College Spending Money

[MichealKnight]

Hello....

I am 46 and retired for 1 year now. I have no college experience at all - but because I don't own any companies anymore, my kids will probably have to do the college route. 1st one - starts in 5 years so of course, I keep planning the money aspect .

Spending Money
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NOT talking room, board, meal plans, books etc. I'm talking extra stuff.
What is a considered a "good" monthly spending budget? I've been using $250 per month so far.

Merit based aid
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I can legally show ZERO income - but assets are 7 figures so I'm assuming no need-based aid although I'll have to research more.

Question: I see on private college sites "99% of our students receive aid". Is that true? Do a majority of students at private colleges get ...$1k, $5k, $10k per year, just because they have good transcripts?

Any opinions or experiences I'd really appreciate - thanks.

 

[njhowie]

Most financial aid is need-based. Showing zero income is not a get out of jail free card - your assets will be looked at and you'll have an "expected family contribution". If you're showing millions in assets, your expected family contribution will be higher.

Here is an Expected Family Contribution calculator. Take note of the lines for Parent Savings, Investment Net Worth, and Business/Farm Net Worth:

https://finaid.org/calculators/finaidestimate/

 

[MichealKnight]

Thanks

Most financial aid is need-based. Showing zero income is not a get out of jail free card - your assets will be looked at and you'll have an "expected family contribution". If you're showing millions in assets, your expected family contribution will be higher.

Here is an Expected Family Contribution calculator. Take note of the lines for Parent Savings, Investment Net Worth, and Business/Farm Net Worth:

https://finaid.org/calculators/finaidestimate/

Yes, I'm positive it'z zero for me - I guess nice problem to have is the way to look at it.

But I wonder if its real - what private colleges say on their website about a vast majority of students getting some form of merit based aid

 

[HawkeyeNFO]

Merit based aid -
I make enough money that no college will give my kids any "need-based" assistance. However, we have found that most private colleges are well aware that they have to compete with very selective public colleges. So they have plenty of financial aid available to help persuade prospective students.

In my daughter's case, she attends a very small private college in Virginia, and the private schools compete with colleges like William & Mary, University of Virginia, and Virginia Tech. In her case, the private school offered about $27k of scholarships, for each of the 4 years. That makes it quite a bit cheaper than the 3 state colleges I mentioned.

 

[Aerides]

As far as spending money, I'd be inclined to keep some of the budget in your hands vs. direct cash:

Preload an Uber account
Regular care packages of socks/underwear, snacks, etc.
Grocery store gift cards

Of course, most creative kids will find ways to turn all that into cash if they really want to, but this way you can make sure they are fed, clothed, and have a safe way home from off campus parties.

 

[The Cosmic Avenger]

We don't give our college sophomore any spending money. Their school is close enough that they can come home any given weekend, so it is usually every 2-3 weeks, and when they come home we will send them back with pantry/snack items. They worked during the summers so they have their own spending money, and we have also sent them, say, replacement headphones when theirs broke. (They take very good care of their stuff, but they used those for all their Zoom classes freshman year, too.)


You might qualify for merit based aid, but don't count on it. Once the kids are choosing which schools they want to apply to, you can join FB groups for parents of students of that school and ask what kind of merit aid their students are getting, or the schools might send you more information, but if they apply to a few they should get some decent offers. We were surprised that the small, private college offered a little under 50% in merit aid, bringing the total OOP cost to us pretty close to the really good state school to which they also got accepted, which didn't offer any merit aid, just need-based. Which was a big relief, as the merit aid is over $30K/year.

 

[Montecfo]

We expected our son to provide his own spending money which he did by working in summers.

 

[disneysteve]

Spending money really depends on the kid and the college. Our daughter wasn't super social or outgoing so she didn't spend a ton of money going out with friends, attending campus events (or off-campus events), and such. She did join a fraternity so that brought with it dues, event fees, clothing, and more. If your kid will play sports, there are a bunch of costs associated with that. The more activities they're into, the more spending there will be.


Food costs can add up too. Even if there's a meal plan, there's still snacking, stocking the room, going out to eat or ordering a pizza now and then, etc. When I was in college, the dining hall was awful so I often hit the grocery store or went out to eat.



