College / financial aid

[cute fuzzy bunny]

I read an article on that recently, maybe i'll go look for it...basically espoused setting up a retirement account for your kids rather than a college fund. Even a modest amount set aside for 60+ years will make for a sizeable retirement nest egg. The argument was that many kids that want a college education can qualify for scholarships or aid of some kind, work their way through school or take out a loan. Not to mention many will live well without a college education. However given the rate of people who retire "on time" without enough to live on, that "gift" is considerably more valuable.

[wzd]

Bob Smith - Thanks for the link. It computes the same thing I computed using the fafsa site spreadsheets (but a lot easier) - that I'm SOL for any aid because an apartment building that generates ER money is worth too much. Maybe we can plead special conditions....worth a try, but sounds unlikely to me.

RE: ER funds for kids/grandkids. Sounds like a great idea, but I wouldn't want them in the kids name. If there is a way to create them, tax deferred or free if possible, in a trust as UncleMick mentions then that would be interesting. I have heard too many cases of people losing inheritance monies in legal procedings, such as divorce or by being sued. There would also be the temptation to pay the penalty tax and spend it. Some kind of trust not under their control that paid out starting at age 40 would be better. If it could be hidden from them (and creditors) that would be even better.

Wayne

Quote:

FAFSA claims to audit 30% of the applications. *How they audit I don't know, but your tax return is a starting point. *It seems like a high percentage to me. *The penalties are severe if caught lying, so maybe they count on that. Also, I'm not sure if the game will be worth it in the big picture. *You will have to evaluate the other tax aspects of tax deferred accounts and taxable accounts as well. *The current dividend and capital gain tax laws are a boon for taxable accounts, which pulls in the opposite direction of sheltering all in retirement accounts. I think playing a shell game with education IRA's is legal though. *You can rollover between beneficiaries once per year. *I first thought of doing it to avoid complications with tax matters on our stepdaughter, who is claimed on her fathers return, but it may have other uses. Wayne

I did the FAFSA thing last year and am totally disillutioned about it. It asks a lot of personal questions that my lawyer wouldn't ask. I was audited. Had to send in tax form - fun since I did it electronically.

My daughter graduated HS with 4.11 average and a 1280 SAT. They "Offered" me a loan of $1300/year for a college (out of state) that was going to cost me $22000/year. No thanks. No merit scholarship. One friend in her grad class had over $150000 in scholarship money - 5 times what it was going to cost her to actually go.

Then the school raised tuition 16% last year and bragged that out of state was paying 4 times what in state paid and perhaps the out of state should pay 5 times. Schools look at out of state students as a source of income. That practice of the disproportionate level of out of state tuition costs only serves to limit diversity of students at school and that will hurt. Private schools don't have that problem.

I've had the opportunity to work with people from around the world and the ones from Europe and Asia all seem to be better educated. The american education system is in trouble, from elementary to college and it's not going to be a easy or quick to fix. It will take a generation to fix and no one is looking at the problem.

It would have been better and more cost effective to spend the recent medicare money into the education system.

Sorry for the rant.

Hello wzd and all. I feel your pain about the cost of higher education (and the results). However, I don't
believe it would make any difference at all if the money
added to Medicare was diverted to education, or anywhere else. My view? Once the government
(at any level) gets their hands on your money, the chances are quite good that it will be wasted. In God
we trust! All others (and especially government)
are suspect. The scary part is that someone said
"The power to tax is the power to destroy!" The
country of our founders is certainly gone. I predict
what's left will be killed off in time.

John Galt

[unclemick]

Is'nt it ever thus. One of the founders - James Madison cpmplained about taxing broadly and spending narrowly. I beleved New England was going to secede early on but the British burned Washington before the delegation got there (around 1812 or so ). I remember southerner's in the lumber mills who put down George Washigton and his dam 'Whisky Tax'.

Today we have spreadsheets and stmulation models so we can measure how bad we're screwing up in super detail.

AND as an American - nobody is going to cheat me out of the shear joy of complaining - no matter how good it gets. BTY - my 87 yr. old mom is still ready for the Great Drepression to return,

[Bob_Smith]

Quote:

BTY - my 87 yr. old mom is still ready for the Great Drepression to return,

My parents think like that too, unclemick. My mother envisions her children and their families returning to the family farm where we would grow vegetables, raise chickens, and survive off the land when it all caves in. Farm land is viewed as the safest investment because it has intrinsic value - it can feed you if needed, plus the land returns around 5% on a cash rent basis, which looks pretty good today. The depression had a profound effect on those who lived through it.

[unclemick]

One positive effect of the depression on my father was that he valued education so highly that he got his college degree AFTER he retired via the local JC and weekend/night classes at Portland State - 70's and early 80's - they never had an income of over 17k/yr and had a pretty good retirement. (no house or car payments though).

[Bob_Smith]

That is incredible that he got his degree after he retired. That generation was made of strong stuff.

Another positive effect of the depression was a general sense of low expectations. They expected the worst, prepared for it, and were continually pleased when things worked out better than anticipated. Our generation tends to have high expectations and feels disappointment when things don't work out as planned.

Well, here are some thoughts, hopefully not too far off topic. First, I was in Barnes and Noble today and the Feb. issue of Kiplinger Personal Finance (??) had a feature article
about college aid. It may be of interest to some of you.

I only have an associate degree from a local junior college, but I managed to become president/CEO
of four (4) small corporations, starting at age 32.
It held me back a bit early on, but after I had some
solid experience it (lack of a 4 year degree) was
a non-issue.

My oldest daughter was very talented (singing,
dancing, etc.). She and I visited one school where
she sang for the Music Dept. Director to see if she could get a scholarship. I thought maybe they would send
us a letter in a few weeks. When she finished, the
Director said, "You're in!" As someone said, if they want
you (for whatever reason), you have leverage. When
I went to college, no one much cared as long as I showed up with a check.

John Galt

[unclemick]

I'm not sure I believe this - but my oldest nephew's now wife was 'recruited' by the Naval Academy because she sailed competitively since age 8. Crew I understand - but sailing?? They did buy a Creola 32(?) after graduation.

[wabmester]

I live about an hour away from a naval base, and some of the officers and naval architects I know are excellent sailors. They probably wanted her because of her love of the sea, great boat handling skills, and because she doesn't get sea sick

[unclemick]

I have a vague awareness of sailboat classes and racing - I have a buddy still working at the old plant who races on Lake Ponchartrain. But not in college?? That's why I think he's 'pulling my leg'. She probably got recruited the old fashioned way.

[Bob_Smith]

FarmerEd,

I just did the FAFSA online for my daughter who is a senior in HS and will start college next fall. I encountered a surprise, and I'm not 100% sure why it happened, but here's what I think it is:

If you use a 1040A or a 1040EZ, or if you use a 1040 but could have used a 1040A or 1040EZ, you do not need to disclose your assets. I do believe that some schools may ask for that anyway, but some don't. I happen to be able to use a 1040A, so the FAFSA let's me take a pass on disclosing assets. I do suspect that my income will put me over the top anyway, but next year, after I ER, that could change. So that may be a strategy to examine. Strange system!

[Ted]

The talk about the sailing scholarship reminded me of the story of the newlywed couple who were guests at a swimming pool party. The young wife, who was Italian, was in the pool doing laps while her husband and another guest were standing beside the pool watching.

The other guest commented that the man's wife was a great swimmer and asked if she had been on the Italian Olympic team. "No," her husband answered, "Actually, she was a street walker in Venice."