Should we save for our son's college?

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guliver
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Re: Should we save for our son's college?

Post by guliver » Sat Apr 14, 2018 3:40 pm

GCD wrote:
Sat Apr 14, 2018 2:30 pm
A couple of thoughts...

OP, where are you from? Just curious. I was in Kyrgyzstan for work and it was interesting to see how "well" educated a certain segment of the population was. Education was free and the economy sucked so a lot of people were "professional" students. Many many people had multiple advanced degrees. I'm not sure what the quality of those degrees were. It seemed kind of hit or miss on their performance. So I can see how a foreign background would give you a different perspective on education.
Israel. Tuition there is ~$2500/year in top universities, and in my case (good grades & STEM field) I got a scholarship that covered tuition and living expenses. My PhD is from a US university, but that was on full scholarships too.
GCD wrote:
Sat Apr 14, 2018 2:30 pm
Add me to the should pay category. Max your 401K, IRA and 529. No reason you can't save for retirement and the kid's college at the same time. It's not an either/or thing. Max the tax advantaged stuff and let your lifestyle be dictated by what remains. Don't let your lifestyle dictate savings.
We are saving as much as we can regardless, maxing 401k & IRA's, and then in taxable account. My question is less about 'can I afford to save in 529'', but more about 'will I be spoiling my son by funding him'. But I never had to pay for my education, so it's hard for me to say...

guliver
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Re: Should we save for our son's college?

Post by guliver » Sat Apr 14, 2018 3:43 pm

Bastiat wrote:
Sat Apr 14, 2018 1:38 pm
We save for our children's education, but they will certainly have skin in the game, and will be paying for it themselves if they want a degree that isn't expected to provide a good return on the investment.
Interesting, I haven't realized is that I would still own the 529 account, not my son.

guliver
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Re: Should we save for our son's college?

Post by guliver » Sat Apr 14, 2018 3:46 pm

RickBoglehead wrote:
Sat Apr 14, 2018 12:31 pm
Checkout your state-specific 529, and also Utah's.
Just curious, why Utah of all places? We're based in NY so I think we have to take their plan to take the state deduction.

golfCaddy
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Re: Should we save for our son's college?

Post by golfCaddy » Sat Apr 14, 2018 3:49 pm

guliver wrote:
Sat Apr 14, 2018 3:40 pm
My question is less about 'can I afford to save in 529'', but more about 'will I be spoiling my son by funding him'.
This mentality may be more common among those 50+, who don't realize college is now much more expensive, even adjusted for inflation, than when they attended. Unless your kid gets a substantial scholarship or is attending a CC, it is no longer possible to pay your own way through school on some combination of summer/part-time jobs and direct student loans.

Bastiat
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Re: Should we save for our son's college?

Post by Bastiat » Sat Apr 14, 2018 3:56 pm

Carefreeap wrote:
Sat Apr 14, 2018 2:45 pm
That's pretty harsh. With that kind of attitude we wouldn't have any teachers, social workers or other noble, but low paying jobs.
The implicit assumption there is that we wouldn't have any teachers or social workers if people with those degrees didn't have college paid for by their parents, which is absurd.

The second assumption there is that I view a teaching degree or a degree in social work as a poor return on investment, and that I care whether you think how I spend my own money raising my own children is harsh or not.

Both of my parents (one of whom was a social worker and did very well) put themselves through college. I worked very hard and got a full-ride scholarship. I think we'd all tell you that we're better off for not having a college degree handed to us by our parents.

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DaftInvestor
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Re: Should we save for our son's college?

Post by DaftInvestor » Sat Apr 14, 2018 4:02 pm

Bastiat wrote:
Sat Apr 14, 2018 1:38 pm
DaftInvestor wrote:
Wed Mar 28, 2018 9:59 am
Regardless of what individuals believe - Here in the US - the government kind of assumes the parents, if they can afford to do so, will be helping out.
They do? According to whom? Who is "the government"?
According to US government policy on student financial aid.
If a student's parents can afford to pay for college the student is not eligible for for financial aid to cover the costs. If the student's parents can't afford it (along with student) - student is eligible for aid covering all costs. This implies the US government assume the parents will help if they can afford to do so. Not sure what other conclusion you can come to based on this policy.

GCD
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Re: Should we save for our son's college?

Post by GCD » Sat Apr 14, 2018 4:15 pm

guliver wrote:
Sat Apr 14, 2018 3:40 pm
Israel. Tuition there is ~$2500/year in top universities, and in my case (good grades & STEM field) I got a scholarship that covered tuition and living expenses. My PhD is from a US university, but that was on full scholarships too.
GCD wrote:
Sat Apr 14, 2018 2:30 pm
Add me to the should pay category. Max your 401K, IRA and 529. No reason you can't save for retirement and the kid's college at the same time. It's not an either/or thing. Max the tax advantaged stuff and let your lifestyle be dictated by what remains. Don't let your lifestyle dictate savings.
We are saving as much as we can regardless, maxing 401k & IRA's, and then in taxable account. My question is less about 'can I afford to save in 529'', but more about 'will I be spoiling my son by funding him'. But I never had to pay for my education, so it's hard for me to say...
Cool. That's interesting about Israeli college.

