College Financing

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zzcooper123
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College Financing

Post by zzcooper123 » Wed Dec 10, 2008 9:27 am

I thought I had a handle on my 16 year old's upcoming college financing with her UGMA and 529 plans. The Market crash of 2008 has changed the equation. Can other Bogleheads share their experiences, tricks, ideas on how I can finance her Education w/o going broke? With income > 100k doubt we will qualify for much aid.

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alec
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Post by alec » Wed Dec 10, 2008 10:02 am

We have two kids and plan to use prepaid state tuition plans for the bare bones future tuition expenses.
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Petrocelli
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Post by Petrocelli » Wed Dec 10, 2008 10:08 am

I have a 15 year old and an 18 year old.

Their college fund is in the Vanguard 529 Income Portfolio, which is made up of 25% cash, 25% TIPS and 50% bonds. It has lost a little value in the recent market downturn, but not much.
Petrocelli (not the real Rico, but just a fan)

SamB
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Post by SamB » Wed Dec 10, 2008 10:13 am

I do not have any tricks, but here was my approach. The 529 plan has come full circle in the past six years. It is pretty much back where it started. However, I knew six years ago that if I wanted to risk the 529 by investing it in equities I better have a plan B. The plan B was to have the same amount of money in intermediate term municipal bonds. The final outcome will probably mean that accessing the 529 funds is delayed a year or two because of the shortfall, and the difference will come out of the bond fund.

The lesson for me is that if you need the money you better not be in equities, and you better have a plan B. There is no more to it than that.

Sam

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sewall
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Post by sewall » Wed Dec 10, 2008 10:25 am

Some readers of this thread may find the following one of interest as well:

http://www.bogleheads.org/forum/viewtop ... highlight=

Valuethinker
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Re: College Financing

Post by Valuethinker » Wed Dec 10, 2008 5:08 pm

zzcooper123 wrote:I thought I had a handle on my 16 year old's upcoming college financing with her UGMA and 529 plans. The Market crash of 2008 has changed the equation. Can other Bogleheads share their experiences, tricks, ideas on how I can finance her Education w/o going broke? With income > 100k doubt we will qualify for much aid.
My understanding of the US college finance system is that indeed, there is aid available.

however your child will need to 'shop' widely and go to (probably) a less prestigious college that is trying to 'buy' a higher ranking for itself by offering scholarships.

The decline in the stock market has affected endowments, but I believe there are still a number of private colleges (and many state ones) that have substantial endowments and a desire to increase their ranking. These can be 'high cost' schools that offer many or most of their students some form of financial assistance.

State university is the other choice if you happen to live in a state with a good university system (that your child can get into).

Your child might also consider ROTC.

Sandy2
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Post by Sandy2 » Wed Dec 10, 2008 5:32 pm

Does anyone know a good formula for predicting college expenses in the future? I have 7 year old twins who will (if all goes well) begin college in 2020. We opened 529 accounts for them when they were born that are now worth almost exactly what they were worth 6 years ago. Uh-oh.

So I learned to be more conservative with the investment choices and hopefully the accounts will grow back. But we figure we need to add more. How much will it cost in 2020?

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Leif
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Post by Leif » Wed Dec 10, 2008 5:49 pm

Plan A was to give her some appreciated stock. This was smashed by the market decline and Congress raising the age to 24 for full time students.

Plan B was to use some EE bonds which I purchased 5 years ago. This may be part of the solution.

Plan C is for her to take on debt for which I can help on repayment once she is older than 24. Of course, by that time Congress will probably redefine a minor as age 30.

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englishgirl
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Post by englishgirl » Wed Dec 10, 2008 6:25 pm

In addition to state schools which are reasonably priced for in-state tuition, and also community college for the first 2 years, there are a few no-tuition colleges.

http://images.businessweek.com/ss/07/11 ... dex_01.htm

Then there's always Scotland:

http://www.nytimes.com/2008/12/01/educa ... =education

And yes, aid is often available, even to higher income parents. For example, my state, Florida, provides scholarships based on academic achievement (the Bright Futures scholarships) which are funded by the lottery. These are not means-based. Your state may have similar programs.