It also depends on location. If they attend a school close to home, you can visit and bring them stuff they need, or they can come home for stuff. If they are farther away, you need to account for that. Also for travel costs if they need a bus/train/plane ticket to get home.


As for aid, yes, ignore the "sticker price" as virtually nobody actually pays that. Our daughter got over $22,000/year in merit-based aid. From day one, she got a $19,500 scholarship based purely on her high school performance. No application even needed. It was just automatically given to her. Starting in year 2, she got another $3,000/yr departmental scholarship. Again, no application. It just got awarded to her. She/we didn't even know about it. One day a $3,000 credit appeared on her account and we had to call to find out what it was because we figured it was a mistake.

 

[daylatedollarshort]

Our kids earned their own spending money from jobs like tutoring and internships. I told one the semester before they graduated they didn't have to work and I'd loan them the spending money that semester, because I knew they would be busy interviewing, but didn't put a dollar limit on the spending money. That was a huge mistake, though they did get a good job and paid it all back rather quickly.

As far as financial aid and assets go, when our kids were in college, it depended on what kinds of asset classes you own. Theoretically you could be a billionaire and qualify for financial aid at some schools if your assets were in non-countable FAFSA assets like a small business, personal home and retirement accounts. Our kids went to college tuition free once we retired as most of our assets were in exempt asset classes and we managed our income to stay under the ACA and state aid maximum MAGI limits while they were in college.

 

[MichealKnight]

Hawk

Merit based aid -
I make enough money that no college will give my kids any "need-based" assistance. However, we have found that most private colleges are well aware that they have to compete with very selective public colleges. So they have plenty of financial aid available to help persuade prospective students.

In my daughter's case, she attends a very small private college in Virginia, and the private schools compete with colleges like William & Mary, University of Virginia, and Virginia Tech. In her case, the private school offered about $27k of scholarships, for each of the 4 years. That makes it quite a bit cheaper than the 3 state colleges I mentioned.

Congratulations to you and your daughter. That is marvelous. $27K per year..... if I could add that to my financial plan my I'd be in a better mood

 

[MichealKnight]

Parties

As far as spending money, I'd be inclined to keep some of the budget in your hands vs. direct cash:

Preload an Uber account
Regular care packages of socks/underwear, snacks, etc.
Grocery store gift cards

Of course, most creative kids will find ways to turn all that into cash if they really want to, but this way you can make sure they are fed, clothed, and have a safe way home from off campus parties.

My daughter is a saint. In 5 years when she goes to college she won't go to one party, have even one alcoholic beverage, even look at a boy. She's going to study like crazy, develop the next Dell or Amazon in her dorm room. She might eat a carb and she'll probably spend time saving the polar ice caps from melting. She;'ll call me every day to tell me she misses me.

 

[mystang52]

My daughter is a saint. In 5 years when she goes to college she won't go to one party, have even one alcoholic beverage, even look at a boy. She's going to study like crazy, develop the next Dell or Amazon in her dorm room. She might eat a carb and she'll probably spend time saving the polar ice caps from melting. She;'ll call me every day to tell me she misses me.

Do what I did: don't overthink it. I started my first college kid with a lump sum of cash for the first 2 months or so. After a week or 2, maybe 3, she'd tell me how much she had drawn down the account. This was 1996, so my memory is 100% vague on any other details. I know if she had any extraordinary expense I would send her $$ for that as well.
Neither of my kids were saints, but they were/are generally good, and I thought it important to convey to them my trust in them. It worked well for me.

 

[Charlotte]

I give my two current college kids $100 each per month. They have a full meal plan at the dining hall and dorm paid direct from their 529 accounts. The $100 is meant to cover the occasional trip to Target, their laundry fees, and eating out or a movie or something fun once a week. They live on a highly walkable college campus in a cute college town (Chapel Hill) and don’t need a car. It’s also common to have a small 5-10 hour a week job to earn a few bucks for incidentals. One of my kids does this (and consequently spends more $$ each month) and one does not.

Some of their friends get nothing, some get up to 300 per month from their parents. Whatever you decide, make sure your kid knows what extras they are expected to cover with it and when you will chip in extra to cover something.

 

[Texas Proud]

Not all assets are considered in your expected payments.... IRAs and retirement accounts are excluded... Also, a low income is much better than a high income...


