College applications -- apply to $$$$ schools or not?

[Anonymous]

Somehow over the past few years, our net worth has skyrocketed. We are early-mid 50s and current net worth is about $4.35 million. This includes about $1m in home equity and $2.4m in retirement. The remaining approx $900k includes around $300k in earmarked college savings. Most of the rest is in brokerage accounts -- and is about 80% gains (so capital gain tax would be due on sale).

Our income has gone up considerably in the past few years, and is now around $280k, including dividends, W2 income and 1099. Mortgage is very low ($1k a month) but property tax is high ($20k per year) and we put about $75k a year into retirement.

Our oldest child will be applying to college in the fall. He is a very high achiever and very interested in Ivy league schools. Realizing that despite his achievements, admission to Ivies is always tough, what I'm trying to work out is whether we discourage his application to highly selective schools that do not offer merit aid where if successful we'd be expected to pay $95k per year. Clearly we won't get any needs based aid.

Everytime I run the numbers -- looking at likely growth of our funds while our kids are in college, only withdrawing 4% or less, possibly diverting money from retirement to college or cashflowing a portion -- it looks like it's doable for us to spend that kind of money, at least for one kid. But what if there is a catastrophic drop in the market? Or if I (the primary earner) lose my job?

Essentially would it be worth the investment? Potentially $400k per kid is more than we've ever spent on a house, for example, and I grew up without much money. If he instead goes to our state flagship it would be one third of the cost. Wouldn't that be a better investment? My husband thinks he should apply to the pricey colleges and then if he gets in, we decide, but I think it makes more sense to work out how much we are prepared to pay in advance.

[Anonymous]

The additional cost of an Ivy is not $400K, it's the difference between $400K and the cheaper option. THat cheaper option might be your in state school or might be someplace that gives your kid merit aid (if your kid can get into an Ivy, he/she will get merit somewhere). What does your kid want to do? What kind of a school does he/she want? I would probably pay it and think it was worth it depending on what my kid wanted to do. For ex, if my kid wanted to be a teacher, I would encourage them to go to one of the cheapest options available and then give them money for a down payment when they are older.

[Anonymous]

How many kids do you have? If more than one, you'll need to work out this scenario for multiple kids. I'd say apply and see what happens. You could probably afford to cash flow some of it or fund with outside scholarships. Only you can determine if the ROI is there. There's different schools of thought on if Ivy degrees are worth it.

[Anonymous]

Anonymous wrote:How many kids do you have? If more than one, you'll need to work out this scenario for multiple kids. I'd say apply and see what happens. You could probably afford to cash flow some of it or fund with outside scholarships. Only you can determine if the ROI is there. There's different schools of thought on if Ivy degrees are worth it.

Two kids

[Anonymous]

Anonymous wrote:

Anonymous wrote:How many kids do you have? If more than one, you'll need to work out this scenario for multiple kids. I'd say apply and see what happens. You could probably afford to cash flow some of it or fund with outside scholarships. Only you can determine if the ROI is there. There's different schools of thought on if Ivy degrees are worth it.

Two kids

Do you have $300k saved total for both kids? Or $300k per kid? If $300k for both, you're probably not in a place to cash flow an Ivy for the one kid unless you're ok with tapping into the savings in brokerage. Not sure that stretch is worth it. I would not feel bad about it though. Most people do not have $100k a year available to send their kid to an ivy league school. And that's ok. There's thousands of great schools that are more affordable.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:How many kids do you have? If more than one, you'll need to work out this scenario for multiple kids. I'd say apply and see what happens. You could probably afford to cash flow some of it or fund with outside scholarships. Only you can determine if the ROI is there. There's different schools of thought on if Ivy degrees are worth it.

Two kids

Do you have $300k saved total for both kids? Or $300k per kid? If $300k for both, you're probably not in a place to cash flow an Ivy for the one kid unless you're ok with tapping into the savings in brokerage. Not sure that stretch is worth it. I would not feel bad about it though. Most people do not have $100k a year available to send their kid to an ivy league school. And that's ok. There's thousands of great schools that are more affordable.

We have $300k total. I don’t feel bad about it at all. We are incredibly lucky.

Our investments (including retirement) have increased by $900k in the past year. We’ve seen steady growth of beyond $100k every year for years. It wouldn’t be a “stretch” exactly especially if we kept our pull from investments to 3-4% max per year.

By most scenarios we can afford it AND still see our net worth increase significantly over the next decade. (But not as much as with a cheaper option)

The unknowns include the path that our younger child will take. He’s just as academically focused as his sibling but also — right now (four years out) — says he wants a budget option. And obviously whether spending that much is worth the hit on our future net worth or the risk of a catastrophic financial downturn or job loss.