I guess spoiled is in the eye of the beholder. Lots of people in the 3rd world probably think my kids are spoiled because they have video games and ice cream.

maroon
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Re: Should we save for our son's college?

Post by maroon » Sat Apr 14, 2018 5:13 pm

Hi OP - My parents chose not to pay for my college under the guise of teaching me responsibility. Yes, it worked; I'm financially responsible. Would I recommend my parents' plan to others? No, I wouldn't. If you can save for your son's college, you'll potentially be lifting a huge burden from him later on.

guliver
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Re: Should we save for our son's college?

Post by guliver » Sat Apr 14, 2018 6:44 pm

maroon wrote:
Sat Apr 14, 2018 5:13 pm
Hi OP - My parents chose not to pay for my college under the guise of teaching me responsibility. Yes, it worked; I'm financially responsible. Would I recommend my parents' plan to others? No, I wouldn't. If you can save for your son's college, you'll potentially be lifting a huge burden from him later on.
One of the things that I didn't really understand is that financial aid is given to low-income students. It makes sense, but your options are better if your parents are poor, rather than wealthy but unwilling to fund you.

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Re: Should we save for our son's college?

Post by Grt2bOutdoors » Sat Apr 14, 2018 7:01 pm

OP - financial aid = loans. Merit aid = free. Grants = free.
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SeeMoe
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Re: Should we save for our son's college?

Post by SeeMoe » Sat Apr 14, 2018 8:17 pm

lthenderson wrote:
Wed Mar 28, 2018 8:49 am
We save for our kids college mostly for the tax break it provides us. Every state is different but in my state each spouse can deduct around $3600 per child per year from their state taxes.
Good point! We saved a lot of taxes when working by having two T-IRA accounts and then two 457b accounts too. It was fantastic savings letting us live well, take vacations and buy a new car every so often then. Plus add to our taxable Vanguard account of index funds. We rolled everything into two IRA accounts and take RMD’s the end of the year paying taxes in a lower tax bracket as retirees... Win, Win.....

SeeMoe.. :dollar
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guliver
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Re: Should we save for our son's college?

Post by guliver » Sat Apr 14, 2018 10:16 pm

Grt2bOutdoors wrote:
Sat Apr 14, 2018 7:01 pm
OP - financial aid = loans. Merit aid = free. Grants = free.
Thanks :D I was thinking 'financial aid' = free ...

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ClevrChico
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Re: Should we save for our son's college?

Post by ClevrChico » Sat Apr 14, 2018 10:32 pm

We live in a state with high income taxes, so a 529 is an easy decision for us. The trend is our state schools receive less funding annually and regular tuition increases make up the differences.

I want to do what is best for my kids, and I don't want to stress about paying tuition when the time arrives.

golfCaddy
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Re: Should we save for our son's college?

Post by golfCaddy » Sat Apr 14, 2018 11:11 pm

guliver wrote:
Sat Apr 14, 2018 6:44 pm
One of the things that I didn't really understand is that financial aid is given to low-income students. It makes sense, but your options are better if your parents are poor, rather than wealthy but unwilling to fund you.
Private colleges expect parents to pay if they can afford to do so. So for example, a student who could get admitted to an Ivy, is going to be in a much better position if his family income is below $65k/year than if his parents earn $200k/year, but are unwilling to provide any support.

Bastiat
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Re: Should we save for our son's college?

Post by Bastiat » Sun Apr 15, 2018 12:03 am

DaftInvestor wrote:
Sat Apr 14, 2018 4:02 pm
Bastiat wrote:
Sat Apr 14, 2018 1:38 pm
DaftInvestor wrote:
Wed Mar 28, 2018 9:59 am
Regardless of what individuals believe - Here in the US - the government kind of assumes the parents, if they can afford to do so, will be helping out.
They do? According to whom? Who is "the government"?
According to US government policy on student financial aid.
If a student's parents can afford to pay for college the student is not eligible for for financial aid to cover the costs. If the student's parents can't afford it (along with student) - student is eligible for aid covering all costs. This implies the US government assume the parents will help if they can afford to do so. Not sure what other conclusion you can come to based on this policy.
Where might one find that policy?

dak
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Re: Should we save for our son's college?

Post by dak » Sun Apr 15, 2018 12:41 am

Save or don't save is clearly an individual decision. At your income level, financial aid will not be forthcoming, and merit aid depends on the academic success of your student. Highly successful parents seem to expect that they will always have academically superior students - my observation is that this is by no means certain. In other words, OP - your son might end up being merely average and thus not end up garnering much, if any, merit money. He might be interested in a field where there is little merit money available. Either way, even with hard work through high school he may be locked out of the relatively small pool of merit funding available. Then what?

