Paying tuition bill

[Anonymous]

I may be going against the grain here, but for each year I like 1/3 529, 1/3 Fed subsidized student loans, and 1/3 cashflow/personal savings.

Fed loans help build credit and could be forgiven if the adult child works in the public sector. My understanding is to make sure to apply the first year of school or you lose the ability to apply later.

If not used up by the end of college, the 529 could be used to pay down the student loans or be converted over to a Roth IRA. The 529 could also be kept as dry a powder in case of major family financial strain during the college years.

[Anonymous]

Anonymous wrote:I may be going against the grain here, but for each year I like 1/3 529, 1/3 Fed subsidized student loans, and 1/3 cashflow/personal savings.

Fed loans help build credit and could be forgiven if the adult child works in the public sector. My understanding is to make sure to apply the first year of school or you lose the ability to apply later.

If not used up by the end of college, the 529 could be used to pay down the student loans or be converted over to a Roth IRA. The 529 could also be kept as dry a powder in case of major family financial strain during the college years.

Loans come last which limits the number of years where interest accrues.

[Anonymous]

- of course that assumes that you won't qualify for subsidized loans

[Anonymous]

Anonymous wrote:We burned through the 529 first then paid out of pocket.

We did the opposite, which we'd planned, but also the market was down. Now that it's mostly recovered, we just used for year 3.

[Anonymous]

Anonymous wrote:I may be going against the grain here, but for each year I like 1/3 529, 1/3 Fed subsidized student loans, and 1/3 cashflow/personal savings.

Fed loans help build credit and could be forgiven if the adult child works in the public sector. My understanding is to make sure to apply the first year of school or you lose the ability to apply later.

If not used up by the end of college, the 529 could be used to pay down the student loans or be converted over to a Roth IRA. The 529 could also be kept as dry a powder in case of major family financial strain during the college years.

No loan for our kids. Their education is our responsibility.

[Anonymous]

OP: Trying to make sense of this advice. I'm not seeing a clear trend in advice about what to use first so it seems like a preference. No worries about kid finishing school. I think my non 529 investments may be yielding a bit more than the 529s but not clear to me as I'm pretty conservative in both.

I'm a single parent so only have 4500 tax free a year to put into a 529. In DC.

[Anonymous]

Anonymous wrote:OP: Trying to make sense of this advice. I'm not seeing a clear trend in advice about what to use first so it seems like a preference. No worries about kid finishing school. I think my non 529 investments may be yielding a bit more than the 529s but not clear to me as I'm pretty conservative in both.

I'm a single parent so only have 4500 tax free a year to put into a 529. In DC.

There is no clear trend because it's very individual preference/situation. In your case, I don't know if different approaches make a big difference. Do what makes sense to you.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My first bill is due. Planning to pay in quarters. I have some $$ (about two years worth) in 529s and plan to pay the rest from other savings/investments. Any rhyme or reason to what to spend down first? Should I pay year 1 from 529 or just split each year from 529 and other funds?

I can't think of a rationale to one or the other so it may not matter?

Which state? We put the money into the 529 and pull it out right away to pay tuition, effectively using outside funds but funneling it through the 529 for the tax benefit. In Virginia you can put in 34K without worrying about gift tax and get a 5.75% tax rebate. If you live in VA, I'd spend down the 529 first and then fund/pull to pay tuition.

+1 Our original 529 investment is gone, but we transferred 20k into it (cash/money market) to pay fall tuition so we could get the state tax benefit.

Planning on doing this with my DC529....but does anybody know how long the money has to be in the account? Can I deposit $8,800 into a 529 today, take it out tomorrow, and still get the DC tax deduction for that full amount?

Mine takes about a week to “invest” (even in the FDIC or Stable Value accounts). Withdraws show back up in my bank accounts within 24-48 hours.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My first bill is due. Planning to pay in quarters. I have some $$ (about two years worth) in 529s and plan to pay the rest from other savings/investments. Any rhyme or reason to what to spend down first? Should I pay year 1 from 529 or just split each year from 529 and other funds?

I can't think of a rationale to one or the other so it may not matter?

Which state? We put the money into the 529 and pull it out right away to pay tuition, effectively using outside funds but funneling it through the 529 for the tax benefit. In Virginia you can put in 34K without worrying about gift tax and get a 5.75% tax rebate. If you live in VA, I'd spend down the 529 first and then fund/pull to pay tuition.

+1 Our original 529 investment is gone, but we transferred 20k into it (cash/money market) to pay fall tuition so we could get the state tax benefit.

Planning on doing this with my DC529....but does anybody know how long the money has to be in the account? Can I deposit $8,800 into a 529 today, take it out tomorrow, and still get the DC tax deduction for that full amount?

Yes

[Anonymous]

Anonymous wrote:OP: Trying to make sense of this advice. I'm not seeing a clear trend in advice about what to use first so it seems like a preference. No worries about kid finishing school. I think my non 529 investments may be yielding a bit more than the 529s but not clear to me as I'm pretty conservative in both.

I'm a single parent so only have 4500 tax free a year to put into a 529. In DC.

Step 1 - Contribute $4500 into DC529 to get the tax credit. Do this every year.
Step 2 - Use a 50/50 mix of 529 and outside funds. The reason for this is that any growth you have in the investments within a 529 will be tax shielded. So would losses. To balance the two, I recommend a 50/50. This way, your 529 will support half your needs for all 4 years while also growing tax-free.

[Anonymous]

Anonymous wrote:

Which state? We put the money into the 529 and pull it out right away to pay tuition, effectively using outside funds but funneling it through the 529 for the tax benefit. In Virginia you can put in 34K without worrying about gift tax and get a 5.75% tax rebate. If you live in VA, I'd spend down the 529 first and then fund/pull to pay tuition.

Tuition and medical costs are not considered gifts.

Tuition paid to colleges is not a gift, but your 529 contribution for your kid's benefit (although it's in your name) IS a gift. Go figure! The 34K limit was about that. 17K per parent to each child, beyond which you'd have to file paperwork, although no tax may be due.