[Anonymous]

We are also mid 50. Over 5M is investing both retirement and taxable , house is little over 1M. Each kids has 180k. Older kid is 11th grade. Younger kid is middle school. HHI is about 250k. We are continuing to put 8k per kid until they finish college. We told the oldest kid that our max 200k for 4 yrs. We will cover tuition, room and board. We cover his extra until he turns 18 next summer like eat out with friends. At 18, we plan to cut off his extra. We have not told him this yet. We can not imagine pay 90k per year for college. Too much for us. We have to save for our old ages. We don’t want and hope not to ask our kids for financial help. We only can help with the first 4 years. We prefer in state Virginia. It is just a plan for now. We wait until next school year ?

[Anonymous]

Anonymous wrote:We are also mid 50. Over 5M is investing both retirement and taxable , house is little over 1M. Each kids has 180k. Older kid is 11th grade. Younger kid is middle school. HHI is about 250k. We are continuing to put 8k per kid until they finish college. We told the oldest kid that our max 200k for 4 yrs. We will cover tuition, room and board. We cover his extra until he turns 18 next summer like eat out with friends. At 18, we plan to cut off his extra. We have not told him this yet. We can not imagine pay 90k per year for college. Too much for us. We have to save for our old ages. We don’t want and hope not to ask our kids for financial help. We only can help with the first 4 years. We prefer in state Virginia. It is just a plan for now. We wait until next school year ?

With $5m in invested assets do you not think you already have plenty for your old age?! Doesn’t your investment throw off considerably more than enough to pay full freight anywhere in the country?

Also are your kids likely to be candidates for Ivies? This calculation is very different when considering whether it’s worth paying for Harvard or MIT vs a middling SLAC.

[Anonymous]

I think it's worth it for the prestige of a well-known school, OP. I know that "prestige" does not translate to health and happiness, but I've seen how their Ivy League degree have opened interview doors for my friends. Essentially it doesn't propel you to great heights as much as it acts as a safety net when you're looking for a job. A brand name school saves your resume from going into the automatic reject bin.

I have more assets than you and my oldest is at a private T50 that now costs 97K a year. Is it worth it? NO!!! But he's autistic and can only do well in his very specific field of interest... which does not exist at our decent in-state flagship that accepted him! Ugh. If he had been a little more flexible, I would have been so happy for him to attend the state flagship.

[Anonymous]

spend that kind of money,

at least for one kid

Geez. You keep it fair
Figure it out and offer an equal amount. Whatever that is

[Anonymous]

Anonymous wrote:Somehow over the past few years, our net worth has skyrocketed. We are early-mid 50s and current net worth is about $4.35 million. This includes about $1m in home equity and $2.4m in retirement. The remaining approx $900k includes around $300k in earmarked college savings. Most of the rest is in brokerage accounts -- and is about 80% gains (so capital gain tax would be due on sale).

Our income has gone up considerably in the past few years, and is now around $280k, including dividends, W2 income and 1099. Mortgage is very low ($1k a month) but property tax is high ($20k per year) and we put about $75k a year into retirement.

Our oldest child will be applying to college in the fall. He is a very high achiever and very interested in Ivy league schools. Realizing that despite his achievements, admission to Ivies is always tough, what I'm trying to work out is whether we discourage his application to highly selective schools that do not offer merit aid where if successful we'd be expected to pay $95k per year. Clearly we won't get any needs based aid.

Everytime I run the numbers -- looking at likely growth of our funds while our kids are in college, only withdrawing 4% or less, possibly diverting money from retirement to college or cashflowing a portion -- it looks like it's doable for us to spend that kind of money, at least for one kid. But what if there is a catastrophic drop in the market? Or if I (the primary earner) lose my job?

Essentially would it be worth the investment? Potentially $400k per kid is more than we've ever spent on a house, for example, and I grew up without much money. If he instead goes to our state flagship it would be one third of the cost. Wouldn't that be a better investment? My husband thinks he should apply to the pricey colleges and then if he gets in, we decide, but I think it makes more sense to work out how much we are prepared to pay in advance.

You do both.

[Anonymous]

We’re in a similar situation and our kids will either go in state or get equivalent merit to bring it down to in state costs. One will be applying for colleges this fall.

$150k a kid will fully cover our very solid in state options. If we’re going to dig deep financially, it’s not going to be for undergrad. We’ll save that for grad school.

[Anonymous]

Waste of money. My ivy friends are so triggered by AI. Everything they are "experts" at is being dwarfed and it's really hurting their sense of self. The whole college model is dead man walking. AI is much better, more convenient, faster and free at educating motivated students.

[Anonymous]

Million dollar house…stop aready.

[Anonymous]

You have the money to send both kids to full private. Inlcuding ivy if they get in. They certainly don’t need to be chasing merit but it sounds like you’re going to ask them to? Or go public? Maybe you should step back and think about your priorities. What do you want to do with your money? Invest in your kids? Set up the next generation? You aren’t going to run out of money. Even though it sounds like you’re worried about that. If the market tanks 30%, you’re not going to need access to all of it in the next 24 months - so you’re going to do what you did in the dot com crash and 2008 - wait it out until it comes back.