them because the subject never comes up?
I hope this question is put much more softly to your clients than it reads here :happy

DS graduated from college this month with a very low and manageable student loan balance that he fully intends to pay off.

Although I never agreed or hinted that I would do so, I intend to get him started by making payments on his balance myself because:
1) I want to--in large part because he was extremely responsible in college and persevered even though we felt he might not. He did better academically than we expected. He made good choices.
2) He will certainly be able to get off to a better financial start in life.
3) There will be minimal risk of the debt being neglected, intentionally or otherwise, and becoming an issue later.
4) I can afford it without it affecting my life (already retired).

In other words: for very similar reason that I began funding a Roth IRA for him last year--and should have done so earlier.

There is no single correct formula for "financial parenting." Perhaps you are trying to impose your non-financial values upon clients who do not share the same values and that is frustrating you?

NotWhoYouThink
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Re: "Soft" question on student loans

Post by NotWhoYouThink » Tue May 28, 2019 12:08 pm

Posters on this site are consistently negative toward undergraduate student loan debt, for reasons mentioned by NYCPete. You have to die to get out of it, unlike car or home loans which can be discharged in bankruptcy.
Second, if you feel like they are more entitled to your assets than you are, then why do you feel they are entitled to it now? From a strictly economic point of view, wouldn't you be better off earning 7-8% on your money for the next ten years (until she is old enough to be out of the party stage), and then pay the student loans that are accumulating at 3.4%? Instead of giving several small "gifts" from age 18-22, why not just give her one big "gift" on her 30th birthday?
The 3.4% rate is for subsidized student loans, right? The kind where you have to show financial need? Many people who have enough money to pay an investment advisor like you would not qualify for need-based financial aid, even loans. So the student loan would be at the higher rate. And even that would be limited to $5500 for the first year, with the amount increasing for later years.

Also, sometimes parents tell kids to take out the loan themselves, and promise to pay it back after graduation. Then after graduation the parents can't or won't pay back the loans, and the family drama when that happens is epic. Ask me how I know.


You'll find plenty of people, including me, who say if you have the money and want to spend it on education, spend away! If you don't have the money, keep saving for retirement and help your student find other ways to go to college.

What do you say to clients who want to spend on a new house or home addition or Tesla X or expensive travel? Spending instead of saving for retirement (as opposed to spending while also saving for retirement) is the problem, not the target of the spending.

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whodidntante
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Re: "Soft" question on student loans

Post by whodidntante » Tue May 28, 2019 12:09 pm

I have noticed that some parents try to control their offspring's setup, life choices, and experiences. Maybe they pay for college out of fear of losing control.

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Re: "Soft" question on student loans

Post by not4me » Tue May 28, 2019 12:13 pm

Greenman72 wrote:
Tue May 28, 2019 9:20 am

So my question to the BH community is this: Am I 100% wrong on this? It seems that so many people want to "snowplow parent" their kid through college. I just don't think that's a good idea.

Or are there a lot of parents like me? I just don't notice them because the subject never comes up?
And please don't focus on the specifics of the example.
Guess I'm lost on what "this" is! Lots of comments, but I suppose they are directed toward a specific?? Best generality I'd throw out has to do with the teaching of financial discipline. IMO, that teaching will have happened long before time for student loans. They will have seen & watched & know where you stand. If their option is to take on debt to get what you want (not need, but want), is that discipline? Is debt debt? You ask (rhetorically?) if car loans & mortgages are "more evil or oppressive" than student loans...Well aside from extreme adjectives, they are indeed different when you consider whether you are taking on debt for a depreciating asset or a (hopefully) appreciating asset that has some tax advantages. Is understanding that not part of financial discipline?

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Re: "Soft" question on student loans

Post by Lee_WSP » Tue May 28, 2019 12:17 pm

Reading some of the responses: Going back to the OP. Exactly what type of financial situation are these parents in? If they're maxing out their tax preferred retirement accounts and/or saving 10%+ of their income, what exactly is the problem with paying for their children's college?

DaftInvestor
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Re: "Soft" question on student loans