I would say that the important thing is to sit the 16-year old down now and say that you guys are going to have to start getting creative about college financing. If your child is involved in the process, you might find out more. For example, the high school may have lots of information available about grants and other aid if your child goes and asks. They may also start reconsidering the type of college they want to go to, or work to get their GPA/community service hours up to levels to qualify for aid. I don't think kids should necessarily expect that their parents will just 100% fund absolutely any college that they wish to go to. Even if that's what you'd like to do (and perhaps, what you end up doing), it doesn't hurt for them to ask around to see what free money is available or if perhaps a lower cost college might meet their needs just as well as a more expensive one.
Sarah

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robby152
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Post by robby152 » Thu Dec 11, 2008 11:40 am

englishgirl wrote: I would say that the important thing is to sit the 16-year old down now and say that you guys are going to have to start getting creative about college financing. If your child is involved in the process, you might find out more. For example, the high school may have lots of information available about grants and other aid if your child goes and asks. They may also start reconsidering the type of college they want to go to, or work to get their GPA/community service hours up to levels to qualify for aid. I don't think kids should necessarily expect that their parents will just 100% fund absolutely any college that they wish to go to. Even if that's what you'd like to do (and perhaps, what you end up doing), it doesn't hurt for them to ask around to see what free money is available or if perhaps a lower cost college might meet their needs just as well as a more expensive one.
I agree. AP/Dual credit programs if available, scholarships at the university of choice (might be more difficult at more prestigious universities), community colleges and having your child work part time through college are good things to consider. Especially the scholarships option. Fastweb.com can be good, but there is so much competition. I have found that there are many 'Tom and Patricia Studebaker Honorary Ballet Fellowship for Northeastern Coal Miners' type scholarships available, but are very difficult to find. However, it is worth 1-2 hours to look for them to save 3K a year.

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Petrocelli
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Post by Petrocelli » Sat Dec 13, 2008 11:45 pm

My son is applying to college and just got his first acceptance letter. We did not apply for financial aid, but the school gave him $28,000 in scholarship money, which I found very surprising.

Apparently, it appears the tuition is a suggested retail price, and the school will move off that number if they want your child to attend.
Petrocelli (not the real Rico, but just a fan)

peter71
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Post by peter71 » Sun Dec 14, 2008 12:27 am

Petrocelli wrote:My son is applying to college and just got his first acceptance letter. We did not apply for financial aid, but the school gave him $28,000 in scholarship money, which I found very surprising.

Apparently, it appears the tuition is a suggested retail price, and the school will move off that number if they want your child to attend.
Yep. It's a strange system, and as someone who qualified for a lot of need-based aid at the schools I really wanted to go to, I always felt I was better off than students from wealthier families who had gotten generous merit aid from their "safety schools" alone . . . though granted, I did have to take out some loans and work 20 hrs a week serving the wealthy kids food :D

All best,
Pete

Valuethinker
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Post by Valuethinker » Sun Dec 14, 2008 3:49 am

englishgirl wrote:In addition to state schools which are reasonably priced for in-state tuition, and also community college for the first 2 years, there are a few no-tuition colleges.

http://images.businessweek.com/ss/07/11 ... dex_01.htm

Then there's always Scotland:

http://www.nytimes.com/2008/12/01/educa ... =education

And yes, aid is often available, even to higher income parents. For example, my state, Florida, provides scholarships based on academic achievement (the Bright Futures scholarships) which are funded by the lottery. These are not means-based. Your state may have similar programs.

