Posted on 02/14/2013 1:12:15 PM PST by Kaslin
Dear Carrie, I'm the father of three teenage daughters. I've been saving for college since they were babies, so I'm shocked to find myself $100,000 short. How can I cover this gap? The oldest is 16. --A Reader
Dear Reader, First, I want to congratulate you for making saving for your daughters' educations a priority. It's no easy task to keep that as a primary goal in the face of all the other costs of raising children. A national Sallie Mae study, "How America Pays for College 2012," found that the typical family covered just 28 percent of their kids' college costs through savings and income in 2011-12. So give yourself a little credit.
But it's no wonder that parents are struggling. According to the College Board, average total charges for in-state students at four-year public colleges and universities in 2011-12 were close to $18,000 a year. Total costs for out-of-state students were over $30,000 per year. Yearly total costs at private nonprofit four-year institutions were close to $40,000. And these are just the averages!
Multiply these average annual costs by four years and then by three children and you have a tremendous challenge. Fortunately, with some research and planning -- and a little help from your daughters themselves -- there are ways to meet it head-on.
Research -- and apply for -- all financial aid
A lot of parents make the mistake of thinking their kids won't qualify for financial aid -- and make the even bigger mistake of not applying for it. But whether it's through private scholarships or government grants and loans, there's a considerable amount of financial help out there -- and not all of it is asset based.
Again, according to the College Board, in 2011-12, full-time undergraduate students received an average of $13,218 per student in financial aid from a combination of federal loans and other sources. That's pretty encouraging.
Equally encouraging is the fact that the Department of Education has made the FAFSA (Free Application for Federal Student Aid) process more streamlined and easier to navigate. Consider, too, that in FAFSA calculations, only 5.64 percent of parents' assets are considered available for college expenses. There's also an asset protection allowance (which increases as the parents age), so a certain percentage of assets won't be counted. Retirement accounts and the value of your primary residence are also excluded.
I don't know how close your daughters are in age, but another factor that increases eligibility for aid is how many kids you have in college at the same time. Finaid.org is a good resource to research ways to maximize financial aid eligibility.
Help with student loans
There's a lot written about the burden of student debt these days, and there's no denying that paying back student loans can be an albatross for many years if not managed wisely. But today, student loans are a fact of life and a viable way to pay for an education. The average student loan debt for 2011 graduates was $26,500. However, you don't necessarily have to saddle your daughters with the entire bill. To cover the shortfall in savings, you could finance a certain percentage of college costs through student loans (ideally federal) and help your daughters pay them back over time.
Put your kids to work
If you haven't done it so far, now's the time to get your daughters involved in saving. Encourage them to get a summer job or even part-time work during the school year and put a percentage of their earnings toward college. It's not unusual for kids to contribute toward their education. According to the same Sallie Mae study, students pay about 12 percent of college costs from their own savings and income, and the National Center for Education Statistics reports that about 40 percent of full-time undergraduates work while in college.
You could also encourage your daughters to put a portion of any monetary gifts toward a college account. Speaking of gifts, when grandparents or other relatives want to buy something for the girls, suggest a contribution toward their education. It all adds up!
Be tax-smart
If you don't have your savings in a 529 College Savings Account, consider opening one for each of your daughters now. A single person can contribute up to $70,000 per child (or $140,000 for a married couple) without gift tax implications, and earnings grow tax-free. Withdrawals are also tax free if used for qualified education expenses.
Once your oldest daughter is in college, talk to your tax advisor about available college tax credits and deductions.
Protect your own retirement
One last -- and very important -- thought. Even though you're saving for your kids, don't short-change your retirement. There are many ways to pay for college, but retirement savings is pretty much up to you. By all means help your daughters, but make sure that when they're graduated and on their own, they can feel confident that you've not only take care of them, you've taken care of yourself, as well.
Yes, WORK! Also not mentioned yet (I don’t think) on this thread is GI Bill Benefits. My son started college then determined he was not sufficiently self-disciplined to go through at age 18, joined the Marine Corps for 4 years. Then worked full time at Home Depot and went to school full time, getting GI Bill Benefits, plus HD gave some bonuses or subsidy for his tuition. Got his degree 9 years after high school graduation, but saw it through and has been steadily employed since age 15.