Post by DaftInvestor » Tue May 28, 2019 12:26 pm

Greenman72 wrote:
Tue May 28, 2019 9:20 am
First, why do you feel that your child (who has 25-30 more years than you have to accumulate assets) deserves your money more than you do?
In my case they don't. But I can afford to fund my retirement and put them through school debt-free - so why not do both. I put myself through college - often working two jobs - and walking away with debt that took me years to repay. I am happy I am successful enough not to burden my children the way I was (who are responsible and thankful I am doing so).
Greenman72 wrote:
Tue May 28, 2019 9:20 am
Second, if you feel like they are more entitled to your assets than you are, then why do you feel they are entitled to it now? From a strictly economic point of view, wouldn't you be better off earning 7-8% on your money for the next ten years (until she is old enough to be out of the party stage), and then pay the student loans that are accumulating at 3.4%? Instead of giving several small "gifts" from age 18-22, why not just give her one big "gift" on her 30th birthday?
I can't guarantee the market return will beat the student loan. Also - I couldn't find any student loans at 3.4% - I was seeing rates in the 5-6% range. And then there are fees and more fees on top of the interest payments (which start accruing immediately unless subsidized - which we don't qualify for).
Greenman72 wrote:
Tue May 28, 2019 9:20 am
Third, why is student loan debt somehow more evil or oppressive than automobile debt or mortgage debt? Yes, the state can garnish wages. But cars and houses can also be repossessed. And when you die, student loan debt dies with you. Car debt and mortgage debt lives on.
When my kids entered college I was seeing student loans at 5 - 6% - meanwhile my mortgage was 3.25% and my car loan 0%. Also - without qualifying for subsidized loans - interest starts accumulating immediately (someone above mentioned that it doesn't until 9 months after graduating - that's only if you qualify for subsidized loans). The market is uncertain - there is no certainty that can beat a student loan interest accrual
Greenman72 wrote:
Tue May 28, 2019 9:20 am
Fourth, since when is teaching your kids financial discipline a bad thing? Why do you think that forcing your daughter to choose between beer & cigarettes and paying your student loan payment is a bad thing? I was young and stupid once. I had to make that decision. Sometimes I chose poorly. But I learned from it, and now that I'm almost 40, I can definitely see how that hardship helped shape character.
Strapping someone with debt before they have their first professional job teaches financial discipline? I've never seen such a study. I believe if you educate your kids properly they can learn just as much discipline if they start with $0 versus starting with negative thousands.
Perhaps I should just kick-them-out at 18 altogether and cut them off entirely if hardship is what they need to learn discipline- but I'm not convinced.

* * *
Greenman72 wrote:
Tue May 28, 2019 9:20 am
So my question to the BH community is this: Am I 100% wrong on this? It seems that so many people want to "snowplow parent" their kid through college. I just don't think that's a good idea.

Or are there a lot of parents like me? I just don't notice them because the subject never comes up?
HUH??!!! The subject has come up thousands of times since I've been here (oftentimes in the 529 threads). It oftentimes gets very heated and locked. There are bogleheads that believe in zero funding; partial funding; and full funding. Most of us don't believe in full funding at the peril of retirement savings.

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Greenman72
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Re: "Soft" question on student loans

Post by Greenman72 » Tue May 28, 2019 1:20 pm

NYCPete wrote:
Tue May 28, 2019 11:01 am
Here's what a student loan really is: debt that, if you can't afford to pay it, will never go away unless you die, can't be bankrupted, can't be refinanced (as of a recent law change), and lenders will never, ever do an "offer in compromise" or similar negotiated deal and accept a reduced amount upfront to wipe away the debt (something even the IRS does if they know someone can't afford to pay back taxes). Think about that last part for a moment. Even the IRS is more forgiving than student loans... :shock:
Your assessment is technically correct. But the other alternative is a cash outlay (for education expenses).

A loss (or in this case, an expenditure) of cash never goes away--not even if you die. It can't be refinanced or negotiated.

So what you told me was true--from a certain point of view.

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Re: "Soft" question on student loans

Post by SimonJester » Tue May 28, 2019 1:27 pm

Greenman72 wrote:
Tue May 28, 2019 9:20 am
Third, why is student loan debt somehow more evil or oppressive than automobile debt or mortgage debt? Yes, the state can garnish wages. But cars and houses can also be repossessed. And when you die, student loan debt dies with you. Car debt and mortgage debt lives on.
Im not sure how it will be for other Bogleheads, but my kids were both offered about $4K -$5K in student loans each year vs us the parents were offered $23K each in parent plus loans. PP Loans are the responsibility of the PARENT not the child, and are currently at 7.6%.
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

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NYCPete
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Re: "Soft" question on student loans

Post by NYCPete » Tue May 28, 2019 1:47 pm

Greenman72 wrote:
Tue May 28, 2019 1:20 pm
NYCPete wrote:
Tue May 28, 2019 11:01 am
Here's what a student loan really is: debt that, if you can't afford to pay it, will never go away unless you die, can't be bankrupted, can't be refinanced (as of a recent law change), and lenders will never, ever do an "offer in compromise" or similar negotiated deal and accept a reduced amount upfront to wipe away the debt (something even the IRS does if they know someone can't afford to pay back taxes). Think about that last part for a moment. Even the IRS is more forgiving than student loans... :shock:
Your assessment is technically correct. But the other alternative is a cash outlay (for education expenses).

A loss (or in this case, an expenditure) of cash never goes away--not even if you die. It can't be refinanced or negotiated.

So what you told me was true--from a certain point of view.
I wasn't proposing alternatives to taking on student debt. I was pointing out how comparing student debt to other types of debt is not an apples to apples comparison.

Yes, it is indeed true that if you pay for something, that loss of money/expenditure never goes away. If I pay $100 for a pair of pants, I'll never get that money back, and can't refinance or negotiate after the fact. If I die wearing the aforementioned pants, the $100 I spent on those pants will still be gone. The same is also true for televisions, shirts, Chinese take-out, airline tickets etc. I'm not sure how that changes the analysis of student debt versus a car loan or mortgage.
To the extent that a fool knows his foolishness, | He may be deemed wise | A fool who considers himself wise | Is indeed a fool. | | Buddha

ncbill
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Re: "Soft" question on student loans

Post by ncbill » Tue May 28, 2019 1:48 pm

Greenman72 wrote:
Tue May 28, 2019 9:20 am
In the very recent past, I have met with multiple clients who all say some variation of the same thing. The details differ somewhat, but the basic message is the same.

