How to pay for 6th year of college?

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RetiredCSProf
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How to pay for 6th year of college?

Post by RetiredCSProf » Sun Apr 15, 2018 4:50 pm

My son is finishing his 3rd year of community college and has several options for transferring to a "four-year" school and completing an undergraduate degree in two additional years; however, one option would require three more years of undergraduate school, thus, completing a BA in six years.

If he takes six years to graduate, then he will turn age 24 before December 31 of his last school year; thus losing his status as a dependent. This may help him in getting need-based scholarships for the final year, but I would expect that scholarships are more typically offered to incoming freshmen.

I would have the following options to pay for the 6th year:
1. Continue paying tuition, room and board out of 529 funds, if enough to cover
2. If not enough to cover all expenses from 529 fund, pay tuition directly to school from taxable account; pay room and board out of remaining 529 funds.
3. If not enough to cover room and board from 529 fund, pay tuition directly to school from taxable account; $15K annual gift toward room and board.
4. Encourage my son to take on part-time work and summer jobs to help pay for the 6th year.

Am I missing anything? My understanding is that paying tuition would not count toward the $15K annual gift maximum, but that paying room and board would.

I think a better option may be for my son to finish a degree in the next two years and then continue with graduate school. There are several schools that offer Master's degrees in his field of interest -- one is a 3-year program, one is a 2-year program, and one is a 12-month program.

UpperNwGuy
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Re: How to pay for 6th year of college?

Post by UpperNwGuy » Sun Apr 15, 2018 4:56 pm

My son took six years to finish college. The original plan, of course, was for him to finish in four years, but it took him a few years to get serious about his studies. I had enough money for the fifth year, but not the sixth. I sucked it up and borrowed the money for the final year. If I hadn't done it, my ex-wife who has a lot less money than me would have done it. And, yes, he was over 24 when he finally graduated. That was five years ago, all the debt is repaid, and I'm glad I did it. My recommendation: just do it. By the way, a year after graduating, he enrolled in a work-study masters program that cost me nothing.

rob65
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Re: How to pay for 6th year of college?

Post by rob65 » Sun Apr 15, 2018 6:21 pm

Note that exceeding the 15K limit doesn’t mean you owe gift tax, just that you have to file form 709 and count the excess towards your lifetime estate tax exemption.

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JPH
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Re: How to pay for 6th year of college?

Post by JPH » Sun Apr 15, 2018 6:31 pm

Paying your own way is incredibly motivating.
While the moments do summersaults into eternity | Cling to their coattails and beg them to stay - Townes Van Zandt

livesoft
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Re: How to pay for 6th year of college?

Post by livesoft » Sun Apr 15, 2018 6:34 pm

You did not mention any of the tax benefits for education which are discussed in detail in IRS Publication 970. My kids used them.
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GCD
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Re: How to pay for 6th year of college?

Post by GCD » Sun Apr 15, 2018 7:56 pm

IMO, I wouldn't worry about the part-time work during the school year. I would expect him to work over the summer instead of laying around, but if he came up with some interesting and productive (summer school, internship, etc.) way to spend the summer I'd let him off the hook for summer work too. It sounds like he is on track with some goal at this point. I'd just support him lest it get derailed. Not everybody is the type to work 20 hours part-time and 60 hours a week during the summer while getting great grades.

He has plenty of time to let life smack him in the face to motivate him later on. If he is on track now, just keep him going.

Valuethinker
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Re: How to pay for 6th year of college?

Post by Valuethinker » Mon Apr 16, 2018 6:26 am

RetiredCSProf wrote:
Sun Apr 15, 2018 4:50 pm


I think a better option may be for my son to finish a degree in the next two years and then continue with graduate school. There are several schools that offer Master's degrees in his field of interest -- one is a 3-year program, one is a 2-year program, and one is a 12-month program.
Certainly a Masters degree in a relevant field to his work is probably more valuable than a BA/ BS.

Exception would be certain high prestige undergrad programs. Someone might hire a BS in Comp Sci from Berkeley, say, over a less well recognized masters. That would also be true of some top engineering schools.

If we are getting to MBA land then the calculation becomes quite different. Better a good Bachelors of Business (B Commerce where I am from) than a mediocre MBA-- it will lead to better entry level jobs at better organizations.

RetiredCSProf
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Re: How to pay for 6th year of college?

