Parents vs. Kids Paying for College

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pharmermummles
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Parents vs. Kids Paying for College

Post by pharmermummles » Wed Jan 01, 2020 4:28 am

I have been reading some recent posts on the board regarding the difficulties of managing higher education expenses and large EFCs.


Both my wife and I come from middle class families that did not help pay much for our college. We took out modest loans to get 4 year degrees at local state colleges, and I took out substantial additional loans to go to grad school. It was never expected that our parents would foot the bill. It was our education, and we would pay for it. And before anyone mentions how things have changed, amd costs are higher, we're Millennials - I graduated in 2016.


I thought this was a good thing for us. The debt is not great, but it sure made us work harder in school knowing we were paying for it. I have no problem at all with my parents or my wife's having a hands-off approach to our educational funding. Now we are lucky to have a solid income. And I realize that because of this, our EFC is likely to be very large for our son (yet to be born early next month) should he go to college. We would like to help him out, but our retirement will be coming first. We don't want him to have to take out massive loans just to teach him the same lesson we got, but if we have other financial priorities, I don't think it is the worst thing to focus on those and have him pay his own way to a significant degree as we did. That said, I also realize that just by having high income we are going to adversely affect his ability to obtain loans or other aid.


So my question is this: to what degree should we feel obligated to fund our son's education? I know this is a personal question, one I never really considered until recently. But aside from the "morality" of it, there are real mathematical considerations. We could contribute to a 529 now, receive state tax deductions, and enjoy tax-free growth for the next 18 years. Doing so is objectively cheaper for us than taking out and later paying interest on what could be significant student loans would be for our son, or for us if we have the means and intent to help him at that time. But saving for college would also significantly hamper our current goal of saving for a down payment for a new home, which is our largest current financial goal (with retirement accounts maximized). Is it selfish or even financially foolish of us to pursue our personal financial goals now instead of saving for our child's education (which he may or may not pursue in 18 years)?

Old_Dollar
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Re: Parents vs. Kids Paying for College

Post by Old_Dollar » Wed Jan 01, 2020 5:15 am

Morally take care of the finances for you and your wife first. Anyone can get a loan for University. You cannot get a loan for retirement. Funding any account by definition will move money away from another purpose. One of the best gift a parent can give a child is the ability to be financially independent of them into old age. Once your financial situation is more stable you can always do an annual review with the following questions.

1. Where are we overall?
2. Have we hit our financial milestones? (Various retirement accounts, house, etc)
3. Do we have extra to afford into a 529 if we so choose?
I am here solely to learn about investing.

manatee2005
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Re: Parents vs. Kids Paying for College

Post by manatee2005 » Wed Jan 01, 2020 6:12 am

Your income will be much higher in 10 years so at that point you might be in a better position to fund 529.

Right now you are 3 years into your career, make sure you max out 401k, IRA, HSA (if you are eligible) before even thinking about 529.

There's a big pressure to put money in 529 and you might feel like a bad parent if you're not doing it, but just ignore it, and make sure your 401ks are fully funded first. My son is 16, I am in the 2 comma club and I have $0 in 529s.

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JoeRetire
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Re: Parents vs. Kids Paying for College

Post by JoeRetire » Wed Jan 01, 2020 6:50 am

pharmermummles wrote:
Wed Jan 01, 2020 4:28 am
I thought this was a good thing for us. The debt is not great, but it sure made us work harder in school knowing we were paying for it.
Nobody can change the past and come up with an alternative present. You don't really know how hard you would have worked if you had no debt.
Now we are lucky to have a solid income. And I realize that because of this, our EFC is likely to be very large for our son (yet to be born early next month) should he go to college. We would like to help him out, but our retirement will be coming first.
That's very reasonable, IMHO.
We don't want him to have to take out massive loans just to teach him the same lesson we got, but if we have other financial priorities, I don't think it is the worst thing to focus on those and have him pay his own way to a significant degree as we did. That said, I also realize that just by having high income we are going to adversely affect his ability to obtain loans or other aid.

So my question is this: to what degree should we feel obligated to fund our son's education? I know this is a personal question, one I never really considered until recently. But aside from the "morality" of it, there are real mathematical considerations. We could contribute to a 529 now, receive state tax deductions, and enjoy tax-free growth for the next 18 years. Doing so is objectively cheaper for us than taking out and later paying interest on what could be significant student loans would be for our son, or for us if we have the means and intent to help him at that time. But saving for college would also significantly hamper our current goal of saving for a down payment for a new home, which is our largest current financial goal (with retirement accounts maximized). Is it selfish or even financially foolish of us to pursue our personal financial goals now instead of saving for our child's education (which he may or may not pursue in 18 years)?
As you wrote - this is a personal decision. You seem to have decided that you cannot do both at the same time.

Like you, my wife and I both had to pay our own way through school and graduate school. I don't believe that made us work harder. I believe we would have worked just as hard. And yes, costs were lower then. Still, we both worked from middle school on. We both worked while we were in college. I worked full time plus a second job while attending graduate school at night.

Just as we decided early on that my wife would be a stay-at-home mom once we had kids and go back to work when they were old enough, we decided early on that we would pay for our sons' college educations. And we always told them that from an early age - their job was to get into college and do well, our job was to pay for it. My wife's entire salary went toward their college expenses while we lived on my salary.

We were still able to purchase a nice house. We were still able to save for retirement.

If we pushed the student loan burden on them, we could have purchase a bigger house in a more expensive town. We could have purchased new cars more often. We could have gone on expensive vacations each year. We could have maxed out our retirement savings each year with a goal to retire much earlier. We chose differently.

Our sons graduated with no debt. They are both successfully employed in solid careers and both have their own families. They have good lives.

And once we became empty nesters we accelerated our savings. I semi retired at 60, then fully at 62. Life is good.

It's not really either-or. You can do things how you wish including both at the same time. It's your personal decisions that determine where you go.
Last edited by JoeRetire on Wed Jan 01, 2020 12:17 pm, edited 1 time in total.
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Re: Parents vs. Kids Paying for College

Post by Dandy » Wed Jan 01, 2020 7:03 am

There was a time that a high school education was all you needed to get a good job with good benefits including a pension. That left little financial obligations as far as education for parents of that time. Not many children went to college and it was often felt it was a waste of money to send "girls" to college since they would leave work to raise the children. In fact a company I worked for had a policy at one time that married women had to quit their job -- essentially because they were taking a job away from a bread winner. :oops:

I'm almost 72 and at my time many children wanted to go to college. I basically could afford the tuition to a decent state college by working hard during the summer. My parents helped with books and gas money for the old clunker I bought for $400. After I graduated my company reimbursed me for grad school tuition expenses.

When our two girls were ready for college there was no way they could have earned enough in the summer to pay for the for parking and mandatory activity fees at the same state school I went to. We always felt that as parents our goal was to prepare our children for becoming successful adults. Getting the education level needed to have a shot at becoming financially ok was considered part of our goal. We were very lucky that we didn't have to sacrifice our retirement savings to help our daughters get the education they wanted and probably needed. We did under spend on ourselves quite a bit.