"I bought my daughter a car and financed it. Later my daughter bought a house and she financed it. But when she went to college, I paid 100% of the costs out of my own pocket. I even stopped contributing to 401k and started a side gig so that she could get out of college debt-free. I wanted her to graduate college without the burden of student loan debt."

I fundamentally do not understand this, and I wish that I could change my clients' attitude toward it.

First, why do you feel that your child (who has 25-30 more years than you have to accumulate assets) deserves your money more than you do?

Second, if you feel like they are more entitled to your assets than you are, then why do you feel they are entitled to it now? From a strictly economic point of view, wouldn't you be better off earning 7-8% on your money for the next ten years (until she is old enough to be out of the party stage), and then pay the student loans that are accumulating at 3.4%? Instead of giving several small "gifts" from age 18-22, why not just give her one big "gift" on her 30th birthday?

Third, why is student loan debt somehow more evil or oppressive than automobile debt or mortgage debt? Yes, the state can garnish wages. But cars and houses can also be repossessed. And when you die, student loan debt dies with you. Car debt and mortgage debt lives on.

Fourth, since when is teaching your kids financial discipline a bad thing? Why do you think that forcing your daughter to choose between beer & cigarettes and paying your student loan payment is a bad thing? I was young and stupid once. I had to make that decision. Sometimes I chose poorly. But I learned from it, and now that I'm almost 40, I can definitely see how that hardship helped shape character.

* * *

So my question to the BH community is this: Am I 100% wrong on this? It seems that so many people want to "snowplow parent" their kid through college. I just don't think that's a good idea.

Or are there a lot of parents like me? I just don't notice them because the subject never comes up?
Not us.

Our financial resources were limited by illness...so we made sure by high school that our kids were playing sports and taking leadership positions so they'd be good candidates for ROTC scholarships, which they all secured for undergrad.

Apart from the above there is so much military money out there for college I don't see a need to carry much student loan debt.

Simply joining the state National Guard will pay for tuition/fees at in-state public schools in many states.

Pointed that out to one poster complaining about the $30,000+/year cost (apparently that was just for tuition/fees) at their kid's state public school.

Bet they're still paying that & complaining about it vs. telling the kid its time to help carry some of the weight.

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Re: "Soft" question on student loans

Post by smitcat » Tue May 28, 2019 2:01 pm

NotWhoYouThink wrote:
Tue May 28, 2019 12:08 pm
Posters on this site are consistently negative toward undergraduate student loan debt, for reasons mentioned by NYCPete. You have to die to get out of it, unlike car or home loans which can be discharged in bankruptcy.
Second, if you feel like they are more entitled to your assets than you are, then why do you feel they are entitled to it now? From a strictly economic point of view, wouldn't you be better off earning 7-8% on your money for the next ten years (until she is old enough to be out of the party stage), and then pay the student loans that are accumulating at 3.4%? Instead of giving several small "gifts" from age 18-22, why not just give her one big "gift" on her 30th birthday?
The 3.4% rate is for subsidized student loans, right? The kind where you have to show financial need? Many people who have enough money to pay an investment advisor like you would not qualify for need-based financial aid, even loans. So the student loan would be at the higher rate. And even that would be limited to $5500 for the first year, with the amount increasing for later years.

Also, sometimes parents tell kids to take out the loan themselves, and promise to pay it back after graduation. Then after graduation the parents can't or won't pay back the loans, and the family drama when that happens is epic. Ask me how I know.


You'll find plenty of people, including me, who say if you have the money and want to spend it on education, spend away! If you don't have the money, keep saving for retirement and help your student find other ways to go to college.

What do you say to clients who want to spend on a new house or home addition or Tesla X or expensive travel? Spending instead of saving for retirement (as opposed to spending while also saving for retirement) is the problem, not the target of the spending.
"The 3.4% rate is for subsidized student loans, right? The kind where you have to show financial need? Many people who have enough money to pay an investment advisor like you would not qualify for need-based financial aid, even loans. So the student loan would be at the higher rate. And even that would be limited to $5500 for the first year, with the amount increasing for later years."

- I am not an investment advisor.
- I am not the OP.
- the subsidized loans were only a fraction of the overall costs
- we were able to qualify for them for a while 8-9 yrs back due to starting a business
- if the loans were a higher % we would have needed to make a logical choice given the rate

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Greenman72
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Re: "Soft" question on student loans

Post by Greenman72 » Tue May 28, 2019 4:49 pm

Doom&Gloom wrote:
Tue May 28, 2019 12:05 pm
There is no single correct formula for "financial parenting." Perhaps you are trying to impose your non-financial values upon clients who do not share the same values and that is frustrating you?
This is possible. But it's less about "values" and more about "fungibility" and behavioral finance.

