8 yrs of tuition ahead and then full speed ahead to retirement

[zerogravity]

Hello- I have enjoyed reading many of the posts on this forum. So, I decided to join because sometimes I have more questions than I can find answers. I am 47 and my DH is 50. We have one going to college Fall 2015 and the next in Fall 2016. We are going to pay for their 4 yr degrees, which is not a small commitment these days. Tuition at the public university is running 23K/yr. DD#1 earned a one-time 3K scholarship and DH's company has a trust fund out of which they contribute approx. 3-5K per student. DD#2 could earn a better scholarship bc she has better test scores (if only her grades reflected her brain power!)
I am going to go back to w*rk to cover the expenses, so we don't have to dip into savings, but I'm not sure I'll be able to find a job that makes enough. I have a interview next Wednesday- wish me luck!

 

[Unpaintedhuffhines]

Good luck, ZG. As my first child was born (27 years ago), we went to go see a financial planner. They did all sorts of projections about income, savings, inflation, 401ks, social security, etc. I saved them because it's kind of fun to go back and look to see where they hit and missed the mark. Thank goodness my salary was way over projections! One thing I remember saying back then was "there is no way in hell that college costs can increase at the rate that they predict. I can't possibly see paying $20K/year for a public school!" Unfortunately, they were dead on.

 

[Evie]

Good luck with your job search! As someone who doesn't have kids yet, did you save money for college while they were growing up?

 

[2017ish]

Good luck ZeroG. Your plan is what we did. I was long-time SAHD and came back to work when the second started college (and the third started his H.S. junior year). Some thought poor planning to have three in undergrad at once, but they (luckily) all got out in 4 years, and once they started graduating, the increased savings from me continuing to work have been a big boost. (Youngest just finished last year.)

Even better, like you, we were relatively young when they were finished.

 

[Big_Hitter]

good luck - I guess the service academies are not an option...

 

[sengsational]

We don't know about the level of income, and the level of non-retirement assets in the family, but it would be easy to run the numbers to arrive at your expected fami!y contribution using a fafsa calculator. Your EFC might be higher than the state school tuition, but it's worth a look.

 

[LOL!]

Good luck! I had two kids in college last semester. Somehow we found some money to pay for it. A little bit of 529 plan money, a little bit of taxable account, a little bit of cash flow, a little bit of education credits.

We didn't do these things: We could have borrowed from a 401(k). We could have reduced 401(k) contributions and/or skipped Roth IRA contributions, too.

 

[MikeWillRetire]

Tuition at a public university is $23k? Some people complain about the taxes in Maryland, but our university tuition is $10k. What state are you in?

 

[wolf]

OP:

Once your child is used to college. Check out Student jobs on Campus.

At some colleges, student gets free room and board, if they work in Dorm.
Also, many students give tours, work in cafeteria, etc. to help mitigate
their expenses.

Then again, there are junior colleges. Two years at JC, finish up general
education requirements, then transfer. IN California, at some JC's, if you
sign up for a "special" program and maintain GPA, you are guaranteed
a spot at certain 4 year colleges.

Don't forget to apply for all grants in your state.

 

[Hermit]

OP:

Once your child is used to college. Check out Student jobs on Campus.

At some colleges, student gets free room and board, if they work in Dorm.
Also, many students give tours, work in cafeteria, etc. to help mitigate
their expenses.

Then again, there are junior colleges. Two years at JC, finish up general
education requirements, then transfer. IN California, at some JC's, if you
sign up for a "special" program and maintain GPA, you are guaranteed
a spot at certain 4 year colleges.

Don't forget to apply for all grants in your state.

Been there, done that. It didn't turn out like it sounded. DS went to second tier college knowing that credits transferred to top state engineering school. He took all of his math courses. Unfortunately, the credits transferred to the new school, but the engineering department would not accept them for their requirements. On the good side, DS should be pretty good at calculus and the other higher level math classes he took twice!

 

[zerogravity]

Good luck with your job search! As someone who doesn't have kids yet, did you save money for college while they were growing up?

We did save In the NC529 plan for a few years, but the fees were actually reducing the principal. We switched investment strategies and made the tactical decision to invest extra cash in our business. We have it all tied up in rental properties now. The rents received will cover part of college costs. My new job will cover some part of the rest. Even with great planning we were not prepared for the high cost of college.

 

[robertf57]

good luck - I guess the service academies are not an option...