So I believe parents should do reasonable things to help their children be prepared for a successful "career". A lot depends on the kids too. If our kids were lazy and didn't study but liked to party they would get more advice then financial help from us. One daughter did like to party, got good grades but somehow wasn't able to graduate in 4 years. We told her to take a loan for the extra semester expenses. When she got good grades for that semester we paid off the loan.

I am puzzled now as to whether spending lots of money for college degrees makes the same sense today. The future job market seems hazy -- like decent jobs will be replaced by automation. My nightmare is that we have lots of highly educated people with lots of debt and they only can get jobs that are low paying/dead end. Hope I'm wrong.

Wellfleet
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Re: Parents vs. Kids Paying for College

Post by Wellfleet » Wed Jan 01, 2020 7:20 am

With what I pay for childcare now, I expect to cash flow state school tuition. I can’t afford to fund a 529 at this point. My spouses’ family paid for state school and they could attend a private by taking the difference in loans. I liked
that approach.

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CyclingDuo
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Re: Parents vs. Kids Paying for College

Post by CyclingDuo » Wed Jan 01, 2020 7:23 am

pharmermummles wrote:
Wed Jan 01, 2020 4:28 am
I have been reading some recent posts on the board regarding the difficulties of managing higher education expenses and large EFCs.


Both my wife and I come from middle class families that did not help pay much for our college. We took out modest loans to get 4 year degrees at local state colleges, and I took out substantial additional loans to go to grad school. It was never expected that our parents would foot the bill. It was our education, and we would pay for it. And before anyone mentions how things have changed, amd costs are higher, we're Millennials - I graduated in 2016.


I thought this was a good thing for us. The debt is not great, but it sure made us work harder in school knowing we were paying for it. I have no problem at all with my parents or my wife's having a hands-off approach to our educational funding. Now we are lucky to have a solid income. And I realize that because of this, our EFC is likely to be very large for our son (yet to be born early next month) should he go to college. We would like to help him out, but our retirement will be coming first. We don't want him to have to take out massive loans just to teach him the same lesson we got, but if we have other financial priorities, I don't think it is the worst thing to focus on those and have him pay his own way to a significant degree as we did. That said, I also realize that just by having high income we are going to adversely affect his ability to obtain loans or other aid.


So my question is this: to what degree should we feel obligated to fund our son's education? I know this is a personal question, one I never really considered until recently. But aside from the "morality" of it, there are real mathematical considerations. We could contribute to a 529 now, receive state tax deductions, and enjoy tax-free growth for the next 18 years. Doing so is objectively cheaper for us than taking out and later paying interest on what could be significant student loans would be for our son, or for us if we have the means and intent to help him at that time. But saving for college would also significantly hamper our current goal of saving for a down payment for a new home, which is our largest current financial goal (with retirement accounts maximized). Is it selfish or even financially foolish of us to pursue our personal financial goals now instead of saving for our child's education (which he may or may not pursue in 18 years)?
These discussions can lead to both sides of the coin being supported when it comes to the debate of parents pay vs. kids pay for college education. And we get that. Most are comfortable doing what they experienced - or some close version of it. You have the wrench thrown into your equation of your own student loan debt.

You asked for opinions, so here goes...

We are of the opinion and firmly in the camp that parents should save and fund their offspring's college educations. Imagine that coming from a household working in pubic and higher education for the latter 20 years of our careers? Education was important in the households we grew up in, and thus we continued that in our own household. College was not a choice, it was a requirement. Hence, any thought of a child not pursuing college was never entertained under our roof. :shock:

That being said, I did acquire some student loan debt from my graduate studies (the equivalent of $42K in today's dollars at double digit interest rates) that I had to hammer on for the first years of my working career. My parents hadn't planned on me attending graduate school, so I took on a large chunk of that myself to get my advanced training and degrees for my profession. After graduation, I knocked those loans out in 5 years time working 6 days a week, scrimping and throwing everything I could at the debt so that I had them all paid off by the time we got married. Nevertheless, I learned I didn't want my own kids to have to deal with the burden of servicing student loans as I literally lived on a mattress on the floor in a cheap, small sublet room and only had belongings that would fit in one suitcase for those first 5 years. That was my version of NYC on a budget for me while I paid off the double digit interest rate loans working 6 days a week. In our case, it resulted in delaying marriage and starting a family as we just were not ready to do that in our 20's. That turned out to be a huge benefit as it helped us financially as our careers were both in full swing by the time we even had kids (ages 32 & 35 respectively when our first was born).

We are also of the opinion that the kids can help out by working in high school and college (Summers, Holidays, Weekends) and can take advantage of paid internships and assistantships to help learn the value of a hard earned buck and contribute to the funds being used for their education. Again, that was our experience as high school and college students since we both worked to help raise funds, as well as had paid internships and assistantships along with scholarships. So we made our kids work because that was our experience and it seemed to turn out fine for us. :mrgreen: In addition, choosing a venue for their schooling that provides what they need, yet is economical in terms of costs, should be a keen part of the decision making process. Going to a school that has out of state tuition that is double what they could get in state? Forget about it! Picking a school where they would come out with student loan debt? Forget about it! Going to a school that didn't provide an assistantship, scholarship, or have a plethora of internships available for those willing to pursue and apply? Forget about it! Joining a fraternity or sorority? Forget about it! We did not have issues saying "No!" or at least guiding the decision to a no when needed.

Funding your kids education is standard Baby Step 5 stuff in Ramsey land: https://www.daveramsey.com/blog/saving- ... position=5

As soon as our kids had a SS#, we opened up an UTMA for each of them and stashed away in the early years into their accounts. 529's didn't exist when we started. We contributed each and every year to their accounts. We set out with a goal their educations would be fully funded with the savings in 100% equities, and would cash flow the rest come college time. The timeline of saving and investing for not only 18 years, but when you add the 4 years of attending undergraduate school and the additional years for graduate school, means you are investing for a period of 22-26 years. Net result in our case - the kids graduated with all of their degrees debt free and the final tuition bill for the last graduate degree was paid out of the college fund in January of 2019 and the final rent bill in June. There were plenty of leftover savings in their college accounts which we turned over to them and made for a nice way to start their working careers.

Goal accomplished. No debt. Degrees obtained. Working careers started.

Saving for retirement, a home, and college education(s) can all be accomplished with planning, diligence, and remaining focused on the goals. It's so early in the game, I wouldn't stress about it for a few months until he is born, Mom and child are doing well.

The wrench thrown into your equation is your student loan debt. :idea: Truth be told - you should be knocking out the student loan debt as priority number one so you can then save for retirement and a home and his college education. How large is the debt and what is your timeline for knocking it out? How will the household income change over the next few years with the child (maternity leave, day care, etc...)? How much will that impact being able to service the student loan debt? Once the student loans are paid off, you can then start saving for retirement, the home, and saving for a college education. I wouldn't be worrying about an EFC and your FAFSA. That's placing the cart a few blocks ahead of the horse at this point. I would be worrying about paying off all the debt ASAP with your current income so you can move on to the other saving goals.