Are student loans more or less "fungible"?
Are they fundamentally the same as a car loan? Or a mortgage? Or a short fixed-income position?
Does it make sense to borrow at 3.4% (or higher, as you say) if you are long government bonds at 2.4%? And does your answer change if your money is held in a retirement account?

Generally speaking, I see all dollars as the same shade of green. And once you open the floodgates, you cannot tell the water where to go. If you pay for your child's school and the child goes 2,000 miles away to NYU to major in Jazz Guitar, all while drinking, drugging, and fornicating, you can never get that money back.

Knowing that, if I choose to pay for my child's school, I have foregone the use of my money. I have voided any options that I may have had. Whereas, had I held on to it, I could simply have paid off the loan at graduation. (Assuming that he actually graduates.) And as noted, many of these loans do not accrue interest until several months after graduation.

When somebody says, "I paid for my daughter's school because she can only save $100/month, whereas I can save $2,500 per month!!!" That's great! Then pay off her $100/month loan for her after she graduates. Now she has $100/month of cash flow. Or give her $25,000 that will spin off $100/month of cash flow, which she can then use to pay her loan. Or invest $12,000 in some sort of account with a 10% expected annual return, which should give you $100 per month of appreciation/dividends. (That would entail investing in a taxable account. Oh, the horror!!!)

Or "Because I paid for my son's school, he can now save more in a Roth IRA." No, he can't. Roth eligibility has nothing to do with indebtedness. If you want your son to put more in his Roth IRA, then give him money to put in his Roth IRA. But again--you have control over the money. If you decide not to give him money, you just stop giving him money.

However, once you pay money to a school, it is gone forever and ever, amen. We will only know many years from now whether or not it was a good "investment".

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NYCPete
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Re: "Soft" question on student loans

Post by NYCPete » Tue May 28, 2019 5:31 pm

Greenman72 wrote:
Tue May 28, 2019 4:49 pm

However, once you pay money to a school, it is gone forever and ever, amen. We will only know many years from now whether or not it was a good "investment".
You've said variations of this more than once. Your statement is true about literally everything a person can spend money on in their life. You could replace the phrase "to a school" with literally anything you can buy and the statement would still be true. Heck, your statement about not knowing whether an investment was a good one for many years is true of stocks and bonds too. Life is uncertain.

Could a parent grow their money more by not paying for their child's post secondary education? Sure. But let's take that line of logic farther: Could they grow their money even more by not having kids in the first place? Definitely. Plenty of things parents spend on their children is money that is gone forever and ever, amen.

But I doubt you'd counsel your clients not to have kids because they'd grow their money faster if they didn't, right?

Different strokes for different folks.

Best,
Peter
To the extent that a fool knows his foolishness, | He may be deemed wise | A fool who considers himself wise | Is indeed a fool. | | Buddha

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Re: "Soft" question on student loans

Post by DaftInvestor » Tue May 28, 2019 5:47 pm

Greenman72 wrote:
Tue May 28, 2019 4:49 pm
And as noted, many of these loans do not accrue interest until several months after graduation.
Many??? Which ones?
The only single one I'm aware of is a single subsidized loan that I (and many here) wouldn't be eligible for. (And last I knew was limited to 5500 yearly). Enlighten me on the others? The loans I looked at were all bad deals- fees, high rates, no deferred accrual, etc.
For someone who says they are advising clients - you seem to be making statements that simply aren't true and conflating multiple worse case scenarios to meet you supposition.

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Re: "Soft" question on student loans

Post by Grt2bOutdoors » Tue May 28, 2019 6:47 pm

FlyAF wrote:
Tue May 28, 2019 9:45 am
People are loco, that's all there is to it. Just read threads on this site about how much money people are willing to spend on college for their kids (100k+), it's absolute insanity. I went to a great school, less than a decade ago, for under 40k.

I honestly think it's an ego thing. The more it costs me, the better it must be.
If senior collegiate state schools cost $26K per year in your home state and going out of state is not an option for you for a multitude of reasons, then the cost over four years is more than $100K. Is it an ego thing if that is what it costs? The 4 year state schools in my region actually cost $26K per year. The community college costs $11,500 per year. If you want to go private, it will cost you alot more than that. Ego thing, please! :oops:

You went to a great school? Congratulations - if the school is so great and it costs less than $100K why not broadcast it loud and clear?, make it known, here is a great school and you know what you don't have to spend $100K to go there.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: "Soft" question on student loans

Post by Grt2bOutdoors » Tue May 28, 2019 6:58 pm

Greenman72 wrote:
Tue May 28, 2019 4:49 pm
Doom&Gloom wrote:
Tue May 28, 2019 12:05 pm
There is no single correct formula for "financial parenting." Perhaps you are trying to impose your non-financial values upon clients who do not share the same values and that is frustrating you?
This is possible. But it's less about "values" and more about "fungibility" and behavioral finance.

Are student loans more or less "fungible"?
Are they fundamentally the same as a car loan? Or a mortgage? Or a short fixed-income position?
Does it make sense to borrow at 3.4% (or higher, as you say) if you are long government bonds at 2.4%? And does your answer change if your money is held in a retirement account?

