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Old 04-09-2013, 12:28 PM   #21
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With our kids, we budgeted for 4 years at state schools. What happened is DS went on for his Masters and we shared the cost of that with him, while DD went to a state u for year 1 and then transferred to a private, and is now thinking a Masters at the same private, after she graduates in May, just when I am retiring.

Like someone else mentioned, do not underestimate the room/board/books/transportation/etc expense on top of tuition. It is not trivial.

That said, what really bugs me is how we have seen college costs go through the roof, while at the same time decent paying jobs for new grads (except for a few select majors) have evaporated.
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Old 04-09-2013, 12:34 PM   #22
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We paid for both kids to attend private schools of their choice (and in fact both of them turned down offers of partial merit scholarships from other schools). The only conditions we had were that we would pay for only 8 semesters and all payments stopped if they got a tattoo. (Not kidding.) We did this because our parents did the same for us and because we had planned to do it since they were born.
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Old 04-09-2013, 01:01 PM   #23
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My daughter was in college in the mid 1990's. We paid her tuition for state schools, fees, and books, and gave her $500/month, with the idea being that she would work half time for the rest of her living expenses. She did, as the projectionist and then assistant manager at a local movie theater. So, our funding of her college expenses came to about $8K/year, IIRC.

We thought that was pretty generous, since neither his parents nor mine had paid for any college for us at all. Their parents did not pay for theirs, either. I guess these days most parents pay (or co-sign loans for) a gazillion dollars in college expenses, with costs rising so dramatically. It's got to be tough.
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Old 04-09-2013, 01:06 PM   #24
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I greatly value the lessons learned by picking up loans to pay for my 4th year of school. My parents had more than enough to pay for it but instead encouraged me to learn how the loan application process works and apply for student aid to pay for my 4th year. They gave me $20,000 at graduation - so technically it was a wash in total figures.

They recommended I either use that money as a down payment for a house, or to pay off my loans - whichever I felt more comfortable with. They also realized I could just go buy a new car with it. However the lessons learned from carrying that debt my senior year taught me to use the graduation gift more wisely, at least looking back I felt it did.

There was also something gratifying in paying for a part of my schooling. I always took it seriously, but with my own money on the line I definitely took it more seriously the last year. At the time I didn't know they had planned to give me such a generous gift at graduation. I averaged an even mix of A's and B's all through the first 3 years of school and got straight A's as a senior.
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Old 04-09-2013, 01:21 PM   #25
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I put the profit from a house sale into 2 529 accounts at ages 2 and 6. $50k each. I added another 10k each a few years later. Now, after 3 years at a private $chool, the one account has only $20k left. But the untouched account is at $130k, to be tapped in the fall.

The only reason the nearly depleted account lasted as long as it did was because I put assets into a variable annuity. Got a huge discount at the $chool for doing that!

What I figured I could do if the one account runs out is change the beneficiary on the $130k account long enough to pay the expensive school for my older daughter, the switch it back to pay for the younger daughter's school (state public university :-)
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Old 04-09-2013, 02:31 PM   #26
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We sort of lucked out on the school thing I think. Here in Washington State they have a program called GET in which you they use the largest school here (University of Washington) as the marker for 100 credits. So you purchase 100 credits at today's tuition and when your kid goes to school they can purchase 100 credits in that year but at today's prices. So when I started purchasing credits they were $61/credit or $6100 for one year at the UofW (other schools you might only use 75 credits or 80 credits). The current price is $172/credit so that same 100 credits would now be $17,200!

But I took my bonuses at the time and in 4 years bought 400 credits (total outlay of about $34k)so she has guaranteed tuition for 4 years (or more depending on which school she goes to). If she chooses one of the smaller state schools the funds will go further. It was interesting I started out at $61 credit and finished at $99 credit and now it is $172 and rising.

She further helped as her last two years in high school she is attending the local community college in a program called "Running Start". In this program the state pays the tuition for the local community college and she gets credit for both high school AND the two year community college. (Btw--bragging dad here, she has made the deans list every semester this year!)

In theory next year she will graduate with both her high school diploma but also her 2 year associate degree. So when she goes to the UofW she will only have 2 years to go to get her bachelor degree.

We also have a fund set aside for her with about $18k in it. So overall I feel we are in good shape but who knows. I know she understands it is a local state school she has to attend, and she is on board with that.
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Old 04-09-2013, 03:01 PM   #27
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We have 2 kids (4 and 3) and have set aside 33k for each kid. I'm planning to save at least enough to cover UC tuition so maybe another 15k for each kid.

