How Should We Think About College Savings?

[NeverBored]

Quote:

Originally Posted by ronocnikral Degree dependent. My degree required 150 credit hours, and heaven forbid you go over b/c the math doesn't work out just right. That's 18-19 credit hours per semester. Plus working ~15 hours/week. The most I took in one semester was 21 (and gained about 30 lbs). About half the kids I graduated with did it in 4, the other in 4+.

Absolutely true. Her school is liberal arts, four-year only, no grad programs. What they do, they do extremely well. Most engineering degrees in our state take 5-6 years at least.

My point is just that a lot of parents don't look beyond sticker prices, and also don't consider the cost of staying in school a few years longer.

[LOL!]

Tell me why you are considering private college for your kids? I went to a private college and my daughter now attends a private college that we are paying full list price for. Bummer. Is it worth it? I have no idea, but I do know that the state flagship university would have been an outstanding choice as well. There is quite a lot of emotional hype about all this with not much factual info floating around. It is probably right up there with
(a) pay off mortgage or invest
(b) stay-at-home-parent or daycare
(c) index funds or actively-managed funds
(d) Mac or Windows
(e) Canon or Nikon
and so on.

I think our second kid will go to a public university.

What we did was save/invest enough for early retirement, then keep working to pay for college from paychecks with little to nothing coming from savings. Consider this: a two-income couple can put $22,500 each into 401(k)s plus $6K each into Roth IRAs. That's $57,000 a year. If you do that for 18 years, then stop, you will have quite a nice retirement package. So you stop and then divert that $57,000 (it will go up due to inflation anyways) to college expenses. In 2012, $57K almost pays for a year at the most expensive universities.

[ejw93]

I attended a seminar at church a year ago about covering college costs, but it was a thinly-veiled sales pitch to buy Cash Value Life Insurance and Master Limited Partnerships.

After talking to some other parents (where I learned about community college option) and regularly reading Lynn O'Shaunessy's college finance blog, I backed myself away from the ledge. I'm convinced 4-year colleges are about to price themselves out of the market, and that market forces (the JuCo option) are going to push them back in line.

One of the dirty secrets not spoken about very often is that JuCo/Community College for the first 2 years is like getting 50% off the cost of college.

... evidently the secret is out. According to the just-released 2011 Sallie Mae report, 22% of families earning greater than $100K are sending their kids to community college (up from 12% in previous years).

Also note that one in seven college students in the ENTIRE COUNTRY goes to a California JuCo(!). You can do a web search for 'feeder community colleges' and figure out which JuCo 'feeds' your favorite 4-year school. For example, Diablo Valley College is a feeder for UC Berkeley.

[Gumby]

Quote:

Originally Posted by bltkmt I have a 17yr old and 13yr old, . . . We live in CT, and the state school options are few - UCONN is decent and that is about it.

Depending on what your kids might want to do, it might be advantageous to look into one of the CT State Universities. For example, if they want to teach in state, it will be significantly easier to get certified if they graduated from Southern than if they go out of state. It's also substantially cheaper.

[NeverBored]

Quote:

Originally Posted by ejw93 One of the dirty secrets not spoken about very often is that JuCo/Community College for the first 2 years is like getting 50% off the cost of college. ... evidently the secret is out. According to the just-released 2011 Sallie Mae report, 22% of families earning greater than $100K are sending their kids to community college (up from 12% in previous years). Also note that one in seven college students in the ENTIRE COUNTRY goes to a California JuCo(!). You can do a web search for 'feeder community colleges' and figure out which JuCo 'feeds' your favorite 4-year school. For example, Diablo Valley College is a feeder for UC Berkeley.

Community college can be a fantastic option, and has been a financial bargain for many years. But it's not always such a deal now in California. Many of my kids' friends took that route, and then struggled each semester to "find" 12-15 units of classes that actually counted toward their general ed requirements or their major. Some of them attend two or three local colleges, just trying to get the classes they need. This has added one to three years to their undergrad education, and some are just now transferring to a university after three or four years at the community college.

The problem of course, is public funding of higher education. I retired from the state university system last year and dealt with this for 35 years.