Some state universities are now not charging for tuition if you are low income... check yours and see what they might pay...



Private colleges give out scholarships but they also have a large sticker price... IOW, my son could have gone to Rice and gotten scholarship money but the tuition etc. would still be 2X a state university.. my daughter was looking at University of Washington and got $3K per semester but still more expensive than in state...


As for 'spending money'.... well, I have a cap on what I am willing to spend on a college degree... it is $100,000... I will be sending money to daughter's account monthly... it is her job to spend it wisely... she IS an adult now and I should treat her as one...

 

[rodi]

I have two college attending kids.

One is working full time while going to community college part time. Lives outside the home and is not a dependent. (His choice.) We pay for his school and books up front, we reimburse his (very inexpensive) rent at the end of the semester if he gets b's or better. This was after a disastrous freshman year where he studied partying more than books.... We are currently in negotiation for him to go back to school fulltime since he's been maintaining straight A's, being reliable for work and school.... basically growing up. We don't give him any spending money. If he goes back fulltime the tentative plan is that he would continue his job part time for spending money, but we would give enough to cover rent and food.

younger kid is a freshman. We pay all the direct school expenses. We do not give him spending money - he worked and earned that ahead of time. He has many friends who have a lot more money given to them by parents. But he says he's fine with being frugal and making his money last. He's finishing his 2nd quarter (finals next week) and has only spent about $900... and that included a plane ticket to go visit a friend attending school in another state. Fortunately, his girlfriend has her own money and doesn't charge him gas when he borrows her car to go surfing. LOL. We do send care packages - like the electric kettle and instant coffee, tea, ramen, oatmeal and other 'just add hot water' meals. He plans to get a job at some point - we are encouraging this.

 

[levindb]

The school's financial aid office will have have an experienced based budget number that they use for calculating any potential aid for students. That should be a good number for you to work with. It will be broken down into different categories, you will know how much you will pay directly (tuition, room, board, and fees) and the remainder will be for your child to manage.

For me, my older two were able to deal with a semester allowance, while the third one needed monthly allocations, else the funds did not last the entire period.

It will be helpful to provide emergency funds via credit/debit card that you monitor, and they know if abused will be cancelled. This is an opportunity to teach financial responsibility along with the formal studies of the institution.

 

[RobbieB]

I got the tuition and room & board covered by parents.

Everything else I paid for from doing the summer jobs thing.

 

[SecondCor521]

Spending money:

I give my kids $0 for spending money. My deal with them is I pay for everything necessary and connected to school: tuition, room, board, books, fees, transportation to/from, transcripts, etc. They pay for optional extras: pizzas, dates, cell phones, etc.

Eldest was frugal and spent nearly nothing. Middle one likes nicer stuff and has various part time jobs. Youngest is also frugal and is getting paid to go to school so has leftover scholarship money. Each kid is different.

Financial aid:

If your kid goes to a FAFSA school and you can have a low enough AGI and some other criteria, you might qualify for FAFSA-based aid even with lots of assets. There is something called the simplified needs test which ignores assets.

If your kid goes to a CSS profile school or a very selective school, it's harder to get aid.

...

Many private schools have a "sticker" price which nearly nobody pays. The students either get Pell Grants, or institutional merit aid which is effectively a coupon or discount but sounds nicer and is treated better tax-wise as a "scholarship".

My middle one, for example, got a $20K merit aid per year at his school, but it's out of state and private so it's still more expensive than the in-state public. His grades were good but not stellar, but he did manage to earn the IB diploma and the school he chose recruits IB students.

You might want to drill down a bit on the aid numbers. 99% getting an average of $500 a year in aid is far different from 99% getting an average of $20,000 a year in aid. If you use the Net Price Calculator at a school or talk with the financial aid people there they can give you a rough idea.

Most schools are well aware of the other schools they're competing with for students, so you'll see similar aid packages from them. They've got it down to a science, so they pretty much know how much $$$ to offer your kid to make it a tough decision to decide where to go.

 

[OldShooter]

I got the tuition and room & board covered by parents. Everything else I paid for from doing the summer jobs thing.

This!