Looking back my college years, I think it'll be important for them to work in college. I'm an accountant so I'm thinking, when they're senior in high school, they'll take an accounting class and I'll start a bookkeeping business and they can assist me. With that experience, they can land a comfortable job making decent money in college so they can pay for room+board. After college, they'll have solid work experience so it'll help with their job prospects. Perfect plan!! At least, I hope it works out that way...
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Old 04-09-2013, 04:16 PM   #28
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...when they're senior in high school, they'll take an accounting class and I'll start a bookkeeping business and they can assist me. ... At least, I hope it works out that way...
Obviously you haven't enjoyed the teenage years yet. My kids went their own way. They both kicked-butt at what they chose to do, but my ideas along the way just got eye rolls. Of course, I'm no iron fist ruler, hehe.

You have plenty of time to pump up the balance. I'd keep an eye on total cost of an education. The idea of working at school is a good idea, I think; some skin in the game.
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Old 04-09-2013, 09:33 PM   #29
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Well, a couple of reasons. Firstly, I suppose, like many people my attitude is shaped by my own experience. In my family its something of an intergenerational pact - my grandfather paid for his kids, my parents paid for us, and I'll pay for mine. In fact, even my grandfather - the first in our lineage to go to school - had his way through MIT paid by much older siblings, his parents had passed away young.

<SNIPPED FOR BREVITY>
Thanks for the response, and thanks for not taking it as an attack. I can totally appreciate the value of a top school, especially for graduate school. I think the value at an undergraduate level may not be as high, but that's just my opinion (if I'm not wrong, many of those Ivy grads did grad school there, not necessarily undergrad).

Regarding the cost, I've loved this infographic from NPR (supplemental to a podcast) showing that the true net cost college has not increased like everyone claims it does. Sticker price has raised, but what kids pay (on average) has actually decreased when factoring in inflation.

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Old 04-09-2013, 10:56 PM   #30
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I am saving for my daughter's college expenses, but have been telling her for years that if she gets a full scholarship that I will give her $10K in cash per year for expenses. She is 12 now and I HOPE this is sinking in.
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Old 04-09-2013, 11:31 PM   #31
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I recognize I'm at one extreme here, but here goes...

I saved approximately 250k in my son's 529 prior to his 4th birthday, and prior to my retirement. I accept that there's a large overfunding risk inherent in that number, but I am entirely unconcerned about that. Really I wanted the comfort of having his education fully funded and off balance sheet* before I pulled the plug.
I would be willing to place a substantial wager that you will come to regret making such a large contribution to your son's 529 plan. Even if it turns out that there is no overfunding and your son uses the entire amount for his education, you will be in danger of losing out on valuable tax deductions that would be available if part of his educational funding came from non-529 sources. Current tax law says that you can't take (for example) the American Opportunity Credit based on educational expenses paid for from tax-free withdrawals from a 529 plan. You can get either the tax-free withdrawal or the American Opportunity credit, not both. Other tax credits have the same restriction. So for tax planning purposes, it is generally a better idea to put funds earmarked for education in a mixture of 529 and other custodial accounts, such as uniform gift to minors. That gives you a much better chance to minimize taxes while still qualifying for all available tax credits.

Of course you know your financial situation better than I do, so you may have already thought of this issue. In any case, it is highly laudable of you to provide so generously for your son's education, even if it turns out there are more tax-efficient ways of doing so.
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Old 04-09-2013, 11:42 PM   #32
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I believe overall that state schools are fine for undergraduate (there may be exceptions, but I am speaking generalities). When my kids were young I knew that with our income, DH and I could not expect much financial aid (I ran a calculator once on expected family contribution and it came out to $90k a year).

I also believe that in my state there is great benefit in spending the first 2 years in community college since academic courses will fully transfer to the state university and tuition is about 25% to 33% of the state university tuition.

We were willing to pay for room and board for the last 2 years with the first 2 years at home.

Of, course, best laid plans and all. It didn't shake out exactly as I expected:

Older son - We started paying room and board right away as he attended a community college that had dorms. We were OK with it as it was still less expensive than a 4 year school. However, after a semester he decided that higher education was not for him and he left school and joined the workforce (we tried to encourage him to attend CC for a career oriented course of study, but he refused).

Younger son - Younger son has ADHD, but was academically advanced. We ended up spending the equivalent of private college tuition for him to attend a therapeutic school and then the equivalent of public college tuition for him to attend a private high school. He graduated high school early and started CC at 16. Our expenses immediately went down as it was way less expensive than the other schools he had attended.