I would recommend spending some time on College Confidential in the financial aid forums. There are some real experts ( i.e. people that work at institutions of higher learning) the frequent the board there and can offer some great insights. My biggest takeaway from you situation is that your son will not qualify for need based aid unless your situation takes a dramatic turn for the worse - and nobody hopes that is the case!

donfairplay
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Re: Should we save for our son's college?

Post by donfairplay » Sun Apr 15, 2018 12:48 am

Where'd all the people who say 'change the locks at 18, and buy him a one way ticket to North Dakota' go?

Afty
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Re: Should we save for our son's college?

Post by Afty » Sun Apr 15, 2018 1:24 am

Bastiat wrote:
Sun Apr 15, 2018 12:03 am
DaftInvestor wrote:
Sat Apr 14, 2018 4:02 pm
Bastiat wrote:
Sat Apr 14, 2018 1:38 pm
DaftInvestor wrote:
Wed Mar 28, 2018 9:59 am
Regardless of what individuals believe - Here in the US - the government kind of assumes the parents, if they can afford to do so, will be helping out.
They do? According to whom? Who is "the government"?
According to US government policy on student financial aid.
If a student's parents can afford to pay for college the student is not eligible for for financial aid to cover the costs. If the student's parents can't afford it (along with student) - student is eligible for aid covering all costs. This implies the US government assume the parents will help if they can afford to do so. Not sure what other conclusion you can come to based on this policy.
Where might one find that policy?
https://studentaid.ed.gov/sa/fafsa/fill ... dependency
The federal student aid programs are based on the concept that it is primarily your and your family’s responsibility to pay for your education. A dependent student is assumed to have the support of parents, so the parents’ information has to be assessed along with the student’s, in order to get a full picture of the family’s financial strength.

MoneyMarathon
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Re: Should we save for our son's college?

Post by MoneyMarathon » Sun Apr 15, 2018 2:06 am

guliver wrote:
Wed Mar 28, 2018 8:36 am
We're foreign, and we (or our parents) never paid tuition in our life. So we're not used to the idea.
Something to consider is that high-income parents are worse than no parents or low-income parents, in the American system.

If the child can achieve age 24, get married, join the military, or otherwise demonstrate financial independence in a way that typically would involve a gap between high school and college in order to get a job and pay their own expenses in a separate residence -- if they, in short, can check one of the boxes for being independent on the FAFSA -- they will be eligible for all the need-based grants and interest-deferred loans that are available. Some of these are not merit based, so they're a sure thing, if you are not saddled with high-income parents. They may also be eligible for a much larger scholarship package at universities that offer those.

If the parents have low income (or "low" middle class income, like the median household income of $50-$60k), then most of the same stuff applies, with some minor dings that won't seriously impair the student's ability to get need-based financial aid.

High-income parents, from the get-go, in a very real way create a financial burden on students entering college after high school.

The American system goes so far as to restrict the kinds of student loans that these students are eligible for. Many of these students can't even get all the student loans that they may need to be originally titled in their own names. The loans may have to be titled in their parent's names; alternatively, the student may take on a consumer loan on the basis of their own credit that doesn't benefit from the single digit interest rates of student loans.

Some parents informally make an agreement with students to have the loans re-titled in their names, or in any case paid by the student. There are companies that can refinance the loan for the student after college, such as SoFi, but they require excellent credit and a good job.

There are some loopholes. As mentioned, you can get the student to be independent first. They may have to take a gap after high school to establish themselves, but they could. Alternatively, the student might be offered a sweet merit-based scholarship anyway. It's important to apply to a lot of colleges and a variety of colleges (including lower-ranked ones as well as well-endowed ones) to increase the odds. The student might be going into a well-compensated field, so they might be able to pay down the debt quickly without breaking a sweat. Alternatively -- and unethically -- if the student foregoes the student loans entirely and somehow (...) manages to get enough scrapped together with consumer loans, on their own credit and name, without a cosigner, they can always get a fresh start if necessary with BK. However, bankruptcy (virtually always) cannot discharge student loans.

Every situation is unique, so nobody can tell you what you "should" do, but these are some aspects of this system to understand.

NotWhoYouThink
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Re: Should we save for our son's college?

Post by NotWhoYouThink » Sun Apr 15, 2018 9:32 am

guliver wrote:
Sat Apr 14, 2018 10:16 pm
Grt2bOutdoors wrote:
Sat Apr 14, 2018 7:01 pm
OP - financial aid = loans. Merit aid = free. Grants = free.
Thanks :D I was thinking 'financial aid' = free ...
Not all financial aid is in the form of loans. Some of it is.

NotWhoYouThink
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Re: Should we save for our son's college?

Post by NotWhoYouThink » Sun Apr 15, 2018 9:44 am

MoneyMarathon wrote:
Sun Apr 15, 2018 2:06 am
guliver wrote:
Wed Mar 28, 2018 8:36 am
We're foreign, and we (or our parents) never paid tuition in our life. So we're not used to the idea.
Something to consider is that high-income parents are worse than no parents or low-income parents, in the American system.