Either way - whether you fund his education or he funds it or a combination of both - it can all work out. You have options. On the front end of your journey, you will have to delay a home purchase until your debt is paid off. On the back end of the working journey, you can utilize the empty nest years and once you hit 50, the catch up contribution years for retirement savings with both of you working can boost things quite a bit.
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winterfan
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Re: Parents vs. Kids Paying for College

Post by winterfan » Wed Jan 01, 2020 7:38 am

I really don't like debt. I had loans, but I don't want to saddle my kids with them. Unless kids are starting out at community college and living at home, I think it's really difficult for kids to pay for college without parental help. Our state school costs over 14K a year for tuition alone. That's pretty tough for an 18 year old a year old to swing without loans, especially you have to pay for room and board too.

My opinion is that for most professional people, there is always room in the budget somewhere to squeeze a little money out to save for college without hampering retirement savings. It doesn't have to be either/or. How about just funneling your child tax credit towards college every year? Or if you kids are in daycare, just moving some of that money to college savings once they start kindergarten? Every bit helps.
Last edited by winterfan on Wed Jan 01, 2020 8:12 am, edited 1 time in total.

crg11
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Re: Parents vs. Kids Paying for College

Post by crg11 » Wed Jan 01, 2020 7:58 am

I was the first person in our entire family line to have ever gone to and graduated from a 4-year college and all of us were figuring out how to make this work on the fly.

My parents did not contribute to my college education costs other than co-signing on loans (which I paid for 100%). It was their goal to have us pay our way through college and learn from our choices, whether good or bad. And I think they were really successful with this strategy and I learned a lot about my finances because of it. And boy would I have made a lot of changes if I knew what I know now, 16 years after graduating and having JUST paid my last college loan off late last year.

With my kids, I plan on following a similar strategy of not paying for college for my kids, unless something major changes with my financial outlook in the next 15 years. My major strategy changes compared to my experience going through college will include:

- 529s to cover basic expenses like books, computers, etc. 529s will NOT cover tuition unless (luckily) there is enough left over.
- Starting financial education early on for my kids so they fully understand the short and long term effects of college loans on their finances. I really wish I had this when it was me back in the day.
- Strongly advocating for starting at a community college / online program that is much lower cost and can get credits transferred into a 4 year college/university only when it makes sense. In hindsight, I could have cut my college loans in half if I had pursued this strategy myself.
- Really hammering home the value of doing well in school and (if applicable) athletics and hope to get them on a good footing for scholarships, if necessary, to help cut down costs even more.
- Come to an agreement with my kids on whether to/how to work through college, so their loans post college are as small as possible, balanced with not overworking them.
- Determining whether it makes sense for me to co-sign loans or not (TBD).

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Re: Parents vs. Kids Paying for College

Post by flaccidsteele » Wed Jan 01, 2020 8:02 am

pharmermummles wrote:
Wed Jan 01, 2020 4:28 am
So my question is this: to what degree should we feel obligated to fund our son's education? I know this is a personal question, one I never really considered until recently. But aside from the "morality" of it, there are real mathematical considerations. We could contribute to a 529 now, receive state tax deductions, and enjoy tax-free growth for the next 18 years. Doing so is objectively cheaper for us than taking out and later paying interest on what could be significant student loans would be for our son, or for us if we have the means and intent to help him at that time. But saving for college would also significantly hamper our current goal of saving for a down payment for a new home, which is our largest current financial goal (with retirement accounts maximized). Is it selfish or even financially foolish of us to pursue our personal financial goals now instead of saving for our child's education (which he may or may not pursue in 18 years)?
I didn’t appreciate college when I knew my parents would pay for it

That’s probably why I failed a couple times and didn’t take my studies seriously

My sibling was the same

Not surprising, as money isn’t valued when it is just handed out like candy

You don’t need to set yourself on fire to keep other people warm
Last edited by flaccidsteele on Wed Jan 01, 2020 8:10 am, edited 1 time in total.
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Re: Parents vs. Kids Paying for College

Post by Jack FFR1846 » Wed Jan 01, 2020 8:05 am

Old_Dollar wrote:
Wed Jan 01, 2020 5:15 am
Anyone can get a loan for University.
I hear this often here. Besides Stafford, what loans do you think students can take WITHOUT A COSIGNER?
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Re: Parents vs. Kids Paying for College

Post by Triple digit golfer » Wed Jan 01, 2020 8:14 am

winterfan wrote:
Wed Jan 01, 2020 7:38 am
I really don't like debt. I wouldn't want to saddle my kids with it when they are just starting out. Even 10K-20K in debt is too much for me and I think that is on the low side today. My opinion is, that for most professional working people, there is always room in the budget to squeeze a little money out to save for college without hampering retirement savings. It doesn't have to be either/or.

Personally, I worked about 30 hours a week in college and was expected to pay a good chunk of my tuition. I think working during college (and HS for that matter) is good for kids. I would expect my kid to contribute something, but I don't want them to graduate with loans.
I agree with every word of this.

My ideal situation is to pay for about 50% via taxable/529 savings, have my daughter work to pay 25%, and pay 25% via cash flow. There are obviously a WHOLE bunch of variables, though.

I would not put one cent in 529 plan unless our retirement accounts were maxed first. If we maxed for years, we can likely afford to cash flow college when the time comes by stopping contributions. If we haven't been maxing, then when college comes we either slow or stop contributions to help, or we are behind on retirement and can't help. Point being, even if you don't contribute to 529 plan, you have options later on if you're still working. If you're not still working, either you're retired and can likely afford to help, or you're out of work and will be glad all that money you need isn't in a 529 plan.

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Re: Parents vs. Kids Paying for College

Post by runner3081 » Wed Jan 01, 2020 8:17 am

It is totally up to you, drown out the noise and do what you feel is right.

We are going to pay books + tuition for a community college during the first two years. Then, we will pay tuition for two years at an in-state university.

If our daughter chooses to live at home during both, she will walk away loan free. If, however, she opts to live in a dorm, go out of state, etc, she will be responsible for the difference.

Her choice at that point if she wants loans or not.

This is similar what my parents did for me. I walked away with 12K of loans. Years 1-2 no loans living at home going to CC, then transferred to an in-state school and worked in the dorms both years for discounted room and board year 1 and free in year 2.

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Watty
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Re: Parents vs. Kids Paying for College

Post by Watty » Wed Jan 01, 2020 8:19 am

pharmermummles wrote:
Wed Jan 01, 2020 4:28 am
So my question is this: to what degree should we feel obligated to fund our son's education? I know this is a personal question, one I never really considered until recently.
A few points;


1) A saying about the mythical town of Lake Wobegon is that "all the kids are above average". In the real world by definition half the kids are below average so you need to be prepared for that. For some people having financial pressure in college works out, but for other people that can cause them to fail. My son was a marginal student in both high school and college. We are pretty middle class compared to most posters here but we were willing and able to pay for him to go to a state university where he really struggled with some of the advanced math classes and had to take some of them several time. I have no doubt that if he had the financial pressure of taking out loans and paying for college himself that he would have given up and dropped out. He managed to graduate Computer Science degree and is now thriving in his career and making more than I ever did.