Generally speaking, I see all dollars as the same shade of green. And once you open the floodgates, you cannot tell the water where to go. If you pay for your child's school and the child goes 2,000 miles away to NYU to major in Jazz Guitar, all while drinking, drugging, and fornicating, you can never get that money back.

Knowing that, if I choose to pay for my child's school, I have foregone the use of my money. I have voided any options that I may have had. Whereas, had I held on to it, I could simply have paid off the loan at graduation. (Assuming that he actually graduates.) And as noted, many of these loans do not accrue interest until several months after graduation.

When somebody says, "I paid for my daughter's school because she can only save $100/month, whereas I can save $2,500 per month!!!" That's great! Then pay off her $100/month loan for her after she graduates. Now she has $100/month of cash flow. Or give her $25,000 that will spin off $100/month of cash flow, which she can then use to pay her loan. Or invest $12,000 in some sort of account with a 10% expected annual return, which should give you $100 per month of appreciation/dividends. (That would entail investing in a taxable account. Oh, the horror!!!)

Or "Because I paid for my son's school, he can now save more in a Roth IRA." No, he can't. Roth eligibility has nothing to do with indebtedness. If you want your son to put more in his Roth IRA, then give him money to put in his Roth IRA. But again--you have control over the money. If you decide not to give him money, you just stop giving him money.

However, once you pay money to a school, it is gone forever and ever, amen. We will only know many years from now whether or not it was a good "investment".
What is this really all about? Is it about parents and students OR is it really about the fact that the more parents pay for their kids college costs upfront, the less money you have to manage and the less you make in fees, is that it? "Once you pay money to a school, it is gone forever and ever" right? Less money for you to manage, less clients since now they have no money. Talking about majoring in Jazz Guitar and then making a huge stretch about lifestyle choices the student chooses really dilutes your claims about investing and use of student loans. I don't see the relevance of the major or school a person attends has to do with paying for college upfront or via a loan.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: "Soft" question on student loans

Post by smitcat » Tue May 28, 2019 7:02 pm

Greenman72 wrote:
Tue May 28, 2019 4:49 pm
Doom&Gloom wrote:
Tue May 28, 2019 12:05 pm
There is no single correct formula for "financial parenting." Perhaps you are trying to impose your non-financial values upon clients who do not share the same values and that is frustrating you?
This is possible. But it's less about "values" and more about "fungibility" and behavioral finance.

Are student loans more or less "fungible"?
Are they fundamentally the same as a car loan? Or a mortgage? Or a short fixed-income position?
Does it make sense to borrow at 3.4% (or higher, as you say) if you are long government bonds at 2.4%? And does your answer change if your money is held in a retirement account?

Generally speaking, I see all dollars as the same shade of green. And once you open the floodgates, you cannot tell the water where to go. If you pay for your child's school and the child goes 2,000 miles away to NYU to major in Jazz Guitar, all while drinking, drugging, and fornicating, you can never get that money back.

Knowing that, if I choose to pay for my child's school, I have foregone the use of my money. I have voided any options that I may have had. Whereas, had I held on to it, I could simply have paid off the loan at graduation. (Assuming that he actually graduates.) And as noted, many of these loans do not accrue interest until several months after graduation.

When somebody says, "I paid for my daughter's school because she can only save $100/month, whereas I can save $2,500 per month!!!" That's great! Then pay off her $100/month loan for her after she graduates. Now she has $100/month of cash flow. Or give her $25,000 that will spin off $100/month of cash flow, which she can then use to pay her loan. Or invest $12,000 in some sort of account with a 10% expected annual return, which should give you $100 per month of appreciation/dividends. (That would entail investing in a taxable account. Oh, the horror!!!)

Or "Because I paid for my son's school, he can now save more in a Roth IRA." No, he can't. Roth eligibility has nothing to do with indebtedness. If you want your son to put more in his Roth IRA, then give him money to put in his Roth IRA. But again--you have control over the money. If you decide not to give him money, you just stop giving him money.

However, once you pay money to a school, it is gone forever and ever, amen. We will only know many years from now whether or not it was a good "investment".
"When somebody says, "I paid for my daughter's school because she can only save $100/month, whereas I can save $2,500 per month!!!" That's great! Then pay off her $100/month loan for her after she graduates. Now she has $100/month of cash flow. Or give her $25,000 that will spin off $100/month of cash flow, which she can then use to pay her loan."
The other alternative - we paid for most of the college costs while our daughter attended but also worked. Due to her working she could open and fully fund a Roth account for a number of the college years - those dollars are not easily replaced later in time and the lesson was as they say 'priceless".

"We will only know many years from now whether or not it was a good "investment"."
You will likely know when you assess your older teens skills traits and abilities - at least we were pretty aware of what to expect by that age. In any case we do now know for sure as she is out of school and working a few jobs as I type this.