If the child can achieve age 24, get married, join the military, or otherwise demonstrate financial independence in a way that typically would involve a gap between high school and college in order to get a job and pay their own expenses in a separate residence -- if they, in short, can check one of the boxes for being independent on the FAFSA -- they will be eligible for all the need-based grants and interest-deferred loans that are available. Some of these are not merit based, so they're a sure thing, if you are not saddled with high-income parents. They may also be eligible for a much larger scholarship package at universities that offer those.

If the parents have low income (or "low" middle class income, like the median household income of $50-$60k), then most of the same stuff applies, with some minor dings that won't seriously impair the student's ability to get need-based financial aid.

High-income parents, from the get-go, in a very real way create a financial burden on students entering college after high school....
High income parents who are willing to pay for college are a great help to students, not a burden at all.

Students who could qualify for large financial aid from top Universities if they came from poor families can also qualify for merit aid from middle to upper tier universities even if they come from rich families who will not help, and can piece together enough merit aid plus loans plus work study to graduate from college with little to no debt.

Students who can't qualify for merit aid at mid to upper tier universities and who come from poor families also won't get financial aid grants (not loans, grants) from anyone, because only the top universities provide that. In order to get huge financial aid grants you have to be an exceptional student. Bright well rounded kids do not get this aid, only exceptional ones.

Students cannot take out large loans without co-signers. Parents can take out large loans even with marginal credit, but in most cases should not.

Really, the system is not stacked against high income families. If anything it is stacked very much in favor of high income families, because their kids can go to the top high schools and participate in the right ECs and take the right test prep courses and qualify for big merit aid, or pay for expensive schools. It's a huge advantage. The rare low income kid who gets a full ride to an Ivy League school is the kind of kid that should be there, and didn't "take" anyone else's spot.

/rant

Nowizard
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Re: Should we save for our son's college?

Post by Nowizard » Sun Apr 15, 2018 10:38 am

Broader question is should you save? Answer is definitely a resounding "Yes." What you do with the savings is your choice, however. If you save an amount that you believe will go to pay for college or graduate school expenses and do not use it for that purpose, you have still made a wise decision. Many believe no help teaches financial independence, that you appreciate more if you pay for it yourself, etc., but many believe otherwise. If able to do so, it is rational to teach financial strategies while a child grows but to pay for their education. Many who have been fortunate enough to be able to pay for the education of their children also have successful children and believe that money received while younger is more valuable than that received later or inherited. We are very pleased with the way that approach worked for our children.

Tim

golfCaddy
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Re: Should we save for our son's college?

Post by golfCaddy » Sun Apr 15, 2018 10:47 am

NotWhoYouThink wrote:
Sun Apr 15, 2018 9:44 am

High income parents who are willing to pay for college are a great help to students, not a burden at all.

Students who could qualify for large financial aid from top Universities if they came from poor families can also qualify for merit aid from middle to upper tier universities even if they come from rich families who will not help, and can piece together enough merit aid plus loans plus work study to graduate from college with little to no debt.
Student loans without a cosigner are extremely limited. Merit aid tends to be very limited or non-existent at the top schools. It is true that anyone who can get admitted to Harvard could get a full ride at the University of Alabama.

guliver
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Re: Should we save for our son's college?

Post by guliver » Sun Apr 15, 2018 11:03 am

Nowizard wrote:
Sun Apr 15, 2018 10:38 am
Broader question is should you save? Answer is definitely a resounding "Yes." What you do with the savings is your choice, however. If you save an amount that you believe will go to pay for college or graduate school expenses and do not use it for that purpose, you have still made a wise decision.
By contributing to a 529 I'm limiting my spending options to higher education (in exchange for tax benefits). So the way I see it, whether to spend the money on education is a question that has to be answered now. As for the broader question - even if we go for the full $10k/year NY deductible 529 contribution, we could still save aggressively in our taxable accounts. At this stage of life saving is a major goal for us - so we try and reasonably limit our expenses (small apt, no car, second hand purchases etc). This is not a case where 529 saving would replace careless spending.

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Re: Should we save for our son's college?

Post by Grt2bOutdoors » Sun Apr 15, 2018 2:45 pm

guliver wrote:
Sun Apr 15, 2018 11:03 am
Nowizard wrote:
Sun Apr 15, 2018 10:38 am
Broader question is should you save? Answer is definitely a resounding "Yes." What you do with the savings is your choice, however. If you save an amount that you believe will go to pay for college or graduate school expenses and do not use it for that purpose, you have still made a wise decision.
By contributing to a 529 I'm limiting my spending options to higher education (in exchange for tax benefits). So the way I see it, whether to spend the money on education is a question that has to be answered now. As for the broader question - even if we go for the full $10k/year NY deductible 529 contribution, we could still save aggressively in our taxable accounts. At this stage of life saving is a major goal for us - so we try and reasonably limit our expenses (small apt, no car, second hand purchases etc). This is not a case where 529 saving would replace careless spending.
Don't underestimate or overestimate the value of tax benefits. If you are in NYC and paying combined NYC/NYS taxes, that alone is close to 9% if you are in a high tax bracket. If you are in the 30%+ marginal tax bracket federal wise, you are talking about 15-20% + 3.8% for investment income surtax. But this all depends upon how much you earn, how much savings accumulated. Education in this country has become a business onto itself.
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amitb00
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Re: Should we save for our son's college?