Post by RetiredCSProf » Fri Apr 20, 2018 6:40 pm

Thanks for the responses:

>UpperNwGuy -- If I borrow money to pay for a 6th year of undergraduate school, I would still risk exceeding the annual $15K gift
>rob65 -- Yes, filing Form 709 would allow me to exceed the annual $15K limit

>JPH -- I agree, paying your own way is motivating.
>GCD -- My son has a part-time job: he works one hour per week tutoring a music student. He has taken a summer class almost every year since starting high school, so has not held a summer job.
>livesoft -- the IRS tax benefits for education (e.g., American Opportunity credit) apply to taxpayers, which my son is not, yet.

>Valuethinker -- My son's career interest is in a relatively new field, so it is difficult to assess the value of a Master's Degree vs stopping at a BA/BS and getting a couple years of work experience. I'll give more detail:

My son's dream career is to be the Creative Director at a video game company. He is interested in game design (level design, interactive storytelling, game asset production), and not so much in computer programming or animation. People hired for this type of job often come from a background in screenwriting. Like all jobs in the entertainment industry, this is a highly competitive field and depends on making connections.

There are relatively few degrees offered in game design (in contrast with CS degrees). The undergraduate programs in game design are for "generalists" -- a mix of computer programming, art, animation, and creative game design. The master's degree programs (NYU, USC) are focused more on collaboration of experts from various disciplines, rather than teaching a mix of skills.

My son's applied for transfer to three schools that offer a BA/BS in game design; two schools that offer a BA in English with emphasis on creative writing or screenwriting; and six schools for Film Studies with a focus on screenwriting. He's been accepted to 7 schools (2 for game design, 1 for English, and 4 in Film Studies) and is waiting on the others.

One of the game design schools would require him to take a year of computer programming courses before starting their two-year program. They recommended he go "somewhere else" to complete the programming courses. I'm concerned that it would be a waste of money and disruptive to spend that extra year at school taking a sequence of programming courses, along with starting a degree in film or English, without finishing the degree.

GCD
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Re: How to pay for 6th year of college?

Post by GCD » Fri Apr 20, 2018 8:06 pm

I can't comment on his career choice because I have absolutely zero knowledge of that industry.

I'm not sure why you care about gifting in excess of 15K though. It's my understanding that if you exceed the annual gift limit the only effect of that is that it is held against you when it is time to settle your estate. If you don't have an estate big enough to be subject to inheritance taxes then the prior years excess gifts don't matter. The only purpose of the limit is to prevent people from skirting estate taxes by giving all their money away before death.

Here's a thread on that: viewtopic.php?t=161918

This thread includes a link to state estate taxes, which may be an issue for you. But fed shouldn't be a problem.

I think you are right that tuition paid directly to the school doesn't count toward the 15K, but are you really concerned that room and board is going to be above 15K?

RetiredCSProf
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Re: How to pay for 6th year of college?

Post by RetiredCSProf » Fri Apr 20, 2018 8:23 pm

GCD wrote:
Fri Apr 20, 2018 8:06 pm

I think you are right that tuition paid directly to the school doesn't count toward the 15K, but are you really concerned that room and board is going to be above 15K?
Absolutely! The school to which I am referring for the game design degree is in the University of California system. R&B for the 2018-2019 academic year is estimated at $16K for living on campus. As a transfer student, he would be guaranteed on-campus housing for his first year at the school. He could save about $4K in Year 6 (2nd year at the school) by sharing an off-campus apartment with several other students and preparing his own meals. That's assuming he can get rides from the apartment to campus or is close to a city bus route (having a car would drive up the cost).

GCD
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Re: How to pay for 6th year of college?

Post by GCD » Fri Apr 20, 2018 8:36 pm

Yeah, ok, LA, got it.

secondcor521
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Re: How to pay for 6th year of college?

Post by secondcor521 » Fri Apr 20, 2018 10:24 pm

Some random thoughts:

1. I like the idea of him paying for the 6th year, but it sounds like OP and some of the other posters do not. I understand that, and I may change my tune if any of my three kids get to that point.

2. If you're paying for his college, then *you* can take advantage of the education tax credits and deductions (assuming you are a taxpayer, which you probably are). The one people usually go for is the American Opportunity Tax Credit. Note that you cannot double dip - you have to pay the $4K in expenses for the AOTC from sources other than a 529 or ESA in order to get the credit. I believe it is a $2,500 credit on the first $4K of expenses, and up to $1K is refundable. But check me on that.