An old joke; "You call the doctor that graduates at the top of their class summa cum laude. What do you call the doctor that graduates at the bottom of their class? Answer: Doctor." You may find yourself in a position where your main focus is just on getting your kid through college.

Lots of people will likely post about how well they did after paying for their own college(good for them) but you will not hear about the people that are working at Walmart after they dropped out of college.

2) Until you have your own student loans paid off it makes little sense to save for your kids college.

3) You mentioned having a high income. A big question is what you will do with the money if you do not pay for your kids college. I would not feel right if I did something like owning a series of expensive sports cars then told my kid that I was not willing to pay anything for his college. Doing something like that can impact your relationship with your kids when they are adults if they resent your choices.

4) There are a few specific college savings plans that may have some tax advantages but for right now you can just focus on building up your net worth. If you have a high net worth when your kid is ready to go to college you can shift the money around then even if you do not have a lot of specific college savings.

5) One of the best things you can do for your kids is to make sure that they will not need to support you when you are elderly. I know people that have had to do that and they love their parents but it is hard of them and especially for their spouses who see a lot of the families resources being used to support the inlaws. Put your retirement savings ahead of college savings.


6) Being willing to pay for college does not need to be unconditional. Our limit was we would pay for a state university and he had to select a degree that lead to a career. He could pick whatever degree he wanted and it did not have to be a high paying field but a high percentage of graduates needed to be able to get jobs in their field. When he was in high school and selecting a college and major I joked with him that when I dropped him off at college I was going to drop him off at the college placement center and not the dorm because he was going to vocational school. This turned out not be be an issue for use since he was never interested in any major that was not real marketable.

Likewise we were not willing to pay for him to party for four years.

7) Since we were paying for his college we also put in the rule that he could not work during the school year unless it was in a job related to his major. Our reasoning was that if he had spare time then it was more cost effective for him to study and take extra classes instead of working at a job flipping burgers. We are glad that we did this, one of his roommates his freshman year was working at a Taco Bell and would frequently have to work until late at night and that greatly impacted his grades. By late in his sophomore year he was able to get a job at the campus computer center which gave him so good work experience which really helped when he was looking for his first job.

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Re: Parents vs. Kids Paying for College

Post by KlangFool » Wed Jan 01, 2020 8:26 am

OP,

It is very simple.

1)Can you afford to help?

2) How much can you afford to pay?

This is the same as buying any luxury good. Many people assume that they will be fully employed continuously until retirement age. So, they spent money on many luxuries. Then, some of them are permanently unemployed or underemployed in their 40s and 50s.

I know my numbers. Hence, I only pay for college education if my investment is 1 million or more. I was unemployed for more than 1 year a few times. But, my kids got lucky. I made my number. So, I pay for college education.

Klangfool

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Re: Parents vs. Kids Paying for College

Post by stoptothink » Wed Jan 01, 2020 8:29 am

pharmermummles wrote:
Wed Jan 01, 2020 4:28 am
So my question is this: to what degree should we feel obligated to fund our son's education?
Non whatsoever. I received exactly zero dollars in help from my parents to fund 11yrs of education (finished PhD in '12). I worked, literally full-time the entire way yet managed to finish on-time and without a penny in debt. I have 6 siblings, 4 of whom have degrees (last one graduated this past fall), all of whom also didn't get a penny of assistance. My wife, similar, she's actually finishing her undergrad right now and we are cash-flowing the whole thing. IMO, having to figure it out myself (not only working, but making major financial decisions about where to attend, forcing myself to budget) was a huge learning lesson, and my wife 100% agrees.

That being said, we are in the fortunate position where we are on a trajectory for FIRE, can easily max out all retirement vehicles and are about to pay off our home this year (in 5yrs total), so 529s for my kids (7 and 4) is kind of the next logical move. We get a state tax deduction and simply maxing that for a handful of years will be enough to fund their education (if they choose to attend our cost-effective local universities). We will be funding their education (they both already have more than 2yrs of tuition + fees at today's costs), but we felt no obligation to do so, and I don't think we will be even telling them of this until they are right in the middle of making decisions about where to attend. I want them to go through the same process we had to, figuring out what is the best fit for them (and finances is a major part of that), before we let them know it's paid for. And, like others, we are not just giving them a blank check so they can attend some exorbitantly expensive university and have the "college experience". If they are intent on doing that, they'll have to figure out on their own how to fund the difference.
Last edited by stoptothink on Wed Jan 01, 2020 8:31 am, edited 1 time in total.

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Re: Parents vs. Kids Paying for College

Post by DiploInvestor » Wed Jan 01, 2020 8:30 am

pharmermummles wrote:
Wed Jan 01, 2020 4:28 am
I have been reading some recent posts on the board regarding the difficulties of managing higher education expenses and large EFCs.
...

Is it selfish or even financially foolish of us to pursue our personal financial goals now instead of saving for our child's education (which he may or may not pursue in 18 years)?
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Re: Parents vs. Kids Paying for College

Post by TomatoTomahto » Wed Jan 01, 2020 8:33 am

Jack FFR1846 wrote:
Wed Jan 01, 2020 8:05 am
Old_Dollar wrote:
Wed Jan 01, 2020 5:15 am
Anyone can get a loan for University.
I hear this often here. Besides Stafford, what loans do you think students can take WITHOUT A COSIGNER?
Yeah, I think the availability of those loans rises to the level of Great Urban Myth.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Harry Livermore
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Re: Parents vs. Kids Paying for College

Post by Harry Livermore » Wed Jan 01, 2020 9:05 am

I have posted a couple of times about this, so I won't type my usual thread-killing long screed.
We wanted to give our kids the gift of higher education, or at least remove as much of the burden as we could. We started accounts as soon as they had a SS number. We added to these accounts whatever we could, while we were also saving for retirement.
We are on track to retire worry-free. AND our kids' 529s and Coverdells will likely cover 75%-100% of costs. Our oldest son is set to get his BA in 2021. And congratulate me! Our daughter just sent in a deposit for the school of her choice, a well-respected state school (out of state for us) which gave her a really nice merit award that brings it right into our zone. Youngest is 13 and his 529 is also fat (we have temporarily suspended contributions to his while we get a better sense if we'll need to cashflow the other two, or alternately, be able to use some of their leftover 529 for him)
All three kids will be expected to take small fed loans. Oldest is currently borrowing $2,500/ year. We will see what daughter will do once we get an actual bill. We want them to have skin in the game (as OP did)
Please note that this did not prevent us from building a multi-7-figure retirement portfolio, plus owning a couple of rental properties. We have been blessed and lucky... but also had a plan and sacrificed a teensy bit; used cars, low cost (but quality) furniture, modest vacations, the usual BH or MMM frugal stuff.
That is how my family is approaching it... OUR personal choice; and every poster with kids will also have a story and personal choice.
OK, I can't help it, I wrote a long screed.
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Re: Parents vs. Kids Paying for College

Post by OnTrack2020 » Wed Jan 01, 2020 9:35 am

I believe somewhere the culture shifted----either that or the kids were told that parents are expected to pay for their education. When you start having "college week" in the 5th grade, there is a problem, and it comes directly from our education system. We have never been under the assumption that parents need to pay for education, but here we are paying for our own kids' education, as well as they have to chip in (depending on circumstances).