Post by amitb00 » Sun Apr 15, 2018 3:09 pm

If you have taken care of your retirement etc. , putting money in 529 is a no brainer. Put as much as you can. If your kid can’t use it, you can change beneficiary to a sibling (if he is around) or transfer to their kids(your grand Kids). Unless you need 529 money for your own non education needs, I see no other way you will pay penalty. You do not have to withdraw in any particular time frame if you have excess money.

MoneyMarathon
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Re: Should we save for our son's college?

Post by MoneyMarathon » Sun Apr 15, 2018 3:12 pm

NotWhoYouThink wrote:
Sun Apr 15, 2018 9:44 am
High income parents who are willing to pay for college are a great help to students, not a burden at all.
1) Yes. Of course.

My post was not claiming that high income families have a deck stacked against them.

It pointed out - correctly - that students from high income households have fewer options for third party funding and that, therefore, for the kids whose parents have said “you are on your own,” they will face different and, often, in some ways greater challenges financing college.

2) The rest of these comments are mostly a difference in emphasis. For example, where I mentioned that there is need based (without a merit component) aid, you say that it is not “huge.”

Well, it’s big enough to pay a California kid’s way through Berkeley or some other UC, which have very generous need based aid for all state residents who get in who are under the AGI limits.

Yes, the same student might get no non-loan aid at USC (or not enough to avoid a mountain of debt). But they would have some options not available to children of high income parents.

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Re: Should we save for our son's college?

Post by daveydoo » Sun Apr 15, 2018 3:32 pm

livesoft wrote:
Wed Mar 28, 2018 8:39 am

However, a 529 plan is for wealthy people and HENRYs like you: You get a tax break for saving at least something for college expenses.
Agree with most things you say but this is a misconception, imo. These plans were designed for -- and will benefit -- anyone who expects to pay anything for kids' college. They were targeted to the middle class. They are pretty much only used by the wealthy because, as in most things, no one knows anything anymore. Planning ahead to save taxes -- what's that all about? Just complain about the status quo.
"I mean, it's one banana, Michael...what could it cost? Ten dollars?"

MoneyMarathon
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Re: Should we save for our son's college?

Post by MoneyMarathon » Sun Apr 15, 2018 4:03 pm

NotWhoYouThink wrote:
Sun Apr 15, 2018 9:44 am
The rare low income kid who gets a full ride to an Ivy League school is the kind of kid that should be there, and didn't "take" anyone else's spot.

/rant
Did someone in this thread say something that suggested otherwise?

ncbill
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Re: Should we save for our son's college?

Post by ncbill » Mon Apr 16, 2018 11:23 am

guliver wrote:
Sat Apr 14, 2018 3:40 pm
Israel. Tuition there is ~$2500/year in top universities, and in my case (good grades & STEM field) I got a scholarship that covered tuition and living expenses. My PhD is from a US university, but that was on full scholarships too.
So is sending your kid back there for cheaper schooling an option?

guliver
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Re: Should we save for our son's college?

Post by guliver » Mon Apr 16, 2018 1:10 pm

ncbill wrote:
Mon Apr 16, 2018 11:23 am
guliver wrote:
Sat Apr 14, 2018 3:40 pm
Israel. Tuition there is ~$2500/year in top universities, and in my case (good grades & STEM field) I got a scholarship that covered tuition and living expenses. My PhD is from a US university, but that was on full scholarships too.
So is sending your kid back there for cheaper schooling an option?
He has Israeli citizenship, so if he moves there he would have to do the 3 years mandatory army service (service is waived for Israeli citizens living abroad). It would be his choice, but I wouldn't be too happy if he decides to do that, my army experience was pretty awful. Also, teaching is in Hebrew which might be challenging. That being said, I issued his US & Israeli passports, but the kid is also eligible for 2 other European citizenships (my family moved a lot...). I plan on issuing at least one of them. He could definitely go to school anywhere in the EU and pay the EU-citizens rate, but to be honest I don't know a lot about their system (I was given the citizenships at birth, but never lived there myself).

dustinst22
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Re: Should we save for our son's college?

Post by dustinst22 » Mon Apr 16, 2018 1:15 pm

I have a couple thoughts on this.

1) I want my son to have at least some skin in the game, I think it helps with motivation and responsibility.
2) I want to incentivize him to either get a scholarship to an out of state top university OR a top in state school.
3) Ideally he is able to gain admittance to a top school for what he is specifically interested in. If he does this, I'll cover 100%. I think ambition and passion along with hard work deserve to be rewarded, and that would be demonstrated here.

Along these lines, I've decided to cover his education 100% if he decides to go to a top public school here in CA. If he decides (or is forced due to poor grades) on a low quality school, I'll cover a portion of it. If he is able to get admitted to a top private university (say ivy league for example), I'll cover a large portion of it (TBD). If he wants to attend a non-top private university, that cost will mostly be his burden unless he has a good scholarship of some type -- in that case I'll cover a large portion of the remaining.