With his ADHD, he can't take more than 9 to 12 hours a semester and he has changed majors a few times so he is on the 6 year plan to graduate. Since he is relatively low cost for college, we are OK with that. He has spent 3 years in CC living at home - very low cost. We pay tuition, gas for him to drive to school, and his basic living expenses.

He is transferring to a state university in the fall and will need 5, maybe 6, semesters to graduate. We moved last year so that we are only an hour away from the university so he will be living at home for at least a year. We have said we will pay for him to live in a dorm (or maybe an apartment) for the last year or two.

Daughter - Currently in 11th grade - She is clear that she does not want an academic degree. She wants to attend community college and do a career oriented program. Most of those are 1 1/2 or 2 years long. She will probably live at home while she does this.
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Old 04-10-2013, 03:16 AM   #33
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I would be willing to place a substantial wager that you will come to regret making such a large contribution to your son's 529 plan. Even if it turns out that there is no overfunding and your son uses the entire amount for his education, you will be in danger of losing out on valuable tax deductions that would be available if part of his educational funding came from non-529 sources. Current tax law says that you can't take (for example) the American Opportunity Credit based on educational expenses paid for from tax-free withdrawals from a 529 plan. You can get either the tax-free withdrawal or the American Opportunity credit, not both. Other tax credits have the same restriction. So for tax planning purposes, it is generally a better idea to put funds earmarked for education in a mixture of 529 and other custodial accounts, such as uniform gift to minors. That gives you a much better chance to minimize taxes while still qualifying for all available tax credits.

Of course you know your financial situation better than I do, so you may have already thought of this issue. In any case, it is highly laudable of you to provide so generously for your son's education, even if it turns out there are more tax-efficient ways of doing so.

The American Opportunity Credit expired in 2012 AFAIK. And since its limited to 2500, I'd be withdrawing in any event. But to your point, it's entirely possible there will be some other credit I miss out on in 2027 when he goes to school. It's another type of overfunding risk, which I'm still happy to accept. If my big financial regret in retirement is having saved too much for my son's college, I'll consider the game won...
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Old 04-10-2013, 05:14 AM   #34
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But if they manage to finish an IB degree in high school (oldest is starting an IB program this next year) they will have a jump up on college - both in Europe and in the US. IB can provide up to 30 units of credit with the UC system (assuming the kid passes all 6 higher level exams.)
Typically you can only take 3 higher level subjects in the IB -- MAYBE four if you are really gifted and the school will agree to let you try.

Too late for your oldest child, but if you have younger kids you might want to have them look at the United World Colleges. US citizens who get accepted get full scholarships from the Shelby Davis Foundation for the two year IB program, and then can get generous financial aid awards if they enroll in certain designated schools for their BA (mostly Ivies and Selective Liberal Arts Colleges). There is a campus in Italy -- in Duino - that is BEAUTIFUL (part of it is in the old castle. I attended the college in Wales, got an excellent education, and a totally different life than I would have had otherwise. Seriously, if your kids are interested in the IB and/or any kind of international or boarding school experience, look into the UWCs. It is an amazing program [alumni plug over]

I'm not sure my kids will be interested in UWCs, but hoping they will as that would potentially help a lot with college costs. We've got a decent amount saved up so far in their 529s, thanks to throwing a bunch in their accounts during the downturn and then stepping up contributions while things were building up. But now we are looking at shelling out a fortune to fund their pre-college expenses -- long story, but not a lot of options for us here in Beijing and we are not happy with what is available at a more affordable cost. So, we may end up not putting much more in the college fund. Hopefully they will find less expensive college options attractive. Though to be honest, with the way things are going I'm thinking more and more that I may just offer them their college funds as a business startup fund that they can access with a simple business plan (ala Ramit Sethi's approach) and let them learn to earn their own income and THEN decide if they want to spend that on higher ed themselves.
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Old 04-10-2013, 05:40 AM   #35
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My parents were big on education due to their immigrant background and sacrificed to get me and my siblings (6) to attend the best schools that we could get into. So DW and I saved with the goal of getting our kids through school with a "gift" to them of graduating with no loans. So far we have been able to do that, but in all honesty after $250K spent the results have been mixed.

We have one kid left who has decided to go to a good public university in our state which will cost around $85K for 4 years (tuition, room, board, incidentals) which we have set aside. For us that is relatively cheap. He had been looking at a private university that was very interested in him, but that would have been close to $200K for 4 years and would have definitely delayed my FIRE goals.