Some of these posts frankly astonish me. If the child is mature enough to go to college, then they are mature enough to have a job and cover their own discretionary expenses. College is like a sheltered workshop compared to what they will find in the real world. Better to learn work and money management in the relatively safe college environment where the extreme failure risk is not homelessness..

In my case I began working in high school before I had a driver's license. From that point I never stopped. My parents paid undergraduate tuition, dorm fees, and the meal plan. Everything else was my problem to fund. In graduate school they paid tuition only. From that point I never needed or asked for any money from them. I guess you could call that a kind of glide path to a soft and safe landing.

We have friends whose amazing daughter is now working on her PhD. In high school she selected a college that was more expensive than her parents were willing to pay for (although they could have easily afforded it), so they told her that each year she had to earn $10,000 towards the cost if she want to go there. She knuckled down, working two or three jobs during her senior high school year and the following summer. This continued for the four years. They built an amazing strength of character in that young woman -- DW and I are in awe.

@MichealKnight, I think you would be doing your daughter a huge disservice by giving her a completely free ride in college. She has five years to learn the world of work and, hopefully, develop at least minimum marketable skills that she can use for a college job that is better than entry level. If she fails to do that I would question whether she is college material.

 

[38Chevy454]

I agree that a kid can work some for their own spending money. Skin in the game is good.
In my case self supporting student everything was on me. Total skin in the game.

 

[MC Rider]

I worked part time in High School, and summer jobs in College, and had student work jobs on campus back in the day.


Put books back on shelf in the library. I could pick my own hours and it was very easy.
Janitor in the dorm. 4 hours to be there, but maybe 2 hours of work. So we would hang out in the TV lounge and watch General Hospital with the girls. LOL.

 

[Sue J]

When our sons were in college we paid for tuition, books, room and board. I sent them off with a roll of quarters and dimes and detergent for laundry. At the end of a visit home take anything from the kitchen, etc that you want. But personal spending money was their responsibility. One son worked and had money, the other one didn't.

Our younger son really didn't like the party atmosphere and missed his job at home so he came home and continued at a state school that he could commute to. For those costs we covered all his transportation expenses (gas, insurance, etc) and meals associated with his classes or on campus work.

Those were expensive years! But both kids graduated in 8 semesters and work in their fields. We did take out some federal student loans (their loan, our responsibility to pay) but paid them in full when DH retired. The interest rate was low and deferred until 6 months after graduation. We did not want our sons to start working life with student loans.

 

[Badger]

I got the tuition and room & board covered by parents.

Everything else I paid for from doing the summer jobs thing.

This is the same experience I had. Anything beyond this was up to me. So it was summer jobs, jobs during Christmas AND Spring break, as well as taking a variety of part-time jobs during the school year. It really gave me an appreciation for what my parents were doing for me. It also gave me an education in the meaning of Want vs Need and the importance of money management.


Cheers!

 

[daylatedollarshort]

Here is what a research study on working in college found -"In a study of more than 160,000 students at a public university, those who held a part-time or full-time job while going to school averaged post-college earnings up to $20,000 higher than classmates who did not work in college. The study by researchers at Rutgers University and the City University of New York (CUNY) suggests working students acquire skills and social networks that set them apart from peers with only academic credentials and unpaid internships on their resume." - https://smlr.rutgers.edu/news-event...ng-during-college-leads-higher-earnings-later

 

[sengsational]

It's been a long time, but back in 2009 or so, CSS and FAFSA formulas didn't count retirement assets. And my kids didn't have UGTM (which get hit at 25% per year in the expected contribution formulas). And although 'variable annuity' is a bad word, that's a retirement asset and some are simply index funds wrapped in an insurance product. Fidelity, Vanguard, etc sell them and there are down-sides to owning them. The biggest, isn't the additional fees, but instead giving up the tax advantage of capital gains vs regular income. All gains must come out first, so if you start early, and the account grows, your basis is "buried". And even if your EFC comes out low, there's no guarantee that the financial aid officer will balance the books on the school budget and EFC, so a risk there.

The good news about financial aid and spending money is that the "package" usually come with an assistantship, and those are usually on campus, often failry cushy jobs. And that money is the right level for pocket money. You cover tuition, books, room and board, and don't get involved in the decisions associated with whether to spend on weed or save for a road trip on spring break.