"When somebody says, "I paid for my daughter's school because she can only save $100/month, whereas I can save $2,500 per month!!!" That's great!"
We will likely continue to give here some funds while she is younger but save more for her in our own accounts - that is simply because we can save at 20 - 25X her rate and we like most of our current work. In a while when we stop working our assessment of what we can give vs use will continue.
This will be very different from how we grew up and just as we planned - fortunately.

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Re: "Soft" question on student loans

Post by smitcat » Tue May 28, 2019 7:08 pm

DaftInvestor wrote:
Tue May 28, 2019 5:47 pm
Greenman72 wrote:
Tue May 28, 2019 4:49 pm
And as noted, many of these loans do not accrue interest until several months after graduation.
Many??? Which ones?
The only single one I'm aware of is a single subsidized loan that I (and many here) wouldn't be eligible for. (And last I knew was limited to 5500 yearly). Enlighten me on the others? The loans I looked at were all bad deals- fees, high rates, no deferred accrual, etc.
For someone who says they are advising clients - you seem to be making statements that simply aren't true and conflating multiple worse case scenarios to meet you supposition.
"The loans I looked at were all bad deals- fees, high rates, no deferred accrual, etc."

Hello DaftInvestor - Yup , we saw these as well ...they were the only options when our daughter went to Grad school, totally different from the time when she was just starting undergrad. They were high % rates , accruing the second you took the loan and even had origination fees with them. Did not choose to use then and would find it very problematic for anyone that was required to use them.
Good points !!

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Re: "Soft" question on student loans

Post by Nate79 » Tue May 28, 2019 7:15 pm

I believe strongly that parents should pay for the cost of college and if they can't afford it then kids should find a cheaper option and/or work to help cover the cost. Student loans should not even be on the table - they are a horrible option for the students and the parents. Planning ahead of time is the only option in my book and any financial advisor that recommended student loans would not be considered competent to me (right up there with whole life salesmen).
Last edited by Nate79 on Tue May 28, 2019 7:23 pm, edited 1 time in total.

derek51
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Re: "Soft" question on student loans

Post by derek51 » Tue May 28, 2019 7:16 pm

teen persuasion wrote:
Tue May 28, 2019 9:57 am
I did the math - we were better off putting as much as possible into retirement accounts while the kids are filing FAFSA. Reducing our AGI allowed us to be eligible to skip the asset tests (until this year), reducing our EFC, and sometimes were eligible for auto EFC = $0 (until the target AGI was retroactively dropped $9k), thus increasing their aid.
Has something changed? My oldest starts college in a couple years and everything I read says IRA and 401k contributions are added back in when considering total income, thus these contributions will have no effect on our EFC.

MathWizard
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Re: "Soft" question on student loans

Post by MathWizard » Tue May 28, 2019 7:18 pm

I guess that you could ask them why they do it.

Maybe they expect the kids to help them out when they are old.
That is commonplace many places in the world and wa Is true in the US until recently.

If so, then increasing their kid's human capital is in their best interest. Getting through college quickly is better long term than going part time and working while I school, since you lose out on years of work at much better pay after graduation.

In the current post agrarian society, pure economic would say don't have any children. Would you ask your clients why they had children if they couldn't max their 401k? I suspect that if you did, you wouldn't have any clients.

MathWizard
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Re: "Soft" question on student loans

Post by MathWizard » Tue May 28, 2019 7:23 pm

derek51 wrote:
Tue May 28, 2019 7:16 pm
teen persuasion wrote:
Tue May 28, 2019 9:57 am
I did the math - we were better off putting as much as possible into retirement accounts while the kids are filing FAFSA. Reducing our AGI allowed us to be eligible to skip the asset tests (until this year), reducing our EFC, and sometimes were eligible for auto EFC = $0 (until the target AGI was retroactively dropped $9k), thus increasing their aid.
Has something changed? My oldest starts college in a couple years and everything I read says IRA and 401k contributions are added back in when considering total income, thus these contributions will have no effect on our EFC.
Contributions do get added back in to income, but gains in retirement accounts are not counted as income, and retirement assets are not considered in the asset portion.

If he starts in a couple years, then capture any long term capital gains in taxable accounts that you want to use now before the base year. If you wait until the spring of his junior year, they will be included in your AGI as income for his first year.

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Re: "Soft" question on student loans

Post by stoptothink » Tue May 28, 2019 7:30 pm

Grt2bOutdoors wrote:
Tue May 28, 2019 6:47 pm
FlyAF wrote:
Tue May 28, 2019 9:45 am
People are loco, that's all there is to it. Just read threads on this site about how much money people are willing to spend on college for their kids (100k+), it's absolute insanity. I went to a great school, less than a decade ago, for under 40k.