I'm not sure how as a society we are expecting kids to pay for education? They normally can't start working until they are around age 16, and the student loans they get during their freshman year of college are only $5500. When in college, work study is only 16-17 hours per week. Unless they are going to community college for the first 2 years, there seems to be somewhat of a financial disconnect here OP. But as OP mentioned, his family still did help him somewhat pay for college. It all depends on what the somewhat amounted to in $$.

We did not use a 529. The monies used for two of our kids' education came straight from taxable monies we had set aside, and we didn't put very much aside per month---maybe $100. The other two kids still in high school are also in taxable accounts. I think one of them wants to pursue higher education. If not used for education, it will go to help the child with housing. You will not really have an idea if your child is on the college track until later junior high or first two years of high school. Also, my son and his friends who played a lot of computer games when they were young all wanted to go to college to study computer science. I can't tell you how many of them dropped out of college in the first year or switched majors.

My husband could have retired maybe a year or so ago if we hadn't paid for our kids' education. But all is good. Yesterday was his last day of work.
Last edited by OnTrack2020 on Wed Jan 01, 2020 9:44 am, edited 2 times in total.

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Re: Parents vs. Kids Paying for College

Post by SchruteB&B » Wed Jan 01, 2020 9:36 am

Jack FFR1846 wrote:
Wed Jan 01, 2020 8:05 am
Old_Dollar wrote:
Wed Jan 01, 2020 5:15 am
Anyone can get a loan for University.
I hear this often here. Besides Stafford, what loans do you think students can take WITHOUT A COSIGNER?
Agreed, this is all that exists. $27k for four years, total. Some posters do seem to exaggerate the ease and the amount of loans available.

And I am of the opinion that how hard a person works is very individual. My sibling and I both had our college educations completely paid for by our parents and we both worked extremely hard and got excellent grades in college. Other posters have had or have seen different results. I just don’t think you can generalize that if you pay for your child’s college they won’t appreciate it. I definitely did.

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Re: Parents vs. Kids Paying for College

Post by Xrayman69 » Wed Jan 01, 2020 9:38 am

OP, Congratulations on your impending birth. Happy New Years.

My situation very similar, paid for my own way through undergrad, grad, and post grad. Went to community college and paid for it by working- no debt. Attended state university self funded and no debt. Qualified for graduate degrees at private universities and required significant school loans with high single digit interest rates (no co-signer from parents as this would only reduce interest rate by a fraction of a percent and leave them at risk - I would have never failed out but accidents do occur for which they would not have been able to afford my debt).

My spouse and I intentionally did not start our family until later in life intentionally because this is a choice of our having limited resources due to late start in professional life. Intentionally starting a family is a choice and choices require decisions about how your family allocates resources. Currently you don’t have unlimited resources and therefore the choice of funding one aspect may require not funding another choice (at this time). Your and your wife must define your goals (financially) and then develop a strategy that is realistic, then execute said plan. Also understand that plans cane and should evolve as your situation/career evolves.

Life is hopefully long and hopefully filled with joy with your family. It’s a journey so enjoy the path but remain disciplined and live within your means based upon your goals and values. Some basic principles from most BH is that you must rid yourself of high interest debt. Save for your retirement accounts to maximize your available accounts and matches and/or tax advantages.

My personal opinion is that you are NOT morally obligated to fund your children’s education at the expense of you and your wife’s own financial well being - making sure that you will ALWAYS have safe shelter, food, and clothing. We can all hope, wish, pray etc.... that our children will understand and value an education and or even appreciate how hard it is to earn money. We all also hope and pray that our relationship with our children will be forever with love and gratitude in our older years. What I’m saying is do NOT depend on anyone to care for you or your wife in retirement other than yourselves (your children may not have the ability, gratitude, or desire to care for you).

Paying or funding your child’# higher education is a WANT not a need. Your savings and preparation for retirement is a NEED (albeit ostensibly a long ways away - but trust me time goes by fast). As you progress in your careers, live within your means, and further advance your financial stability you will likely be able to direct some funds into the buckets of WANTS which includes college savings. It’s not an all or nothing scenario. Live life reasonably within your means and enjoy the journey. It’s also OK to spend some money on thing’s or experiences that contributes to a joyful life for you and your family on this journey as well.

Maximize your retirement accounts first to grow large enough and allow compound interest and time to do its magic. until this is full every year this is probably best as primary bucket. If able this is The hedge to fund higher education costs as well. Don’t pull money from retirement accounts to fund college but at that time you can decrease funding retirement to fund college costs if there is no dedicated college savings account. Thus your retirement account maximizing and stability is likely a more flexible strategy to cover NEED and if able offset and underwrite the WANT of helping your child with college.
Last edited by Xrayman69 on Wed Jan 01, 2020 9:43 am, edited 1 time in total.

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Re: Parents vs. Kids Paying for College

Post by OnTrack2020 » Wed Jan 01, 2020 9:42 am

SchruteB&B wrote:
Wed Jan 01, 2020 9:36 am
Jack FFR1846 wrote:
Wed Jan 01, 2020 8:05 am
Old_Dollar wrote:
Wed Jan 01, 2020 5:15 am
Anyone can get a loan for University.
I hear this often here. Besides Stafford, what loans do you think students can take WITHOUT A COSIGNER?
Agreed, this is all that exists. $27k for four years, total. Some posters do seem to exaggerate the ease and the amount of loans available.

And I am of the opinion that how hard a person works is very individual. My sibling and I both had our college educations completely paid for by our parents and we both worked extremely hard and got excellent grades in college. Other posters have had or have seen different results. I just don’t think you can generalize that if you pay for your child’s college they won’t appreciate it. I definitely did.
Our son came back to his dorm room after classes were over a few years back and his roommate's belongings were gone. I asked our son later what happened, and he mentioned something about his loan not going through. I'm with you. It's not always as easy as it seems.

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Re: Parents vs. Kids Paying for College

Post by Halicar » Wed Jan 01, 2020 9:45 am

pharmermummles wrote:
Wed Jan 01, 2020 4:28 am
We would like to help him out, but our retirement will be coming first.
Well, since you asked, I find this shockingly selfish. I can't even imagine saying that about my son.

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Re: Parents vs. Kids Paying for College

Post by Jack FFR1846 » Wed Jan 01, 2020 9:49 am

I'm glad I'm getting confirmation. Some years ago, my older son wanted to try to "pay his own way" through student loans in his own name. We looked at our local credit union, a bank where I did business at the time, private loans and such. ALL of them required a parent cosigner. That's not a student loan.....it's a parent loan.

So.......You can't get a loan for retirement......and......Besides Staffords, your kid can't get a loan for school.
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Re: Parents vs. Kids Paying for College

Post by aristotelian » Wed Jan 01, 2020 9:50 am

I think it is fine for them to have some skin in the game. Our state gives us a small tac deduction per kid so we contributed up to that limit. Should work out to a couple years at in state university. They can be on the hook for the rest.