And, all you really did was fund a bunch of lazy, Liberals in so-called “Education”.
I have two in college. Both work. Both live at home. Both are going to a state supported school. My son is saving up to be able to pay next year to live on campus. They rent their books from Chubb when they can. Tuition and fees run about 4K a semester for each one. Book prices are Crazy! No Loans.
Exactly. Minimize any money that is in your child's name. The FAFSA process will consider that ALL of it is to be used for tuition.
Instead, take the money that you would have used to put in a 529 account, and use it to pay down your mortgage. Equity in your home is NOT considered in the FAFSA process. Read the FAFSA calculation document(available online). If your house is paid off, then max out your 401K contributions in the years leading up to your kid going to college.
Did all of that. Enjoyed it. Have no regrets.
Would I have borrowed money or taken my parents' money to do all that?
No.
Part of the problem with colleges is the lack of transparency in prices so that people can compare prices. The other problem is the treatment of college as a wealth transfer method - charging people based on income by subsidizing the “poor”, pretty much all of them. The third failing is the introduction of social engineering and political correctness, essentially charging whites and Asians more to subsidize the less capable minorities.
1. Not all universities take the full amount of 529 savings off the top in calculating “expected financial contribution.”
2. The income of the non-custodial parent is included in financial-aid calculations.
Nevertheless, it is shocking how much middle-class families are expected to pay toward college costs, and how little of the total assistance distributed is in the form of merit-based aid.
Each kid costs 7-8 thou/semester in state school (tuition, books, room and board). TUITION MANAGEMENT is the way to go. T.U. takes around $1600 out on the 10th of every month for each of our kids and it works for us as long as don't buy a new house, truck, boat, or anything else. $3200 on average/month, our only real expense and it works for us and no loans to ever be payed back to anybody.
Can't even imagine how people send their kids to schools that cost 40-50k/year?????
With what I made from my summer jobs, my parents didn't have to pay a dime.
Obama will be out in 4 years, and we're going to need good young officers to help rebuild the force.
And, the student gets no useful education, only indoctrination. Sounds like good reasons to bag the whole idea to me.
Having said that, I put both of my kids through state universities.
The son is a Deputy Sheriff with 4 kids in Podunk, USA making $17 an hour. The daughter is an engineer with a large defense contractor making 6 figures. She has no spouse, no kids, no pets, no houseplants, no debt and is having a grand old time.
Go figure.
Dear Mr. Stupid.
The simple solution to the problem is to get government “free money” and “bennies” out of the Colleges of our country.
When the students have to pay for their college (like back in the old days) the amazing fact would be that the price of college would revert to “supply and demand” and the old business saying “what the market will bear.”
Suddenly, the cost of college would almost have a free-fall to justifiable costs.
The second thing is that not everyone has to go to college. A good technical education in many cases is far better since the demand for skilled trades is far more reliable than the market for heavy thinkers and pencil pushers.
FYI. Mr. Stupid does not refer to you....it refers to the man writing the letter in the article.
Rule #1.
My parents and my own college employment made that true for me. I passed along the boot strapping, at least for my kids' undergraduate degrees (2 out of three in Science).
I am not a Mister anyway.
In the good old days, only the rich went to college, then the WW2 Vets got to go and that changed everything. Then the Universities got to figuring out how they could again make awesome money by getting the Government involved and here we are with 4 year degrees taking 5 years and costing huge amounts of money and not teaching graduates decent skills.
I agree you don’t need College for everything. You know what, I think its a form of daycare for lots of Parents.
I’d like to see a cap of 4 years for a B.S. for one.
Now they get the money from foreign students paying full freight and using TAs who can barely speak English to teach classes.
Outstanding points!
Please excuse my ignorance, but what is Chubb in this instance? I know that there is a huge insurance company by that name but I don't know of a Chubb involved in education. Thanks.
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