Does this seem like sound advice for paying for college?

[Anonymous]

Anonymous wrote:They have their lifetimes left to earn; you don't.

It's best for them to pay their own student loans.

Ugh, why saddle your kids with that debt if it can be avoided??

[Anonymous]

Anonymous wrote:My dad is a bit of a financial whiz and has advised us to pay off our house first, as opposed to saving for the kids' college. Once the house is paid off, the mortgage money could be used to pay for college.

Does this make sense?

That's what we did.

[Anonymous]

You need to look at what the cost of college is likely to be in 16 years, and how that compares to your mortgage payments. College costs will increase substantially while your mortgage costs will stay the same so that may create a gap down the road. The theory with a 529 is that the savings grow/compound.

And that assumes nothing happens (job losses, divorce, disability) which would affect your ability to help pay for college.

It would make me nervous, but we were able to do both (and currently have one in college).

[Anonymous]

NP here, how does saving for college work if your kids choose trade school? Like cosmetology for instance.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:How much of a tax break are you getting on your mortgage interest? Mortgage interest is deductible, but student loans are not (go figure).

Student loan interest is, in fact, deductible.

+1 Yes. If you have students loans you would know this because your lender sends you a statement at tax time.

Yes, and we would also know that the income cap for deducting student loan interest is very low, because TurboTax tells us when it doesn't let us deduct the interest.

[Anonymous]

Anonymous wrote:NP here, how does saving for college work if your kids choose trade school? Like cosmetology for instance.

Trade school may be covered by 529 regulations - you'd have to look into that. If you've saved more in a 529 than trade school costs you can transfer to another kid, or, if there are no educational expenses left to pay you can withraw the money with some penalties. If you haven't saved it all in a 529 (we didn't, we had some set aside for college in regular UGMA mutual fund accounts) then you can do what you want with the money.

[Anonymous]

Anonymous wrote:

Anonymous wrote:What's your mortgage interest rate and how long do you have before the kids start college?

3.625% and 14 and 16 years before the kids start college. Loan is for $375k.

It would make more sense if you didn't have such a low interest rate. Historical rates of return on investments are higher than that, so it would make sense to invest it - stock heavy at first, and then move to more bonds and cash in 10 years or so.

[Anonymous]

Definitely pay off the house first so you aren't saddled with paying interest on that for any longer than you have to. Also I find it difficult to choose college savings plans, esp since there are so many restrictions and policy info details to go through before making a decision. I don't want to already decide that the baby will go to school in a certain state, for example, nor do I want the 'lock in' rate at what it is now. What if college prices drop (unlikely, but possible) or he receives a scholarship? Or opts for a trade school or a work-study program? I'd prefer to invest the money somewhere or pay off the existing debt we already have.

[Anonymous]

He is wrong.

[Anonymous]

I was really hoping you were going to say "get a job." I paid my own way and worked hard. I graduated with a $3500 fed loan. Why should my parents pay 200k in 4 years for my education? My education is mine and it was my first move toward adult life.

[Anonymous]

Mathematically you can probably do better investing it, but I think his advice makes sense anyway. If you pay off your house you in a drastically better financial situation. Once there you can choose to pay for college or not (if circumstances make it a poor decision).

Incidentally there is an exemption from gift tax to pay schooling for your children.

[Anonymous]

We also have 14 and 16 years until our kids start college. We started saving for college a few months before each kid was born. Our mortgage is about $410k. We will most likely pay the house off early (close to when out oldest starts college) and then have the extra $2400 a month we pay now available to put towards college.

I think everything is a balance. We don't want to be risky with the college savings, so we choose to pay extra towards our mortgage, but also put money into the 529s, even though the return may not be great.

On a side note, anyone feeling bad for the child with a lot less money than the other? We have invested about the same amount for each child, but because our older child hit the market better, she has much more than her brother did at the same time. How do you plan to deal with this? I think we are hoping to pay for all of college for both, so maybe it won't be a big deal, but if there is any left is it fair for one to have a bunch of money left over while the other has none (assuming costs were roughly the same)?

[Anonymous]

Anonymous wrote:We also have 14 and 16 years until our kids start college. We started saving for college a few months before each kid was born. Our mortgage is about $410k. We will most likely pay the house off early (close to when out oldest starts college) and then have the extra $2400 a month we pay now available to put towards college.

I think everything is a balance. We don't want to be risky with the college savings, so we choose to pay extra towards our mortgage, but also put money into the 529s, even though the return may not be great.

On a side note, anyone feeling bad for the child with a lot less money than the other? We have invested about the same amount for each child, but because our older child hit the market better, she has much more than her brother did at the same time. How do you plan to deal with this? I think we are hoping to pay for all of college for both, so maybe it won't be a big deal, but if there is any left is it fair for one to have a bunch of money left over while the other has none (assuming costs were roughly the same)?

I beliebe you can use that money however you want - it's yours, not theirs. I wouldn't even tell them there is a disparity.

[Anonymous]

Anonymous wrote:

Anonymous wrote:My dad is a bit of a financial whiz and has advised us to pay off our house first, as opposed to saving for the kids' college. Once the house is paid off, the mortgage money could be used to pay for college.

Does this make sense?

That's what we did.

We are doing both - we have 529 savings, and will pay off our mortgage a year after DC1 starts college. That will free up some cash flow to supplement the savings.

[Anonymous]

Anonymous wrote:Definitely pay off the house first so you aren't saddled with paying interest on that for any longer than you have to. Also I find it difficult to choose college savings plans, esp since there are so many restrictions and policy info details to go through before making a decision. I don't want to already decide that the baby will go to school in a certain state, for example, nor do I want the 'lock in' rate at what it is now. What if college prices drop (unlikely, but possible) or he receives a scholarship? Or opts for a trade school or a work-study program? I'd prefer to invest the money somewhere or pay off the existing debt we already have.

OP here. My dad shares this thinking. He's reviewed all the options for savings and doesn't like any of them. (Before anyone asks why he's "making decisions" for us- we asked him for guidance on the best way to save).

You all had good points to think about. My husband and I are definitely in agreement that should we go the house route, if something were to happen like a death or disability, we would work on recovering and college savings would unfortunately fall by the wayside and be used for retirement. We do have enough life insurance to pay off the house and pay for some college, but lets hope it doesn't come to that!

We'll have to run some numbers and look at how soon we think we can pay off the mortgage, etc. We just refinanced so the 3.625% interest rate is new to us.

As to the people who think that our children should pay their own way- well, realistically they probably will have to take out some loans, but I would prefer to help them as much as we can. My parents paid for my undergrad, and I'm grateful. My husband paid for his own, and despite working full-time at Walmart for 4 years to pay for college, he still has a lot of loans left.