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Re: Parents vs. Kids Paying for College

Post by Nupey03 » Wed Jan 01, 2020 9:51 am

I was lucky enough to get somewhat of a full ride to college (outside of general living expenses for 4 years). However, something that I looked at was if my parents were to put $10k into the markets (let’s say 100% VTI) the day I was born, it would’ve yielded close to $80k the year that I began college... :moneybag :oops:

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Re: Parents vs. Kids Paying for College

Post by Broken Man 1999 » Wed Jan 01, 2020 9:52 am

Obligation? No. Paying for college for children is not an obligation.

I never considered not paying for DDs education. I wanted to pay for their college. And, I did. Scholarships certainly helped. They graduated with ZERO student debt.

BUT, that was over 20 years ago. I'm not sure some posters truly appreciate what college costs today. Now, we can bay at the moon all night about what it should be, but at the end of the day, college is expensive.

One thing that really helped my generation to be able to afford to pay for our children to attend college was that many of us had pensions. DW and I had pensions + 401K plans at MegaCorp. So, we didn't need to worry all that much about retirement, assuming we stayed on the payroll.

So, after getting DDs through college and well launched into life, I turned my attention to the grandchildren as they started coming along. Again, I feel no obligation, it is just my desire to do what I can to get them launched into life with no debt as well. My DDs face a much different environment today on two fronts: college expenses for their children, and the ever declining number of employees receiving pensions.

I don't agree with the idea that one needs skin in the game to be a better whatever. When DDs were going to college they worked part time. I told them if they needed more help, it was available from me, as their priority was to be a student. For me, that priority hasn't changed when I consider the grandchildren. They are first and foremost students.

So, OP, let your conscience be your guide. There is no right or wrong answer, it all boils down to a very personal choice for YOU to make.

Broken Man 1999
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Re: Parents vs. Kids Paying for College

Post by Minty » Wed Jan 01, 2020 9:57 am

Our own parents were able to offer us little help for college (although a free place to live in NYC is not nothing). However, we cheerfully pay for tuition, room, board, and books for our two kids at private schools at sticker price (except this year we have about a 10% discount because both are enrolled simultaneously). About half was saved in 529s. While we wanted to pay (the kids are reasonably motivated and hard working) we also felt obligated to pay. With their high school records, they could have gone to school for free at several places, either based on a merit scholarship or at a school rich enough to meet financial need with grants. Because of parental income, they were ineligible for more than a small amount of need-based financial aid. It did not seem fair to disadvantage them because of our income, while not giving them the benefit of that income. The calculation would have been different if we had to sacrifice our own retirement savings, but one who has a satisfactory income need not sacrifice retirement savings. We like other posters in this and similar threads drove older cars and took fewer expensive vacations. But again I don't think it would have been fair to enjoy a fancy lifestyle at the expense of the children's education. Of course, this is just my opinion.
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Re: Parents vs. Kids Paying for College

Post by cshell2 » Wed Jan 01, 2020 10:21 am

Halicar wrote:
Wed Jan 01, 2020 9:45 am
pharmermummles wrote:
Wed Jan 01, 2020 4:28 am
We would like to help him out, but our retirement will be coming first.
Well, since you asked, I find this shockingly selfish. I can't even imagine saying that about my son.
I don't think that's selfish at all. Paying for college is a wonderful gift, but setting yourself up to not be a burden on your children in your old age is an even better one IMO. I'm in my 50's and have friends that are really struggling with caring for aging parents and I'm so glad I don't have to worry about that. My mom and stepdad did not help me with college, neither one of them went and they're not big believers in it being necessary so why would they? However, they are financially set and it makes me happy to see them traveling the world in their 70's and not for want of anything.

Plus, putting retirement FIRST doesn't mean not helping with college. I'm paying my kid's way through college (well, me and financial aid), but that does not mean I didn't prioritize retirement first.

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Re: Parents vs. Kids Paying for College

Post by flaccidsteele » Wed Jan 01, 2020 10:29 am

Watty wrote:
Wed Jan 01, 2020 8:19 am
7) Since we were paying for his college we also put in the rule that he could not work during the school year unless it was in a job related to his major. Our reasoning was that if he had spare time then it was more cost effective for him to study and take extra classes instead of working at a job flipping burgers.
My parents paid for my university and had a rule like this

I didn’t work and didn’t study

And then I failed

Free money is never as appreciated as earned money

Working (at any job) > free money
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

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Re: Parents vs. Kids Paying for College

Post by TomatoTomahto » Wed Jan 01, 2020 10:31 am

Broken Man 1999 wrote:
Wed Jan 01, 2020 9:52 am
Obligation? No. Paying for college for children is not an obligation.
Depending on where you live and the judge, if you get a divorce, you might find that it is legally considered an obligation.

In my case, since it was congruent with my views, I didn't really mind and would have contributed regardless.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Re: Parents vs. Kids Paying for College

Post by KlangFool » Wed Jan 01, 2020 10:36 am

Nupey03 wrote:
Wed Jan 01, 2020 9:51 am
I was lucky enough to get somewhat of a full ride to college (outside of general living expenses for 4 years). However, something that I looked at was if my parents were to put $10k into the markets (let’s say 100% VTI) the day I was born, it would’ve yielded close to $80k the year that I began college... :moneybag :oops:
Nupey03,

And, why should that matters to you? It is still your parent's money. They should spend it on themselves. You are not entitled to their money.

KlangFool

cshell2
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Re: Parents vs. Kids Paying for College

Post by cshell2 » Wed Jan 01, 2020 10:38 am

SchruteB&B wrote:
Wed Jan 01, 2020 9:36 am

And I am of the opinion that how hard a person works is very individual. My sibling and I both had our college educations completely paid for by our parents and we both worked extremely hard and got excellent grades in college. Other posters have had or have seen different results. I just don’t think you can generalize that if you pay for your child’s college they won’t appreciate it. I definitely did.
+1

So many like to throw out examples of the trust fund babies that partied through college and failed all their classes, but I'm sure there are MANY students getting their education paid for by someone else (parents, scholarships, financial aid) that are very appreciative and work hard. Some people are even more motivated to do so if they know it's on someone else's dime. I paid my own way and dropped a lot of classes. I wasn't accountable to anyone but myself and I was easy to convince it was worth losing the money over putting in the extra effort (classes were a lot cheaper then though!)

I mean, right now my son is in a private high school. I pay his tuition and he doesn't have to pay for food or books or rent yet he's pulled straight A's the past 2 years. Not sure why he'll all of a sudden change in 8 months when it's college. Well...actually it might. The kid pulls straight A's without having to study now, so college is probably going to be a shock to the system and he's going to have to learn time management and good study habits to continue to be successful. However, the bank of mom is not going to keep cranking out money if he doesn't progress.

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Re: Parents vs. Kids Paying for College

Post by Normchad » Wed Jan 01, 2020 10:42 am

For us, we view the entire family as a single team. And we are all actively engaged (or at the ready) to help and assist each other in being successful in all endeavors. So for college, yes, we are all engaged (including the student) in doing whatever we can do to help her make a better life for herself. She’s working very hard studying and figuring out the world. The wife and I are working hard to pay for it, save for our own futures, etc.

