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.
First, you find all the community colleges within driving distance and sign up to those for the first two years. Second, if the kid is fairly smart...sign up for CLEP and DANTES testing on five or six subjects. Almost all community colleges will accept a couple of these as part of the overall credit. Finally, maybe the kid realizes after two years that some technical area at the community college was better than wasting four years at a real college.
Community College for the basic courses, a State School for the last two years; Or online learning (from MIT, etc.)
DO NOT borrow money from the Federal government “Direct Loan” program! We did that for one year and they are a nightmare to deal with. But what did we expect from a bureaucracy created to fund 0bamacare?
We can, by pinching pennies, pay for about 80-90% of our son’s costs out of current income. The rest we are paying through our home equity line of credit. Lower interest rate and the interest is still tax-deductible as mortgage interest. It’s much better than the government route.
Do cost/benefit analysis on the degrees your daughters pursue.
If you don't do this, then you have no right to complain when they are buried in college debt and waiting tables at Applebee's.
Allow the promise of the web to full filled.
The Sate University Unions don’t allow classes to be taught online.
Don’t send ‘em to college. The return on investment is minimal to non-existent and you and they will have to suffer through a lifetime of leftist indoctrination.
My lessons learned from college financial aid?
No one pays the full amount, except for Bill Gates’ kids.
Do not have savings in the childrens’ names. It is taken right off the top before financial aid is calculated
Do not contribute to 529’s. It also is taken right off the top before financial aid is considered.
Or, in some states, after child is accepted at college and financial aid is calculated, open a 529 and put the maximum amount in. Withdraw it the next day to pay for college expenses. You still get the state tax deduction.
Assets, such as primary home, are less important, vs. W-2 income, which should be minimized.
Like most things the Gov’t does, its anti-family - its better off if you are divorced. Child can go with the spouse who has lowest income for FAFSA calculation
Now that the Gov’t controls education, financial aid and higher-education is like welfare, medicaid and foodstamps - the prudent and conservative pay more. Scammers pay less.
It depends on why they are going to college. If they want a technical degree; engineering, chemistry, medicine, yes, they need to go to college. I am not going to see a doctor who “self studied.”
For the rest, it’s optional.
FAFSA and Direct Loans are the collegiate collective farm, comrade. And they are just government rip-offs.
Paying to send your kids to hell doesn’t sound like a good investment.
That is a great idea!
Other ideas: Tell the kids right up front (say, about sophomore year of high school) the fixed amount you are willing to pay and for what time frame. Whether it is $50,000/year for 8 years or $10,000/year for 4 years, be sure they know what you are willing to put on the line, so that they will own any decisions that require them to take on debt.
Help them see the “cost” of going longer than is really needed, and the “cost” of going for degrees that are worthless. At one point my daughter thought she might not graduate (BSN/RN) in 4 years. I showed her that one more year of college would cost X for more school expenses PLUS Y for the lack of income at her occupation for that extra year; which made it more than twice the “cost”... about a week later, she had met with an advisor, and they worked out a plan that kept her on track for the 4 year graduation.
Be sure they understand the “cost” of taking student loans that will end up just financing a party or frivolous lifestyle while in college. The extra $100 or $300 per month, borrowed now to allow for plenty of pizza and beer, turns fairly daunting when amortized for the 10 year repayment plan, with interest....
Consider deferring borrowing as long as possible and/or making some interest payments while the kid is still in school; will keep the interest from compounding the first 4 years or so.
Do what I did...WORK!!!
I was a waiter in college, I made a killing especially on football weekends.
And employers will want to know how you financed your education.
Community College for the basic courses, a State School for the last two years;
That’s worked for my son, he graduates in June!
Damn, you learned that the hard way too! I also found out that there is a huge difference in tuition between colleges in the east (where we live) and in the midwest and west. One year in Virginia, even in a modest conservative college, was more than double what we paid for the same thing in Idaho.
Yeah, it is hard having the kids that far away, but you can buy a lot of airline tickets for the difference in tuition. After the first year, we gave them very little help. With the greatly lowered tuition rate, they didn't need it.
All graduated with less than 20K in loan debt. Not fun, but manageable since they actually learned marketable skills.
College doesn’t pay and as it is 100% gov’t funded now you can expect that if they borrow even a penny they WILL be required to work for the gov’t for a number of years to pay it off... it isn’t the rule now but THINGS CHANGE...
I suggest learning a trade ... plumbing , HVAC , splicing fiber cable , anything to do with gas and oil ,, move to Montana ... YES , even for girls.. farming is GOOD ,, have them take out a college loan and buy a 20 acre farm... nothing says the money has to be spent on college ... college kids spend their loan money on tattoos and beer...
WHATEVER YOU DO THEY SHOULD NOT GO INTO ANYTHING MEDICAL OR COMPUTER RELATED.
Not every child should go to college, even if you can afford to send them
That is due to change under Obamacare.
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.
“DO NOT borrow money from the Federal government “Direct Loan” program! We did that for one year and they are a nightmare to deal with.”
We never did that, but what was the nightmare?
“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.”
No, it’s not. At least if you think as a conservative. The ENTIRE GOAL of the left-wingers that run our colleges has ALWAYS BEEN to punish the rich...and to them, the rich is anyone above the federal poverty level. So they have FINALLY achieved their long-term goal, which was to charge tuition based on family income - you make more, you pay more - that simple (and, by the way, try to think of anything else priced that way). Of course they couldn’t say that outright, so they took an indirect route to the same place. They simply have a very high “sticker price”, but give discounts to those that ‘qualify’, due to ‘hardship’.
Do you see the message...when Harvard and the rest of the Ivory League stated that there would be NO MORE MERIT-BASED scholarships (about 2 years ago), they had finally achieved their dream...from their early LSD days...and there is NOTHING we can do about it, since they OWN the schools.
OUTSTANDING!
Judge Smails is THE MAN !!
It’s the “big education” cycle, dear to the hearts of Democrats:
1) make massive borrowed funds available to students
2) increase school tuition to absorb funding
3) schools pay inflated salaries to inflated ranks of profs and admins
4) profs and admins donate heavily to Democrats
and repeat
It’s the “big education” cycle, dear to the hearts of Democrats:
1) make massive borrowed funds available to students
2) increase school tuition to absorb funding
3) schools pay inflated salaries to inflated ranks of profs and admins
4) profs and admins donate heavily to Democrats
and repeat
//////////////
worth repeating
If you’re paying full price you’re doing it wrong.
Kids can work their way thru. They’ll value it more if they do. Help out, but no free ride.
Be flexible with school and degree. Few employers care where you went, just that you did and can finish long term hard projects. Go somewhere you can afford. There is a lot of free money out there if you’re willing to go to it.
Go somewhere cheap for the first couple years, taking classes taught the same everywhere. Finish somewhere special.
Get a real job which is willing to invest in you. Many will pay your way if you get a relevant degree.
My error. My daughter says its Chegg.com
I started my own business about six years before our kids started college. The turn in the economy cost a lot of our savings. The college accounts were the last to go...but they were raided.
I discovered that if your kids are good students, good citizens, and can sell their abilities to a college, there is a ton of financial aid out there.
I have two kids in college. They each work many hours a week on campus. Combined, their debt will be about $25k. Now our business is moving again...we will help pay off their debts in about five years.
It’s possible to do it. It just takes work.
They don’t respond to inquiries. They don’t apply the funds to the loans you direct them to. If a private lender did what they do, thekd be prosecuted.
wgu.edu
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