Of course by the time my son reaches college age (10 years), I think a lot of things are going to be very different regarding traditional education. So this is all flexible.

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DaftInvestor
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Re: Should we save for our son's college?

Post by DaftInvestor » Mon Apr 16, 2018 3:04 pm

Afty wrote:
Sun Apr 15, 2018 1:24 am
Bastiat wrote:
Sun Apr 15, 2018 12:03 am
DaftInvestor wrote:
Sat Apr 14, 2018 4:02 pm
Bastiat wrote:
Sat Apr 14, 2018 1:38 pm
DaftInvestor wrote:
Wed Mar 28, 2018 9:59 am
Regardless of what individuals believe - Here in the US - the government kind of assumes the parents, if they can afford to do so, will be helping out.
They do? According to whom? Who is "the government"?
According to US government policy on student financial aid.
If a student's parents can afford to pay for college the student is not eligible for for financial aid to cover the costs. If the student's parents can't afford it (along with student) - student is eligible for aid covering all costs. This implies the US government assume the parents will help if they can afford to do so. Not sure what other conclusion you can come to based on this policy.
Where might one find that policy?
https://studentaid.ed.gov/sa/fafsa/fill ... dependency
The federal student aid programs are based on the concept that it is primarily your and your family’s responsibility to pay for your education. A dependent student is assumed to have the support of parents, so the parents’ information has to be assessed along with the student’s, in order to get a full picture of the family’s financial strength.
Thanks Afty for answering a question directed at me with a great reference!
Bastiat,
Note that the term "dependent" above, for federal student aid purposes, is different than the definition used on federal income tax returns. The definition of a dependent on the federal income tax return is defined by the Internal Revenue Code of 1986, while the definition for federal student aid purposes is defined by the Higher Education Act of 1965. Whether the parents claim the student as a dependent on their income tax returns is irrelevant to the student’s status as a dependent for federal student aid purposes. Before 1992, a student who was self-sufficient for two years was considered an independent student for federal student aid purposes but Congress changed the definition starting with the 1992-93 academic year. The new definition established a specific set of criteria for a student to be considered independent. The current criteria for independent student status include whether the student is age 24 or older as of December 31 of the academic year. A student can also be independent by being married, having a dependent other than a spouse, being a veteran of the US Armed Forces, serving on active duty in the Armed Forces for other than training purposes, having been an orphan or in foster care or a ward of the court at any time after reaching age 13 or older, being an emancipated minor or in a court-ordered legal guardianship prior to reaching the age of majority, or being a homeless unaccompanied youth. Graduate and professional students are also considered independent. All other students are considered to be dependent.

Thus - most unmarried freshmen who are under age 24 and who are not veterans are "dependent" under this current definition. Even if the parents are unwilling to support the freshmen for any reason (and are not even in touch with the incoming freshmen)- financial aid (need based from the US) won't be possible if the parents have the money to pay.
Last edited by DaftInvestor on Tue Apr 17, 2018 10:48 am, edited 1 time in total.

GAAP
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Re: Should we save for our son's college?

Post by GAAP » Mon Apr 16, 2018 6:44 pm

You can:
Save for his education, and spend it on his education when he goes to college, allowing him to graduate without excessive debts.
Save for his education, see him join the military and not need to spend it on his education at all.
Save for his education, see him choose not to go to college, and choose what to do with those funds.
Not save for his education, see him go anyway, effectively saddling him with years/decades of debt, and use the money for something else.
Not save for his education, see him unable to afford it, and choose not to go.

I don't see much in the way of downsides to the saving part -- it gives you options in 17 years. Not saving limits the options severely.

guliver
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Re: Should we save for our son's college?

Post by guliver » Mon Apr 16, 2018 7:56 pm

GAAP wrote:
Mon Apr 16, 2018 6:44 pm
You can:
Save for his education, and spend it on his education when he goes to college, allowing him to graduate without excessive debts.
Save for his education, see him join the military and not need to spend it on his education at all.
Save for his education, see him choose not to go to college, and choose what to do with those funds.
Not save for his education, see him go anyway, effectively saddling him with years/decades of debt, and use the money for something else.
Not save for his education, see him unable to afford it, and choose not to go.

I don't see much in the way of downsides to the saving part -- it gives you options in 17 years. Not saving limits the options severely.
Agreed.

ncbill
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Re: Should we save for our son's college?