This is our approach for everything. What can we all be doing to make each other successful, or overcome obstacles, etc. for those that pay for the college, but neglect retirement savings, it might be ok fir their family. With limited resources, the kids might want to help the parents in later years, just as the parents helped them earlier. If you spent $300K and your kid became a surgeon, I’m sure they could help you more than 300K worth later on.....

Someone else alluded to it. What are you going to spend your money on? If you’re not going to use it to help your loved ones, what are you doing?

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Re: Parents vs. Kids Paying for College

Post by SQRT » Wed Jan 01, 2020 10:48 am

I wanted to give my daughter as much as I could. Paid all education ( including post grad), bought her a car, gave her an allowance. She is now 35 well employed and displays no signs of a sense of entitlement. I’m proud of her.

My personal view is that the value of hardship is overrated, but it depends on the child. If you think paying for an education will “spoil” your child, don’t do it. I don’t really see how graduating with a lot of student debt will enhance a person’s character but maybe sometimes?

Would I have worked less getting my education if my parents had funded it (they didn’t)? Doubt it.

But obviously it will depend to a large degree on how much you can afford. I was lucky enough (daughter too I guess) that I could afford her education as well as a well funded early retirement for me. So felt like a no brainer.
Last edited by SQRT on Thu Jan 02, 2020 8:39 am, edited 2 times in total.

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Re: Parents vs. Kids Paying for College

Post by SQRT » Wed Jan 01, 2020 10:49 am

Normchad wrote:
Wed Jan 01, 2020 10:42 am
For us, we view the entire family as a single team. And we are all actively engaged (or at the ready) to help and assist each other in being successful in all endeavors. So for college, yes, we are all engaged (including the student) in doing whatever we can do to help her make a better life for herself. She’s working very hard studying and figuring out the world. The wife and I are working hard to pay for it, save for our own futures, etc.

This is our approach for everything. What can we all be doing to make each other successful, or overcome obstacles, etc. for those that pay for the college, but neglect retirement savings, it might be ok fir their family. With limited resources, the kids might want to help the parents in later years, just as the parents helped them earlier. If you spent $300K and your kid became a surgeon, I’m sure they could help you more than 300K worth later on.....

Someone else alluded to it. What are you going to spend your money on? If you’re not going to use it to help your loved ones, what are you doing?
Good post. I agree.

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UpsetRaptor
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Re: Parents vs. Kids Paying for College

Post by UpsetRaptor » Wed Jan 01, 2020 10:56 am

Another thing to consider: Studies show that students who have to work during college are more likely to have lower grades and not complete their degree.

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Re: Parents vs. Kids Paying for College

Post by DDDDD » Wed Jan 01, 2020 11:09 am

1. Back in the day, my DW and I were able to pay for our college educations with money we made during our summer and school year employment. It is rare that this could occur now.

2. So....we set money aside using 529 plans for our 3 kids college education. Our personal savings along with the 529 plan provided enough to pay for all their tuition/expenses for college without effecting our retirement,etc.

3. Even though we could afford to pay for all of their education, we thought it was important for them to have some "skin in the game". So we estimated what we had paid per year for our college education back then and made them pay that portion of their expenses.

4. Every Fall we would sit down with their college bills and figure out their payment and our payment....during these conversations we would talk about debt, investing, loans, emergency funds, credit cards, etc.

5. They have all graduated, and have moved out into the working world. I appreciate the "thank yous" I have received from them, and I am thankful that they participated and learned in the process as well.

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Re: Parents vs. Kids Paying for College

Post by ncbill » Wed Jan 01, 2020 11:09 am

cshell2 wrote:
Wed Jan 01, 2020 10:21 am
Halicar wrote:
Wed Jan 01, 2020 9:45 am
pharmermummles wrote:
Wed Jan 01, 2020 4:28 am
We would like to help him out, but our retirement will be coming first.
Well, since you asked, I find this shockingly selfish. I can't even imagine saying that about my son.
I don't think that's selfish at all. Paying for college is a wonderful gift, but setting yourself up to not be a burden on your children in your old age is an even better one IMO. I'm in my 50's and have friends that are really struggling with caring for aging parents and I'm so glad I don't have to worry about that. My mom and stepdad did not help me with college, neither one of them went and they're not big believers in it being necessary so why would they? However, they are financially set and it makes me happy to see them traveling the world in their 70's and not for want of anything.

Plus, putting retirement FIRST doesn't mean not helping with college. I'm paying my kid's way through college (well, me and financial aid), but that does not mean I didn't prioritize retirement first.
Had to leave a Fortune 500 company in my early 30s to care for an ill parent who had made poor life choices prior to their illness.

Unfortunately, while most with their disease die 8-10 years after diagnosis, my parent's young age meant that essentially doubled.

So we were never in a position to save for college...our kids both chose to use the military (via ROTC scholarships) to pay nearly all the costs for their undergraduate educations.

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Re: Parents vs. Kids Paying for College

Post by ZMonet » Wed Jan 01, 2020 11:18 am

SQRT wrote:
Wed Jan 01, 2020 10:49 am
Normchad wrote:
Wed Jan 01, 2020 10:42 am
For us, we view the entire family as a single team. And we are all actively engaged (or at the ready) to help and assist each other in being successful in all endeavors. So for college, yes, we are all engaged (including the student) in doing whatever we can do to help her make a better life for herself. She’s working very hard studying and figuring out the world. The wife and I are working hard to pay for it, save for our own futures, etc.

This is our approach for everything. What can we all be doing to make each other successful, or overcome obstacles, etc. for those that pay for the college, but neglect retirement savings, it might be ok fir their family. With limited resources, the kids might want to help the parents in later years, just as the parents helped them earlier. If you spent $300K and your kid became a surgeon, I’m sure they could help you more than 300K worth later on.....

Someone else alluded to it. What are you going to spend your money on? If you’re not going to use it to help your loved ones, what are you doing?
Good post. I agree.
+1 I think whether a does well in school that is fully funded is largely dependent on that kid's makeup and not the level (or lack of) college funding.

OP -- If what you are saying when you say your retirement comes first is that you won't fund college for your child and forever give up a comfortable retirement, then I agree with you. If it is that you want to retire early at 40 on a fat FIRE, then not so much.

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Re: Parents vs. Kids Paying for College

Post by Grt2bOutdoors » Wed Jan 01, 2020 11:19 am

You have 22 years to save for 4 years of college. Let me be more specific, state flagship university. Over 264 months (over 7,000 days) you saving for college should not be a hinderance to you living and saving for retirement. Use the Vanguard college savings planner to come up with a monthly number and include it in your budget. If you can not afford 4 years, then shoot for 3 years. The sooner you start the earlier the magic of compounding works for you.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Vulcan
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Re: Parents vs. Kids Paying for College

Post by Vulcan » Wed Jan 01, 2020 11:20 am

KlangFool wrote:
Wed Jan 01, 2020 8:26 am
OP,

It is very simple.

1)Can you afford to help?

2) How much can you afford to pay?