I honestly think it's an ego thing. The more it costs me, the better it must be.
If senior collegiate state schools cost $26K per year in your home state and going out of state is not an option for you for a multitude of reasons, then the cost over four years is more than $100K. Is it an ego thing if that is what it costs? The 4 year state schools in my region actually cost $26K per year. The community college costs $11,500 per year. If you want to go private, it will cost you alot more than that. Ego thing, please! :oops:

You went to a great school? Congratulations - if the school is so great and it costs less than $100K why not broadcast it loud and clear?, make it known, here is a great school and you know what you don't have to spend $100K to go there.
I think FlyAF might actually have been saying $100k/yr, which is hyperbole, but not that far from it. I recall several threads where people here were stating they were spending $70k+/yr to send their child to school. Tuition only, 4yr universities in this country can cost anywhere from $6k/yr to $60k+; there is a very large chasm between the two extremes. The cheaper tuition universities also tend to have cheaper non-school living costs. If you are on the far end, you have a lot of more cost-effective options. And I totally agree with him that there is ego involved in spending extreme amounts on your child's education. If you can afford it, it is none of my business what you are spending.

multiham
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Re: "Soft" question on student loans

Post by multiham » Tue May 28, 2019 7:52 pm

Like many others on here have said, I am paying for my kids education because I can. I saved from the day they were born and strongly believe that this is a "gift" that we can give them that will benefit them for a lifetime.
Both my kids have worked in high school and have saved money to help cover costs. My son did not pick his school because of ego, instead he picked it because it offered the program he wanted in the environment he was looking for.

I will never apologize or be ashamed that I am paying for my kids education
I will never apologize or be ashamed that I will do whatever I can to help my kids
My wife and I realize how fortunate we are to be able to do this as both of us paid 100% of our own college cost.
I make it a habit to not judge people based on their beliefs (buying cars, houses, college, etc). Please don't judge me because I have decided to pay for their education. Everyone has their own beliefs. No one is wrong, no one is right.

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Re: "Soft" question on student loans

Post by cshell2 » Tue May 28, 2019 8:00 pm

Greenman72 wrote:
Tue May 28, 2019 9:20 am


First, why do you feel that your child (who has 25-30 more years than you have to accumulate assets) deserves your money more than you do?


If you want to keep all your money to yourself, having kids at all is kind of a bad idea.

I personally don't feel that my job in raising them to adults ends at 18 and I believe an education is important. I've saved for it and it makes me just as happy to spend my money this way as anything on myself...more actually... so why not? So I can have more money for myself? Yeah, no. Don't care. I'm definitely a saver, but I don't feel I need to save/invest everything my entire life.

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Re: "Soft" question on student loans

Post by SimonJester » Tue May 28, 2019 8:18 pm

stoptothink wrote:
Tue May 28, 2019 7:30 pm
I think FlyAF might actually have been saying $100k/yr, which is hyperbole, but not that far from it. I recall several threads where people here were stating they were spending $70k+/yr to send their child to school.
Yes the Average cost of college per year is $25,290 for in state. This makes 4 years now over 100K, additionally those numbers are based on 12 credit hours per semester and there is a national movement to push kids towards 15+ credit hours per semester. On top of all of that many kids take summer courses and or go an extra semester...

Given all of this I am glad i saved as much as I could in my kids 529 plans WHILE still maxing out my own retirement. Scholarships are a rare rainbow colored unicorn now given schools with multiple valedictorians and 100+ graduating students all with a 4.5+ gpa...
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

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teen persuasion
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Re: "Soft" question on student loans

Post by teen persuasion » Tue May 28, 2019 9:34 pm

derek51 wrote:
Tue May 28, 2019 7:16 pm
teen persuasion wrote:
Tue May 28, 2019 9:57 am
I did the math - we were better off putting as much as possible into retirement accounts while the kids are filing FAFSA. Reducing our AGI allowed us to be eligible to skip the asset tests (until this year), reducing our EFC, and sometimes were eligible for auto EFC = $0 (until the target AGI was retroactively dropped $9k), thus increasing their aid.
Has something changed? My oldest starts college in a couple years and everything I read says IRA and 401k contributions are added back in when considering total income, thus these contributions will have no effect on our EFC.
The Simplified Needs Test and Auto EFC = 0 sort of do an end run around the normal EFC calculation. Both test AGI, before anything is added back. If meet the criteria for SNT, skip asset reporting and inclusion. If meet criteria for Auto EFC = 0, then, well, EFC = 0, no calculations necessary. Else, calculate using regular formula.

You are correct that retirement contributions are added back to AGI to calculate Available Income.

Another quirk of the methodology is that HSA contributions thru payroll are completely excluded (essentially invisible), but HSA contributions deducted on the 1040 are added back to Available Income. A nasty surprise for anyone utilizing a Roth conversion ladder to access retirement account balances prior to age 59.5 is that Roth withdrawals (tax and penalty free if contributions) are also added in to Available Income.

stoptothink
Posts: 5747
Joined: Fri Dec 31, 2010 9:53 am

Re: "Soft" question on student loans

Post by stoptothink » Tue May 28, 2019 9:48 pm

SimonJester wrote:
Tue May 28, 2019 8:18 pm
stoptothink wrote:
Tue May 28, 2019 7:30 pm
I think FlyAF might actually have been saying $100k/yr, which is hyperbole, but not that far from it. I recall several threads where people here were stating they were spending $70k+/yr to send their child to school.
Yes the Average cost of college per year is $25,290 for in state. This makes 4 years now over 100K, additionally those numbers are based on 12 credit hours per semester and there is a national movement to push kids towards 15+ credit hours per semester. On top of all of that many kids take summer courses and or go an extra semester...