Post by ncbill » Wed Apr 18, 2018 12:37 pm

guliver wrote:
Mon Apr 16, 2018 1:10 pm
ncbill wrote:
Mon Apr 16, 2018 11:23 am
guliver wrote:
Sat Apr 14, 2018 3:40 pm
Israel. Tuition there is ~$2500/year in top universities, and in my case (good grades & STEM field) I got a scholarship that covered tuition and living expenses. My PhD is from a US university, but that was on full scholarships too.
So is sending your kid back there for cheaper schooling an option?
He has Israeli citizenship, so if he moves there he would have to do the 3 years mandatory army service (service is waived for Israeli citizens living abroad). It would be his choice, but I wouldn't be too happy if he decides to do that, my army experience was pretty awful. Also, teaching is in Hebrew which might be challenging. That being said, I issued his US & Israeli passports, but the kid is also eligible for 2 other European citizenships (my family moved a lot...). I plan on issuing at least one of them. He could definitely go to school anywhere in the EU and pay the EU-citizens rate, but to be honest I don't know a lot about their system (I was given the citizenships at birth, but never lived there myself).
Service in the United States military is how my kids are paying for their college education...one's trying to go to medical school the same way.

Dandy
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Re: Should we save for our son's college?

Post by Dandy » Wed Apr 18, 2018 1:53 pm

College expenses used to be reasonable at least for state schools. I used to work the summers and could at least pay for the tuition. My parents picked up the books etc. and provided a small weekly allowance to cover gas/lunch - I commuted (but bought a 6 year old used car.) Those days are long gone.

Now even state schools are usually expensive and the tuition is just the beginning. Colleges today are like airlines with list of fees in addition to the tuition. Today's students often graduate with crushing debt and I'm not sure what degree I would recommend today since the automation and outsourcing is so amazing. So, their prospects for a great paying job might not be great and/or may not last long.

The usual advice is make sure your retirement savings is on track before allocating a ton of money toward paying for children's expenses. But, if you value education and a degree, having children bear the whole cost is likely having them start their post grad life in a big debt hole.

cdu7
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Re: Should we save for our son's college?

Post by cdu7 » Wed Apr 18, 2018 2:33 pm

In my view openly refusing to pay for your child's college education today would be equivalent to an middle to upper class American refusing to sent their child to school in the early 20th century. If you are choosing to have a child you are taking on a responsibility to prepare them for the world to the best of your ability. Many parents are unable to pay for college, many are also unable to read daily to their kids or feed them nutritious foods. Would you actively refuse to read to your child to teach them "independence?" College isn't a luxury item, you aren't buying your kid a Lexus, you are buying them a future. If you have the ability to pay for it without jeopardizing your own retirement then it strikes me as almost abusive not to. A parent who doesn't read to their kid because they are working 3 jobs is a tragedy, a parent who doesn't read to their kid because they just don't care is a selfish jerk. That isn't to say you should pay for all college options at all times, but to simply throw them to the wolves without so much as a spear seems unconscionable. If you aren't sure you want to pay for the things necessary to ensure your child has a successful future that is perfectly fine, just figure it out before you decide to have kids.

986racer
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Re: Should we save for our son's college?

Post by 986racer » Wed Apr 18, 2018 2:49 pm

As long as you are saving, I'd go in some order like this...
  1. 401K plans
  2. Any back door ROTH type plans
  3. 529
  4. Taxable
Start at the top of the list and don't go to the next item until the ones before it are fully funded. The only caveat would be the 3rd item (the 529). In theory, with your spouse, you can put in 150K in a single year without having to use up part of your lifetime gift amounts. However, that would mean that you would lose the 10K write-off against NYS taxes for the following four years. If you do have the funds to put that much in though, that one time funding would basically pay for college in 18 years at almost any school.

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StevieG72
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Re: Should we save for our son's college?

Post by StevieG72 » Wed Apr 18, 2018 3:12 pm

Save for the kids education, just let them know that there is no free lunch.

I told my daughter that I will help her with college expenses IF she gets good grades. Otherwise she is going to have to figure it out on her own.

My income is much less than yours and I set aside money for the kiddos college expenses without derailing my retirement plans.
Fools think their own way is right, but the wise listen to others.

GCD
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Re: Should we save for our son's college?

Post by GCD » Wed Apr 18, 2018 3:34 pm

I'm of mixed feelings on crushing debt from college loans. My kids won't have it, unless they pick it up in law or med school. But it does teach good lessons. Depending on your definition, I might have had crushing debt. I think I learned a lot from that experience. I wish I could force my kids to take out loans and live a paupers life for a couple years before I used the 529s to pay off their loans. Unfortunately that's not the way it works.

I think I derived the life lessons in the first couple years and the next 8 were just an uneducational beatdown. But I still learned important things that are difficult, if not impossible, to teach through parental guidance and coaching. I'm actually sorry my kids can't have that experience for a couple years. It is life changing in a way.

I don't think the purpose would be served by having them take out a few loans or work part-time. It needs to be crushing debt that puts your take home pay after loan payments below the poverty level.

DouroBound
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Re: Should we save for our son's college?

Post by DouroBound » Wed Apr 18, 2018 4:17 pm

Bastiat wrote:
Sat Apr 14, 2018 1:38 pm
DaftInvestor wrote:
Wed Mar 28, 2018 9:59 am
Regardless of what individuals believe - Here in the US - the government kind of assumes the parents, if they can afford to do so, will be helping out.
They do? According to whom? Who is "the government"?