Sorry to hit the soapbox, I just get frustrated when people think the community college option is the only smart way to go. In our state, in this economy, it's not as easy as it used to be.

(I did the community college/state university route myself; it was a great deal then. Hardly a secret.)

[ronocnikral]

NB is correct to some degree. However, if you know where you want to go and which program you want enroll in before you start, it can be very advantageous. My college wouldn't accept Physics classes from any other school (even MIT or Caltech if you tried). But, Calculus (lowest level of math offered), chemistry, economics, liberal arts, physical activity etc were all accepted. If one knows beforehand where they want to go, they can talk to both schools and make sure what they are doing at the juco makes sense/cents. I helped a young person from my church do this very thing and I was surprised that most juco's already knew what would transfer, we still checked with the school this girl wanted to go to.

Also, I am also going to advocate DD to start attending juco in high school. for instance, instead of me taking 2 years of calculus in high school and 2 years of chemistry, I could have knocked out some college classes and high school classes at the same time.

[NeverBored]

Quote:

Originally Posted by ronocnikral I was surprised that most juco's already knew what would transfer, we still checked with the school this girl wanted to go to. Also, I am also going to advocate DD to start attending juco in high school. for instance, instead of me taking 2 years of calculus in high school and 2 years of chemistry, I could have knocked out some college classes and high school classes at the same time.

If you are in California - sounds like you are - you can go to assist.org and look up the transfer articulation lists for all the CA community colleges and state universities. You can see exactly what courses will transfer and will be equivalent to the required university course. These are listed by academic year, by department, major, etc., and it's a great tool.

Good luck to your daughter. That's a great way to get some things out of the way. AP credit can help too.

[ronocnikral]

Well, my daughter is only 2.5 months. I am making big assumptions that things won't change much in the next 15 years or so. And I'm in UT, but I helped the young lady out in TX!

Thanks for the website though!

[Independent]

I'll repeat stuff that's said above.

We were aggressive savers when our kids were small, but we didn't have any savings labeled "college".

We paid off the mortgage about the time our oldest child started college. That freed up cash flow. We also found that our supermarket bill really did go down when those kids lived away from home. And our savings rate went down, but not so much that I had to work to 65.

All three went to private colleges, but I'm not convinced that was a cost effective choice. We could afford it. If we had less money, I would have said public universities or scholarships.

If kids are very bright, they will get academic scholarships to most private schools - remember there is a sticker price and a real price.

[ProGolferWannabe]

My thoughts:

If your kids do well in their high school studies, and demonstrate that they have some reasonable outside interests, there is no reason they won't be able to secure some merit based aid when they attend college. My own personal experience with our kids is that smaller liberal arts schools are rather generous with merit based aid in order to attract decent students who might otherwise go elsewhere. In short, the list price of college is probably not what you will have to pay. Seems to me like you are on a good track to fund your kids' educations.

[bubba]

Repeating stuff already mentioned, but seriously reconsider the private school stuff. DS is a 25 y.o. engineer with MS from a state school. He scored a 31 on the ACT, so tuition was covered by scholarship. We paid room and board, etc. out of our current income (no loans). He only worked during the 3 co-op semesters and as an extreme LBHM type of kid, he stretched that co-op pay a mile! With no loans to repay all the savings we had for his education are now for his first house (still renting).

He is doing very well and enjoyed his college experience. Would he be in better shape now had he gone to a private school? No way to know, but he is very happy to have no student loans (a lot of his friends do have loans).

[Hamlet]

I think it depends a lot on which private school you are talking about.

I think I would pony up for a degree from Harvard or MIT.

I would be less likely to spend the money on the little local liberal arts colleges.

Quote:

Originally Posted by tightasadrum I'm not convinced that an undergraduate degree at a private college/university is worth the premium. That also includes paying for out-of-state tuition. Spend the money for the better school for the advanced degree(s). DD would not take my advice on this one. It was very expensive. We told her if she'd go to school in-state, we'd pay for her graduate degree too. We couldn't sell that idea. Now DD is thinking about an advanced degree and is faced with some bills/loans beyond her imagination. The choice was hers. I haven't asked her whether she now regrets her original decision. It's not my problem now.