Given all of this I am glad i saved as much as I could in my kids 529 plans WHILE still maxing out my own retirement. Scholarships are a rare rainbow colored unicorn now given schools with multiple valedictorians and 100+ graduating students all with a 4.5+ gpa...
Even then, there is a huge difference between $25,260 and $70k+. Keep in mind, the average cost of in-state public tuition in this country is just above $10k/yr. In that $25,290 total is some variability. I just looked at the estimated cost of living for where I did my PhD ('08-'12), my COL was about 1/3 the estimates and I'm pretty confident COL in that area hasn't tripled in the past 7yrs. Yes, I know that not everybody has the combination of cheap in-state tuition and cheap available housing/living options, but it is available to a lot of people. Both my sisters and my wife will have graduated between '18 and '20: combined they will have spent less than $100k on their undergrad education (2 from a decent in-state public, another from a decent nearby private) and one of my sisters never lived at home.

College is expensive, but people very often make it a lot more expensive than it has to be. I definitely get the impression (as FlyAF does) that some people get an ego boost, almost bragging, about spending more for their children's education than they have to. And again, if you can afford it; no judgement, good for you.

Small Savanna
Posts: 37
Joined: Sat Feb 09, 2019 2:27 am

Re: "Soft" question on student loans

Post by Small Savanna » Tue May 28, 2019 9:53 pm

Having kids at all is not a rational financial decision, yet lots of us do it. Once you have them, you are going to spend a lot of money on them. It means forgoing a lot of "fun" and working longer and harder than we otherwise would have. There is a lot of trade space between saving for retirement and spending money on your kids, and each of us has to find a balance that feels right.

SimonJester
Posts: 1912
Joined: Tue Aug 16, 2011 12:39 pm

Re: "Soft" question on student loans

Post by SimonJester » Tue May 28, 2019 10:32 pm

stoptothink wrote:
Tue May 28, 2019 9:48 pm
Both my sisters and my wife will have graduated between '18 and '20: combined they will have spent less than $100k on their undergrad education (2 from a decent in-state public, another from a decent nearby private) and one of my sisters never lived at home.

I am curious if you could break down the numbers here 3 people all for under 100K? What state if you don't mine me asking...

My posts are not to brag about my kids college education at all, but to point out the published numbers are skewed, and costs are rising each year.

I have also found a lot of other related costs that often are not factored in, traveling to said schools for tours, orientation, move in day, extra food, school supplies, etc little things all add up.

15 years ago I started saving for my kids college, at that time I though 60K per kid would be more then enough, turns out that was not the case...
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

cshell2
Posts: 112
Joined: Thu May 09, 2019 10:29 am

Re: "Soft" question on student loans

Post by cshell2 » Tue May 28, 2019 10:39 pm

SimonJester wrote:
Tue May 28, 2019 1:27 pm
Greenman72 wrote:
Tue May 28, 2019 9:20 am
Third, why is student loan debt somehow more evil or oppressive than automobile debt or mortgage debt? Yes, the state can garnish wages. But cars and houses can also be repossessed. And when you die, student loan debt dies with you. Car debt and mortgage debt lives on.
Im not sure how it will be for other Bogleheads, but my kids were both offered about $4K -$5K in student loans each year vs us the parents were offered $23K each in parent plus loans. PP Loans are the responsibility of the PARENT not the child, and are currently at 7.6%.
7.6% PLUS a 4% origination fee!

stoptothink
Posts: 5747
Joined: Fri Dec 31, 2010 9:53 am

Re: "Soft" question on student loans

Post by stoptothink » Tue May 28, 2019 10:44 pm

SimonJester wrote:
Tue May 28, 2019 10:32 pm
stoptothink wrote:
Tue May 28, 2019 9:48 pm
Both my sisters and my wife will have graduated between '18 and '20: combined they will have spent less than $100k on their undergrad education (2 from a decent in-state public, another from a decent nearby private) and one of my sisters never lived at home.

I am curious if you could break down the numbers here 3 people all for under 100K? What state if you don't mine me asking...

My posts are not to brag about my kids college education at all, but to point out the published numbers are skewed, and costs are rising each year.

I have also found a lot of other related costs that often are not factored in, traveling to said schools for tours, orientation, move in day, extra food, school supplies, etc little things all add up.

15 years ago I started saving for my kids college, at that time I though 60K per kid would be more then enough, turns out that was not the case...
My wife and one sister from Utah Valley University; tuition <$6k/yr, probably $7k/yr with books and fees https://www.uvu.edu/tuition/docs/tuitio ... s18-19.pdf. Both live at home and commute. My other sister, BYU https://finserve.byu.edu/Tuition_Fees_And_Deadlines. Tuition is nearly identical. She lives a few blocks from campus in an apartment with 3 other girls, <$350/month and it is cheaper during the summer. All received $0 in parental assistance and all have (or will) graduate debt-free. Both my sisters cash-flowed it working themselves, my wife has a full-time professional career (tech sales) so paying for it was not a big deal for us.

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