Your comment seems to imply that this is a generally available option..... An appointment to a service academy is a big deal requiring not only excellent grades, extra-curricular activity including sports, and usually at least some evidence of leadership. These a coveted positions not available to many people. But a great deal. 4 yr scholarship, room and board, and a guarunteed job when your done.

 

[zerogravity]

We don't know about the level of income, and the level of non-retirement assets in the family, but it would be easy to run the numbers to arrive at your expected fami!y contribution using a fafsa calculator. Your EFC might be higher than the state school tuition, but it's worth a look.

Good point, We ran fafsa this year and it said our Efc is 34000. I don't know what that would look like next year when we have two kids in school? I do not know how fafsa's formulas weigh income and assets against college costs and EFC.

 

[zerogravity]

Tuition at a public university is $23k? Some people complain about the taxes in Maryland, but our university tuition is $10k. What state are you in?

Western Michigan university. I should clarify. 23k is total tuition and room and board. It's crazy to me but room and board totals more than tuition. I really want my DD to live on campus to have access to all the university offers, but off campus is a lot less expensive. A lot of kids share apartments so they don't have to pay for the dorm and the meal plan.

 

[scrinch]

We've been paying college tuition for the past 10 years, with two years to go (3 kids) . I'd be happy to be paying only $23k! Our kids have gone to California public schools and now the last is in a small liberal arts college in Ohio.

 

[kannon]

Applaud all the parents here for their dedication in helping their kids don't start their career in debt. We did the same and both boys have no debt and already started retirement savings.

That said a couple of lessons learned:

- community college would have been better for one of our kids, not only saved money by transferring after two years but an easier transition. It's a good option

- loans are ok under certain conditions. Our state universities ran about $20K/yr. Seems like a lot but after 4 yrs, $80K in debt but with an engineering degree, with very good starting salaries, with proper diligence those loans can be paid off fairly quickly. The key was getting a good job after graduation.

Just some observations. Good luck to all the parents in their college support.

 

[MikeWillRetire]

Western Michigan university. I should clarify. 23k is total tuition and room and board. It's crazy to me but room and board totals more than tuition. I really want my DD to live on campus to have access to all the university offers, but off campus is a lot less expensive. A lot of kids share apartments so they don't have to pay for the dorm and the meal plan.

Ok, that makes sense now. My son entered the University of Maryland this year, and he also lives on campus. With your child away at college, various bills will decrease, like food, gasoline, electric, water bill, etc. I have found that room & board is roughly the same as the decrease in bills....much to my pleasant surprise. Just don't send them away with a car, credit card, or promises of spring break in Florida.

 

[papadad111]

Tuition at a public university is $23k? Some people complain about the taxes in Maryland, but our university tuition is $10k. What state are you in?

I suspect that's tuition plus room and board. Figure 10-12k for tuition at average state university and another 10-12k per school year for room/board/transport/books.

Just read an article. Cost for going to a state school averages 25k per year for undergrad for the typical student living on campus in a dorm or equivalent off campus student housing (eg. Apt with classmates).

Not far off at all. DS1 is off to school in the fall ...

University Education + living cost Inflation projected to be approx 5 percent overall per year so start at 25k, year 2 is 26k. Year 3 is 27k and year 4 is 29k --- so presume done in 4 years it's a $108K expense....

 

[sengsational]

Good point, We ran fafsa this year and it said our Efc is 34000. I don't know what that would look like next year when we have two kids in school? I do not know how fafsa's formulas weigh income and assets against college costs and EFC.

This is the parent's calculation details. You calculate "total available" from both income and assets. I think you get total available income by starting with your income less federal taxes paid, less SS paid, less state-specific tax offset, less "income protection allowance" (which is only $25K IIRC). So that's the first total. Then you get total available from assets by taking 12% of your assets (cash, savings, investments, rental property , but not your current home equity in FAFSA), less "asset protection allowance" (which is only $50K or $60K IIRC). BTW, the available from assets calculation does not include retirement assets (IRA, 401k, retirement annuities, cash value of life insurance, etc).

You add the available from income and total available from assets to get total available (TA). They expect you to spend 27% of that total below a cut-off, and 47% of the amount exceeding the cutoff. So for instance 0.27*29K + 0.47*(TA-29K). Those are old percentages/values I pulled from a spreadsheet of mine. I don't imagine they've changed too much.

The good news with two kids is that the EFC does not change (very much). So you would be looking at $34K/2= $17K per kid. If each kid had a school budget of $25K, your kids might each get $8K/yr in grants, loans, and work-study.