We should have pushed him more for sports, I have a brother and sister-in-law (both doctors) whose oldest will be going to college as well this fall but on a full ride athletic scholar ship. But, to each their own.
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Old 04-10-2013, 02:16 PM   #36
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What would you do?

This may be a bit off topic but the potential decision is driving me crazy. Our middle son has his college selection down to two choices. He has been accepted into the business school of both colleges. Option 1. Indiana University. Total annual cost (out of state tuition, room & board, misc. books, etc. less scholarships) = $36,186. Option 2. Purdue University (out of state tuition, room & board, misc. books, etc. less scholarships) = $17,130.
He wants to go to Indiana because its business school is ranked higher but is it worth an extra $20,000 per year? We (the parents) are paying for everything. We also have a 10th grader and a sophomore at another college. We have money saved up but I am hesitant to pay for the higher cost needlessly. My husband is 68 and still working and I am 10 years younger. Retirement is in the future and outside of our house purchase this will be the biggest spending decision we will make.
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Old 04-10-2013, 03:09 PM   #37
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I've three and planning to fund four years of college. Beyond that, I expect them to take a loan. This is what I've saved so far:


DD: Year 2014 97K...stopped monthly contribution a year ago. She's smart and most probably will get some sort of scholarship.
DS1: Year 2022 84K...Automatic contribution of 375/Month
DS2: Year 2022 84K...Automatic contribution of 375/Month
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Old 04-10-2013, 03:15 PM   #38
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For anyone looking for flexibility in education planning, I would suggest a look at DeVry University.
Many choices with 95 Campuses across the country, or online courses, accelerated (shortened) degree options, and a good record of placement.
Work/study programs in many disciplines.
DS graduated in less than 3 years w/BS degree while working in related job to pay for education.
There are other similar schools, but this is the one that fit our situation best.
While this will not be everyone's choice, a look at the "Planning" process...
Courses/Degrees/Cost charts/Home or Campus etc. may help put some of the variables into perspective, and help with comparisons with other school options.
Aiming_4_5 ..... Keller @ Edina worth a look.
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Old 04-10-2013, 04:01 PM   #39
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I would be willing to place a substantial wager that you will come to regret making such a large contribution to your son's 529 plan. Even if it turns out that there is no overfunding and your son uses the entire amount for his education, you will be in danger of losing out on valuable tax deductions that would be available if part of his educational funding came from non-529 sources. Current tax law says that you can't take (for example) the American Opportunity Credit based on educational expenses paid for from tax-free withdrawals from a 529 plan. You can get either the tax-free withdrawal or the American Opportunity credit, not both. Other tax credits have the same restriction. So for tax planning purposes, it is generally a better idea to put funds earmarked for education in a mixture of 529 and other custodial accounts, such as uniform gift to minors. That gives you a much better chance to minimize taxes while still qualifying for all available tax credits.
Those tax deductions are minimal at best. Of course, I could relate horror stories of what happens in some instances with large balances in irrevocable gifts such as UGMA accounts but I digress. In addition, you do not mention that 529 plans are not counted as the child's assets like UGMA accounts are in figuring in financial aid eligibility.......
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Old 04-10-2013, 04:12 PM   #40
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This may be a bit off topic but the potential decision is driving me crazy. Our middle son has his college selection down to two choices. He has been accepted into the business school of both colleges. Option 1. Indiana University. Total annual cost (out of state tuition, room & board, misc. books, etc. less scholarships) = $36,186. Option 2. Purdue University (out of state tuition, room & board, misc. books, etc. less scholarships) = $17,130.
He wants to go to Indiana because its business school is ranked higher but is it worth an extra $20,000 per year? We (the parents) are paying for everything. We also have a 10th grader and a sophomore at another college. We have money saved up but I am hesitant to pay for the higher cost needlessly. My husband is 68 and still working and I am 10 years younger. Retirement is in the future and outside of our house purchase this will be the biggest spending decision we will make.
I would tell him you will pay the fees for Purdue and if he really wants to go to Indiana he's going to have to find a way to cover the 20k/year difference. If you want to be nice you can tell him you'll match him on the student loan payments dollar for dollar once he finishes and starts paying back.

He wants to go to business school -- he better get used to cost/benefit analysis...

And does the ranking of the school really matter THAT much for a BA? I could possibly see the value in paying more for an MBA at a top-ranked school, due to the networking spilloffs such programs usually provide, but not necessarily at the undergraduate level.
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