[alexbalex]

I have two young kids and am planning on saving around $108K a piece for them, which I think with interest should provide an adequate cover for them to graduate a four year college without a crushing debt-load (I'm planning on asking them to contribute a very small amount towards their overall education costs, maybe like $1K a year, so they take college seriously)

One point I would like to raise: there is no way college costs can continue to increase by 6-7%, an inflation which has happened due to the increase in people going to college and the increase in access to student loans.

The reason for this is that in a very short amount of time, it would lead to college being completely unaffordable to the middle class. This would be a serious problem for any college, especially given the wealth of alternative options out there, including junior colleges, state schools, community colleges, etc.

If you look at the numbers recently, you'll notice that state school tuition is inflating at a higher rate than private schools. There are plenty of good reasons why this happening, but at least one of them, IMO, is that private schools have already inflated their tuition rates so high, that they have little ability to inflate them further without risking becoming completely unaffordable.

This is not to say that private tuition won't continue to go up, I just feel that it will go up at a more reasonable rate going forward.

[Sesq]

I have 529 plans for my two kids. Right now I am contributing a relatively paltry amount (2.5K/year). In a couple years when either the house is paid off and/or my wife goes back to work I intend to bump that up to ~17.5K/year.

I have 5% education inflation in my model, and expect the price to be about $75K private, ~35K public for my 6 year old. 85/40 for my 3 year old. My spreadsheet says I'll be able to fund 150% of public or 2/3rds of private for each kid. I intend to leave the choice to them. I think I owe it to them to at least fully fund a public education, if I can.

That said, I think something has got to give, and college is going to look different 10-15 years from now.

It was a tremendous help that my parents paid my tuition. I remember at 18, my father who did 13 years of night school supporting a wife and kids, saying how important education was to him that he would pay my tuition through a doctorate if that is what I wanted (unless I got married, at that point I am starting my own family, and on my own). I stopped at a Masters via a 5 year plan.

[haha]

Quote:

Originally Posted by tightasadrum I'm not convinced that an undergraduate degree at a private college/university is worth the premium. That also includes paying for out-of-state tuition. Spend the money for the better school for the advanced degree(s). DD would not take my advice on this one. It was very expensive. We told her if she'd go to school in-state, we'd pay for her graduate degree too. We couldn't sell that idea. Now DD is thinking about an advanced degree and is faced with some bills/loans beyond her imagination. The choice was hers. I haven't asked her whether she now regrets her original decision. It's not my problem now.

A young woman friend of mine lived in an upper midwest state with a very good public university system, including the flagship school which was almost right in her neighborhood. But after high school she decided to make a lateral move to an adjoining state and attend their flagship school, also a highly regarded state school. She funded this mostly through loans, rather than on the backs of her parents. Later she borrowed to get a mid-tier private MBA, which her husband would not pay for- so although he handled her living expenses, she had to borrow the full tuition amount.

Now she is divorced, working at 2 very so-so jobs, and making loan payments that exceed her studio apartment rent as a budget expense. She is really strapped.

I think we often do not consider what a snow job school guidance counselors and the whole academic system puts on students. They rarely have time to step back and consider whether any of this really makes any sense. Many people are also not yet aware that the major state universities are now very competitive in admissions. In any state with a large East Asian population, our sons and daughters are going to be studying all night just to keep in the middle of the curve. Anyone been on the Berkeley campus in the last 10 years?

Or walked down University Avenue in Seattle?

To get an education equal to, let alone better than, this type of environment is going to take the top Ivies or Stanford, or a few other very elite schools.
Parents need more authority over their kids, but this isn't going to happen in modern media-driven America.

Ha

[sheehs1]

Quote:

Originally Posted by NeverBored Many smaller private schools have great scholarship/grant/merit awards, which as a package starts to compete with some of the more expensive public schools. The smaller privates publish a sticker price, but almost no one pays that sticker price. We have two daughters graduating in May from two different small private colleges. They both have academic scholarships and loans, and one has a sports scholarship (which she's worked very hard to earn and keep). They both work, on and off campus (coaching, babysitting, tutoring, office assistant) and are responsible for their personal expenses and some living expenses. They pay their own car insurance/gas/repairs and cell phone bills. What some people don't think about is - they will graduate in four years; most of their high school friends who took the community college or state university route will take five to seven years to complete their undergrad degree. A friend at a prestigious polytech university has waited two years to get into a required chemistry class that is a pre-req for his major courses. That slows you down a bit. It's a big chunk (especially when you have twins) but manageable. Just be sure to look at all the options. One of the colleges our girls attends is considered to be one of the more expensive schools in our state. After her scholarships, college-based grants and interest-free loans, it is less expensive than the state school up the road. And she'll graduate in four years (many students at her school graduate in 3-1/2 years).