This is the same as buying any luxury good. Many people assume that they will be fully employed continuously until retirement age. So, they spent money on many luxuries. Then, some of them are permanently unemployed or underemployed in their 40s and 50s.

I know my numbers. Hence, I only pay for college education if my investment is 1 million or more. I was unemployed for more than 1 year a few times. But, my kids got lucky. I made my number. So, I pay for college education.
What if your portfolio drops under 1mil while kids are in college? Will you continue paying or insist on them dropping out or taking out loans?
If you torture the data long enough, it will confess to anything. ~Ronald Coase

BlueCable
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Re: Parents vs. Kids Paying for College

Post by BlueCable » Wed Jan 01, 2020 11:21 am

Halicar wrote:
Wed Jan 01, 2020 9:45 am
pharmermummles wrote:
Wed Jan 01, 2020 4:28 am
We would like to help him out, but our retirement will be coming first.
Well, since you asked, I find this shockingly selfish. I can't even imagine saying that about my son.
What would be worse: making your kids pay for their own college, or your retirement?

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Vulcan
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Re: Parents vs. Kids Paying for College

Post by Vulcan » Wed Jan 01, 2020 11:23 am

pharmermummles wrote:
Wed Jan 01, 2020 4:28 am
So my question is this: to what degree should we feel obligated to fund our son's education? I know this is a personal question, one I never really considered until recently. But aside from the "morality" of it, there are real mathematical considerations. We could contribute to a 529 now, receive state tax deductions, and enjoy tax-free growth for the next 18 years. Doing so is objectively cheaper for us than taking out and later paying interest on what could be significant student loans would be for our son, or for us if we have the means and intent to help him at that time. But saving for college would also significantly hamper our current goal of saving for a down payment for a new home, which is our largest current financial goal (with retirement accounts maximized). Is it selfish or even financially foolish of us to pursue our personal financial goals now instead of saving for our child's education (which he may or may not pursue in 18 years)?
Regardless of whether you will or will not pay for your kids college, the first financial priorities are the same, both in terms of setting yourself up for financial independence and to be better positioned for financial aid:

1. Max out all available retirement space (they have more years of growth than a 529, and are shielded from all finaid formulas)
2. Pay off the mortgage (home equity is fully or partially shielded from many finaid formulas)

Until then, not a penny to 529.

Simple enough.

Then during their college years you can redirect retirement contributions to cash flow college.
Even if you think your income is too high for financial aid, these steps are an insurance against income reduction while kids are in college.
Last edited by Vulcan on Wed Jan 01, 2020 11:28 am, edited 1 time in total.
If you torture the data long enough, it will confess to anything. ~Ronald Coase

chipperd
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Re: Parents vs. Kids Paying for College

Post by chipperd » Wed Jan 01, 2020 11:28 am

We have our kids pay 10% of all costs related to college (tuition, room, board, books, fees...). This is working out well for both sides as we can swing the other 90% without impacting our retirement and they have "skin in the game" (altho all 3 are intrinsically motivated, it's my parental insurance policy :D ).
Just how we do things. This seems to be a very subjective, value laden topic with the correct path best to be tailored to each kid.

KlangFool
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Re: Parents vs. Kids Paying for College

Post by KlangFool » Wed Jan 01, 2020 11:29 am

Vulcan wrote:
Wed Jan 01, 2020 11:20 am
KlangFool wrote:
Wed Jan 01, 2020 8:26 am
OP,

It is very simple.

1)Can you afford to help?

2) How much can you afford to pay?

This is the same as buying any luxury good. Many people assume that they will be fully employed continuously until retirement age. So, they spent money on many luxuries. Then, some of them are permanently unemployed or underemployed in their 40s and 50s.

I know my numbers. Hence, I only pay for college education if my investment is 1 million or more. I was unemployed for more than 1 year a few times. But, my kids got lucky. I made my number. So, I pay for college education.
What if your portfolio drops under 1mil while kids are in college? Will you continue paying or insist on them dropping out or taking out loans?
Vulcan,

Taking out loans or pay their own way. They each have about 20K to 30K of their own money.

I was unemployed for more than 1 year while my son started college. My daughter was about to start college before I found a job. If it lasted more than that, it would have gone that way.

KlangFool

stoptothink
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Re: Parents vs. Kids Paying for College

Post by stoptothink » Wed Jan 01, 2020 11:31 am

cshell2 wrote:
Wed Jan 01, 2020 10:21 am
Halicar wrote:
Wed Jan 01, 2020 9:45 am
pharmermummles wrote:
Wed Jan 01, 2020 4:28 am
We would like to help him out, but our retirement will be coming first.
Well, since you asked, I find this shockingly selfish. I can't even imagine saying that about my son.
I don't think that's selfish at all. Paying for college is a wonderful gift, but setting yourself up to not be a burden on your children in your old age is an even better one IMO. I'm in my 50's and have friends that are really struggling with caring for aging parents and I'm so glad I don't have to worry about that. My mom and stepdad did not help me with college, neither one of them went and they're not big believers in it being necessary so why would they? However, they are financially set and it makes me happy to see them traveling the world in their 70's and not for want of anything.

Plus, putting retirement FIRST doesn't mean not helping with college. I'm paying my kid's way through college (well, me and financial aid), but that does not mean I didn't prioritize retirement first.
+1. This thread is just another variation of the daily "how to pay for college" thread. Nothing posted in this thread is helping someone on the other side of the fence see the other perspective. With both my parents and in-laws in dire financial situations near retirement age, I am very thankful they did not attempt to help us (wife and I) finance our education as they both would likely have to be living with us at this point. IMO, this thread also is the perfect example of the socioeconomic divide on this board. So many posters who are "helping their kids because their parents helped them;" almost nobody who my wife and I grew up with got financial help from the parents. It just wasn't an expectation where we grew up.

We are very fortunate to be in a position to provide our children this gift, but there is no obligation whatsoever, and our financial stability comes first. PERIOD.

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Vulcan
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Re: Parents vs. Kids Paying for College

Post by Vulcan » Wed Jan 01, 2020 11:38 am

KlangFool wrote:
Wed Jan 01, 2020 11:29 am
Taking out loans or pay their own way. They each have about 20K to 30K of their own money.

I was unemployed for more than 1 year while my son started college. My daughter was about to start college before I found a job. If it lasted more than that, it would have gone that way.
A nice benefit of going to a (full need) private school vs state flagship is it becomes free if you lose your income (assuming typical taxable assets).
If you torture the data long enough, it will confess to anything. ~Ronald Coase

doneat53
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Re: Parents vs. Kids Paying for College

Post by doneat53 » Wed Jan 01, 2020 11:41 am

Another variable you may not have considered is the feeling parents get when they experience their children making decisions that impact their lives based on the finances. "I don't think I'll go to graduate school because I can't afford it". Granted it's their choice but if you are capable of helping out it becomes a much more tangible struggle. I'd set up 529's and put a little money in them just so you have the work done and a place to send extra funds or a place for grandparents to put gifts if they desire. Then back off and see how your own income profile develops and fund as you are able or as you choose.

doneat

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