I would say that the important thing is to sit the 16-year old down now and say that you guys are going to have to start getting creative about college financing. If your child is involved in the process, you might find out more. For example, the high school may have lots of information available about grants and other aid if your child goes and asks. They may also start reconsidering the type of college they want to go to, or work to get their GPA/community service hours up to levels to qualify for aid. I don't think kids should necessarily expect that their parents will just 100% fund absolutely any college that they wish to go to. Even if that's what you'd like to do (and perhaps, what you end up doing), it doesn't hurt for them to ask around to see what free money is available or if perhaps a lower cost college might meet their needs just as well as a more expensive one.
Hi I don't believe Scottish universities are free to non-Eu residents?

I believe they charge standard foreign tuition ie c. £10k a year?

The problem in the UK is the high cost of living. Things roughly cost in pounds, what they would cost in dollars in America.

Conversely you have some of the best universities in the world. Any of the 'Russell Group' is, depending on department, a fantastic university. Oxford and Cambridge of course, but also Edinburgh, Manchester, LSE, UCL, Imperial, Bristol, Warwick to name but a few.

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Post by grumel » Sun Dec 14, 2008 5:57 am

Hi I don't believe Scottish universities are free to non-Eu residents?
Scottish Universities are not free for EU residents either. They are cheap compared to most other English speaking countries if you attend them from first year till graduation, but only then. Prices for exchange students are quite high. Ireland is similar. Irish Bachelor degrees are free for EU residents, but only if you never attended any other University. For everyone else or non eu residents Irland is quite expensive.

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Post by Valuethinker » Sun Dec 14, 2008 7:10 am

peter71 wrote:
Petrocelli wrote:My son is applying to college and just got his first acceptance letter. We did not apply for financial aid, but the school gave him $28,000 in scholarship money, which I found very surprising.

Apparently, it appears the tuition is a suggested retail price, and the school will move off that number if they want your child to attend.
Yep. It's a strange system, and as someone who qualified for a lot of need-based aid at the schools I really wanted to go to, I always felt I was better off than students from wealthier families who had gotten generous merit aid from their "safety schools" alone . . . though granted, I did have to take out some loans and work 20 hrs a week serving the wealthy kids food :D

All best,
Pete
I think about 20 years ago US colleges went off 'needs blind' admission to 'targetted' admission?

So rather than find the students who qualify, and then offer them financial assistance according to their needs, its now about selecting the students from the applicant pool that you *really want* and buying them with financial assistance.

Some private colleges found that by raising tuition, but offering more scholarships, they actually improved the quality of the applicant base.

In economics, this is known as 'Signalling Behaviour'. Michael Spence won the Nobel Prize for elucidating it.

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Post by livesoft » Sun Dec 14, 2008 8:33 am

My trick is to drop my income to a low value so that my kids should get plenty of financial aid. So instead of saving for college, I just saved for my retirement. I have already cut my income in half by the time my oldest was 16. Now I just have to cut out the rest of my income. It should not be too hard.

A side benefit of not working is that you get to post on internet forums all day.

But if you don't want to retire, here's another idea: If you and your spouse have been maxing out your 401(k) plans and your Roth IRAs (Roths may not be possible with high income), that's about $51K a year in retirement plan contributions if you will be 50 years old on 12/31/2008. You can simply reduce your retirement plan contributions and divert that cash-flow to education expenses instead. There are hardly any colleges in the US that cost more than $51K a year. Thus, a benefit to maxing out retirement plan contributions is not only being able to retire early, but keeping your normal everyday lifestyle expenses low enough, so that there is cash-flow to pay for college if you have to.

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Post by peter71 » Sun Dec 14, 2008 9:32 am

Valuethinker wrote:
peter71 wrote:
Petrocelli wrote:My son is applying to college and just got his first acceptance letter. We did not apply for financial aid, but the school gave him $28,000 in scholarship money, which I found very surprising.

Apparently, it appears the tuition is a suggested retail price, and the school will move off that number if they want your child to attend.
Yep. It's a strange system, and as someone who qualified for a lot of need-based aid at the schools I really wanted to go to, I always felt I was better off than students from wealthier families who had gotten generous merit aid from their "safety schools" alone . . . though granted, I did have to take out some loans and work 20 hrs a week serving the wealthy kids food :D

All best,
Pete
I think about 20 years ago US colleges went off 'needs blind' admission to 'targetted' admission?