I had the same experience with our daughter. Our sons went to in state public. Our daughter went to in state private. As you said, no one pays the sticker price at the private colleges and in todays environment one should be able to get at least $8k to $10K off the sticker price right off the top. There are all sorts of scholarships and grants. This also is before any FASFA ranking (which like most here meant absolutely no aid to us).

Another factor to consider is room and board. We found the private college much cheaper. Our daughter lived in an apartment and then a town house with others on campus. No utility bills. College paid for all that and I'm sure it was embedded in the cost of room and board. Still, it was cheaper than what our sons did, renting housing within the city, paying utilities...etc.

[alexbalex]

Quote:

Originally Posted by sheehs1 I had the same experience with our daughter. Our sons went to in state public. Our daughter went to in state private. As you said, no one pays the sticker price at the private colleges and in todays environment one should be able to get at least $8k to $10K off the sticker price right off the top. There are all sorts of scholarships and grants. This also is before any FASFA ranking (which like most here meant absolutely no aid to us).

When you say no one pays sticker, how do they avoid it? I'm saving for my kids now, and am just wondering how people go about getting money off the sticker price.

I was fortunate enough to have my parents pay my college, so I'm not as familiar as I should be with the process.

[sheehs1]

Quote:

Originally Posted by alexbalex If you look at the numbers recently, you'll notice that state school tuition is inflating at a higher rate than private schools. There are plenty of good reasons why this happening, but at least one of them, IMO, is that private schools have already inflated their tuition rates so high, that they have little ability to inflate them further without risking becoming completely unaffordable. This is not to say that private tuition won't continue to go up, I just feel that it will go up at a more reasonable rate going forward.

ALso, private schools do not have the huge influx of students the public schools have had over the last 20 years. Most are small cities with 20K or 30K students. Infrastructure and maintenance needs are enormous. Public colleges have built and built and built.

[sheehs1]

Quote:

Originally Posted by alexbalex When you say no one pays sticker, how do they avoid it? I'm saving for my kids now, and am just wondering how people go about getting money off the sticker price. I was fortunate enough to have my parents pay my college, so I'm not as familiar as I should be with the process.

Alexbalex
It's not like we had to avoid paying sticker price. This is what happened in all cases with all private schools my daughter applied to. With the acceptance letter she received a tuition package or letter telling her how much each semester would be. It is offered up front. And it was always $8k to $10K off the sticker price.
It is not advertised on any of their websites...although you might be able to find an amount offered to the last class in tuition scholarships, grants...etc.
After the first year, my daughter was offered another academic scholarship that further reduced the tuition costs.
Private schools want to retain their students and do what they can to help them return each year.
I didn't know about this either when she started making applications to private colleges.
Might be worth calling a couple and asking them what the average semester cost is now for an entering freshmen. That might give you some idea of what is happening now.

[alexbalex]

Quote:

Originally Posted by sheehs1 Alexbalex It's not like we had to avoid paying sticker price. This is what happened in all cases with all private schools my daughter applied to. With the acceptance letter she received a tuition package or letter telling her how much each semester would be. It is offered up front. And it was always $8k to $10K off the sticker price. It is not advertised on any of their websites...although you might be able to find an amount offered to the last class in tuition scholarships, grants...etc. After the first year, my daughter was offered another academic scholarship that further reduced the tuition costs. Private schools want to retain their students and do what they can to help them return each year. I didn't know about this either when she started making applications to private colleges. Might be worth calling a couple and asking them what the average semester cost is now for an entering freshmen. That might give you some idea of what is happening now.

interesting, thanks for pointing this out. I'll try to do some research into this, when I have more time. Sounds like it could really result in some fantastic savings.