Oh, one more bit of possibly bad news...if your kids have any assets in their name, those are expected to be spent at a rate of about 25% per year, IIRC. That means after 4 years, the kid would have 30% left.

 

[zerogravity]

This is the parent's calculation details. You calculate "total available" from both income and assets. I think you get total available income by starting with your income less federal taxes paid, less SS paid, less state-specific tax offset, less "income protection allowance" (which is only $25K IIRC). So that's the first total. Then you get total available from assets by taking 12% of your assets (cash, savings, investments, rental property , but not your current home equity in FAFSA), less "asset protection allowance" (which is only $50K or $60K IIRC). BTW, the available from assets calculation does not include retirement assets (IRA, 401k, retirement annuities, cash value of life insurance, etc).

You add the available from income and total available from assets to get total available (TA). They expect you to spend 27% of that total below a cut-off, and 47% of the amount exceeding the cutoff. So for instance 0.27*29K + 0.47*(TA-29K). Those are old percentages/values I pulled from a spreadsheet of mine. I don't imagine they've changed too much.

The good news with two kids is that the EFC does not change (very much). So you would be looking at $34K/2= $17K per kid. If each kid had a school budget of $25K, your kids might each get $8K/yr in grants, loans, and work-study.

Oh, one more bit of possibly bad news...if your kids have any assets in their name, those are expected to be spent at a rate of about 25% per year, IIRC. That means after 4 years, the kid would have 30% left.

Awesome information, do you have a link that I could refer to help explain this further? Your explanation is great and makes me want to know more. I would like to understand the fafsa calculations better so that I could a) plan and b) shift $$ around if beneficial. ( what is IIRC?)

 

[Rothman]

Welcome zerogravity, I too am planning retirement savings around college education costs for our kids. I used a pre-paid option our state provides for undergraduate degrees leaving cash to cover room and board. Graduate school is covered with cash as no programs are available. My choice is leaving the kids to graduate without debt so that they can start out working and saving for their future. In fact I expect to leave Roth accounts to their children someday that could provide them the same benefit. I value education very highly and don't want to be critical of those who graduate with debt as given a marketable field the data supports it's a big positive in lifetime earnings, but I see peers in my child's grad school graduating with undergrad and graduate debt of $500k and that scares me. We work and save money for a purpose, to me this ranks high, I applaud your effort, congrats on planning.


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[fosterscik]

Parents planning for college need to be aware of the most important aspect of the FAFSA calculation: it shows your "need" as defined by the government, but VERY few schools provide that much aid to your child. You need to understand that the EFC they calculate is the minimum amount you will be on the hook for, and not the maximum. Few students actually pay as little as their EFC.

The pricier privates use a different form (and the most exclusive privates do meet your need as they define it - but they are very hard to be admitted into). State schools are cash strapped and much of the "aid" they award is in the form of loans.

 

[Evie]

I saw an app on Shark Tank called Scholly, which helps students find scholarships for college. It's only $0.99 in the App Store, so not a huge outlay and definitely worth the money if it makes finding scholarship opportunities easier. I think if I were a student, I'd apply for as many as possible. Every little bit helps!


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[sengsational]

Awesome information, do you have a link that I could refer to help explain this further? Your explanation is great and makes me want to know more. I would like to understand the fafsa calculations better so that I could a) plan and b) shift $$ around if beneficial. ( what is IIRC?)

IIRC=If I Recall Correctly (it's a CYA for people who don't want to validate a "fact" but they still want to spew it, hehe!)

The problem you might have is that you must move assets into the retirement accounts before the first FAFSA filing, or they'll see you're suddenly poorer. Since the FAFSA calculation is a guideline, the financial aid officer can change the offer based on this other information.

The calculation for the federal methodology is public (http://ifap.ed.gov/efcformulaguide/attachments/091913EFCFormulaGuide1415.pdf). Some schools use that as well as the institutional methodology (that's from collegeboard.org). The institutional methodology's calculations are now not public information. Last time they were public was 2010 IIRC There's a book called Paying for College Without Going Broke, and the old books had the institutional methodology calculations. You might be able to find an old one on half.com or something.

Looking at the forms in the PDF, above, it's not obvious how it's working, so I built a spreadsheet that did the calculations (for both IM and FM). The numbers in the sheet are outdated now, but I'll see if I can find that sheet.