So rather than find the students who qualify, and then offer them financial assistance according to their needs, its now about selecting the students from the applicant pool that you *really want* and buying them with financial assistance.

Some private colleges found that by raising tuition, but offering more scholarships, they actually improved the quality of the applicant base.

In economics, this is known as 'Signalling Behaviour'. Michael Spence won the Nobel Prize for elucidating it.
Hi VT,

Yes, I believe purely "need blind" admissions did go out of fashion at least among the top schools around then, but in part because they wanted to attract more non-wealthy applicants -- i.e., they wanted to do class-based affirmative action and actually favor poorer students via their admissions standards. A few years ago US News and World Report even started ranking colleges on economic diversity, and given the controversies about universities just sitting on their endowments -- "being huge money management institutions that did education on the side" -- the scholarship grants to poor and even middle-class kids just kept growing and growing . . . but whether all that will continue now will be interesting to watch. Logically it seems likely that cash-strapped unis might well go back to preferring customers who can pay in full, but whether the really rich ones will ever get that cash-strapped is unclear.

All best,
Pete

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Post by fishndoc » Sun Dec 14, 2008 9:46 am

Something to think about before encouraging/allowing your child to take on debt for college, is do they plan on professional or grad school afterwards?
Four years ago we were wrestling with whether is was worth the huge cost difference for a private college vs our state university. In the end our daughter chose the state university, and we were able to pay for it out of pocket. Now, her college fund is still intact, and should get her half way thru medical school before she has to resort to loans.

Wayne
" Successful investing involves doing just a few things right, and avoiding serious mistakes." - J. Bogle

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englishgirl
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Post by englishgirl » Sun Dec 14, 2008 9:53 am

Valuethinker wrote:Hi I don't believe Scottish universities are free to non-Eu residents?

I believe they charge standard foreign tuition ie c. £10k a year?

The problem in the UK is the high cost of living. Things roughly cost in pounds, what they would cost in dollars in America.

Conversely you have some of the best universities in the world. Any of the 'Russell Group' is, depending on department, a fantastic university. Oxford and Cambridge of course, but also Edinburgh, Manchester, LSE, UCL, Imperial, Bristol, Warwick to name but a few.
True, they're not free. But they're still cheaper than many prestigious private universities over here. And the lower tuition cost more than makes up for the higher cost of living so it's cheaper over all than an Ivy League college (assuming you're not getting a lot of scholarships).

However, the reason that Scotland is more appealing to Americans is that the educational system is slightly different - I believe it is a bit broader based than in England/Wales, according to the NY Times article I linked to. I went to one of those universities you quoted, and I'm now having problems in getting into a US masters degree program because of the lack of general education (English, humanities, social sciences) classes that I have. So I've been picking up the classes I'm "missing" in Community College. :roll:

Personally, I think the public (state) universities can be just fine. My plan would be to steer my kid towards the best state university where I live (possibly after doing the first 2 years at CC). You can still get in to Harvard Law from a good state school if that's what you really want to do. You don't have to have done your Bachelor's degree at Harvard as well.
Sarah

grumel
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Post by grumel » Sun Dec 14, 2008 10:30 am

True, they're not free. But they're still cheaper than many prestigious private universities over here. And the lower tuition cost more than makes up for the higher cost of living so it's cheaper over all than an Ivy League college
For someone willing to study on another continent at such a young age, there are some English Bachelor degrees and a lot of Master/Phd Degrees in non English speaking countries with good cheap Universities (Netherlands, Denmark, Sweden..). Also if someone is able to get into prestigious us College, she should be able to speak at least one foreign language good enough to study in a native language program somewhere. French, Spanish or German would open doors to a lot of Universities with no or low tutotion fees.

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