OP: There is no expectation that you pay for your child's college education. From what I have seen, you can do much more harm than good in providing everything for your children. We save for our children's education, but they will certainly have skin in the game, and will be paying for it themselves if they want a degree that isn't expected to provide a good return on the investment.
I don't know about the government, but many universities explicitly assume that parents will contribute to their children's higher education if they have high (or even moderate) incomes and/or assets. I graduated from a very expensive private law school about 20 years ago and financed my tuition and living expenses entirely through public and private loans. My father's fairly modest income (public school administrator) was deemed high enough by the law school to rule out any "needs-based" grants, despite the fact that I had not received any financial support from my parents for 18 months. This left me no choice but to borrow, which has proven to be the right decision for me. My roommate in law school came from a similar background, but he received needs-based grants from the school to cover part of his tuition. The main difference? His parents had not claimed him as a dependent on their tax returns during his undergraduate years, which meant he could establish that he was "independent" for financial aid purposes and thus the school did not look at his parents' income.

I realize any conclusions drawn from this may not apply equally to the question of saving for undergraduate education, but the fact remains that parents' income may indeed have a negative impact on the financial aid options available to their kids down the line, and in an extreme case they may even be forced to pay tomorrow for the tax break you get today. Things may have changed in the last 20 years, but as age 18 approaches you should look into the policies at a range of schools to understand potential impacts of your wealth. I think any potential impacts should be taken into account when deciding whether and how much to contribute (or whether to stop claiming a kid as a dependent earlier than you otherwise might).

guliver
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Re: Should we save for our son's college?

Post by guliver » Wed Apr 18, 2018 10:07 pm

ncbill wrote:
Wed Apr 18, 2018 12:37 pm
Service in the United States military is how my kids are paying for their college education...one's trying to go to medical school the same way.
I assume the financial aspect is only one of the things that contributed to their decision to join the army. In any case, things are different in Israel: the 3 years service is unpaid (you get ~$1200/year, unless your parents are very poor), and people who are exempt for whatever reason (rightfully or not) are also eligible for almost free education. So financially at least, it's not a very good deal.

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12345
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Re: Should we save for our son's college?

Post by 12345 » Thu Apr 19, 2018 9:05 am

We started saving for doughter`s college. It will help she get a more job opportunities in future and save time. Of course, we try explain she value of money. I hope in future she will be financially independent.

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siamond
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Re: Should we save for our son's college?

Post by siamond » Thu Apr 19, 2018 9:48 am

guliver wrote:
Sat Apr 14, 2018 3:46 pm
RickBoglehead wrote:
Sat Apr 14, 2018 12:31 pm
Checkout your state-specific 529, and also Utah's.
Just curious, why Utah of all places? We're based in NY so I think we have to take their plan to take the state deduction.
Strangely enough, you can use the 529 of any state, irrespective of where you live. The 529 plans from UT and NY are the best (Vanguard-based, very low fees), which is why they are often recommended. Last time I looked (which was a while ago), UT was marginally better. Now, if you have a tax break for 529 contributions in your state, then by all means, stick to the NY plan.

Back to your OP, my wife and I also came from a foreign country and had comfortable (US) income while we worked, and we decided to fully fund tuition + room for our children's colleges via 529s. We couldn't stand the idea of them being burdened by a heavy loan when starting in life. This turned out to be VERY expensive (those East coast colleges have insane tuition fees), but we don't regret it one second, and we plan to keep some money in the 529 plans for the future grandchildren. This being said, we left our children to their own devices when it came to books and day-to-day living (including cell phones and the likes). They got out of this acting fully financially responsible. This is a very personal decision though, and we were lucky to be able to afford it.

Camarillo Brillo
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Re: Should we save for our son's college?

Post by Camarillo Brillo » Thu Apr 19, 2018 2:03 pm

I'm a high earner ($1M/year) and I can tell you what I did in case it's of help.

In 2009 I left my prior job and received a lump sum of $84K from a deferred comp plan. The details are a little hazy but I think I contributed $90K of pretax cash into that deferred comp account.

Anyway, I put that entire $84K into a 529 for my two sons. Five months ago I started withdrawing from the 529 to pay for my older son's first year of college and it had grown to $217K. Petty cool that that 90K of deferred comp is going to pay for nearly all of boths son's college costs.

ncbill
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Re: Should we save for our son's college?

Post by ncbill » Thu Apr 19, 2018 6:32 pm

guliver wrote:
Wed Apr 18, 2018 10:07 pm
ncbill wrote:
Wed Apr 18, 2018 12:37 pm
Service in the United States military is how my kids are paying for their college education...one's trying to go to medical school the same way.
I assume the financial aspect is only one of the things that contributed to their decision to join the army. In any case, things are different in Israel: the 3 years service is unpaid (you get ~$1200/year, unless your parents are very poor), and people who are exempt for whatever reason (rightfully or not) are also eligible for almost free education. So financially at least, it's not a very good deal.
For them, yes, but many people do join primarily to help pay for college.

It doesn't have to be full-time either.

In some states joining the National Guard covers tuition at those state public schools.

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