3. The $15K gift tax limit is per giver/recipient pair per year, so - and sorry, I don't know your personal situation, but - if both parents are alive and otherwise able then Mom can give son $15K in year X and Dad can give son $15K in year X with no gift taxes and no Form 709.

4. My BIL essentially did the job your son wants to do; he was a lead game designer and executive at a leading game company (if I said the name of the parent company, you'd know it). He has a Human Design degree from Stanford, which is basically a Mechanical Engineering degree without some of the hardest math classes as I understand things. I don't think the screenwriting / filmmaking / English degree path would get your son to where he wants to go (which is highly, highly competitive, by the way - every kid dreams of working in a lead role for a video game company and there aren't that many big successful ones out there). I'd suggest programming and leadership classes and maybe some computer science classes.

5. Boise State University has an undergrad degree in Game Design, one of the few in the nation. Even saying that, it's probably more appropriate for someone who wants to be involved in video game development but doesn't have the chops to be one of the actual programmers. But it could get you in the door and work his way up to Creative Director: https://cid.boisestate.edu/gimm/

ThePrince
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Re: How to pay for 6th year of college?

Post by ThePrince » Sat Apr 21, 2018 10:16 pm

JPH wrote:
Sun Apr 15, 2018 6:31 pm
Paying your own way is incredibly motivating.
+1

RetiredCSProf
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Re: How to pay for 6th year of college?

Post by RetiredCSProf » Mon Apr 23, 2018 8:13 pm

secondcor521 wrote:
Fri Apr 20, 2018 10:24 pm
Some random thoughts:

1. I like the idea of him paying for the 6th year, but it sounds like OP and some of the other posters do not. I understand that, and I may change my tune if any of my three kids get to that point.

2. If you're paying for his college, then *you* can take advantage of the education tax credits and deductions (assuming you are a taxpayer, which you probably are). The one people usually go for is the American Opportunity Tax Credit. Note that you cannot double dip - you have to pay the $4K in expenses for the AOTC from sources other than a 529 or ESA in order to get the credit. I believe it is a $2,500 credit on the first $4K of expenses, and up to $1K is refundable. But check me on that.

3. The $15K gift tax limit is per giver/recipient pair per year, so - and sorry, I don't know your personal situation, but - if both parents are alive and otherwise able then Mom can give son $15K in year X and Dad can give son $15K in year X with no gift taxes and no Form 709.

4. My BIL essentially did the job your son wants to do; he was a lead game designer and executive at a leading game company (if I said the name of the parent company, you'd know it). He has a Human Design degree from Stanford, which is basically a Mechanical Engineering degree without some of the hardest math classes as I understand things. I don't think the screenwriting / filmmaking / English degree path would get your son to where he wants to go (which is highly, highly competitive, by the way - every kid dreams of working in a lead role for a video game company and there aren't that many big successful ones out there). I'd suggest programming and leadership classes and maybe some computer science classes.

5. Boise State University has an undergrad degree in Game Design, one of the few in the nation. Even saying that, it's probably more appropriate for someone who wants to be involved in video game development but doesn't have the chops to be one of the actual programmers. But it could get you in the door and work his way up to Creative Director: https://cid.boisestate.edu/gimm/
Thanks for your thoughts:
1. I don't object to my son working in the summer or part-time; but he would not be able to earn enough to cover the cost of attending a Univ of California school; resident fees for one year are estimated as $37K to cover tuition, R&B, transportation, and personal expenses.
2. My MAGI is too high to take the American Opportunity Tax Credit.
3. I am a single parent.
4. I expect that the game industry will need to diversify to grow, both in terms of their customer base ("Call of Duty" fans) and in terms of the range of talents needed to collaborate in the design and development of games. There is nothing magical in studying compiler construction and operating system theory that translates into designing entertaining games. (I have a PhD in CS and I'm a CS professor, so I know what is taught in the typical CS curriculum.)
5. Thanks for the link to Boise State, but not a good fit (no men's track team).

My son is waiting for a few more schools to respond. He's been accepted to two very good schools that are within commuting distance from home. One is a public school and the other is private -- so we are waiting to hear if there will be a financial package offered. If he ends up transferring again after one year, then I may need to stretch out the 529 fund for the 6th year.

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