Middle class & 529

[Anonymous]

OP again,

I went to a Harvard-type school and I can't imagine saving 150K for college. At 160K per year I had 10-20K in financial aid which would be much more today (after a congressional investigation). Anyway, I earned & applied for scholarships to help pay for college and all it did was replace the "need" award.

I know that 529 says it doesn't impact FAFSA (up to 5%) but the fine print is that each university gets to decide how to facto it in and the elite universities are tough to predict. I don't want to invest in the state tuition plan because no one in our family has attended state universities so it's likely my child will end up at a private school as well.

[Anonymous]

Anonymous wrote:We barely make the 100K income level. We were told by several friends in the financial field that it is better to save money in a ROTH IRA than a 529 plan. It grows tax free, you can take the base out anytime, it doesn't count against financial aid and if your kid doesn't go to college or gets scholarships etc., then you have the money for retirement. Even those who make over the limit for a ROTH IRA can contribute to a regular IRA and convert it. Between two people, that's at least $11K a year going into the account (more if your over age 50). I think its just a little more flexible than the 529 plans.

Don't do this. First fund your retirement, then fund your child's college education. I.e., if you have the money, first put it into a Roth IRA (or a regular IRA and convert it to a Roth) up to the maximum allowable amount per year. Only once you've done that, set aside money for child's college (in a 529).

[Anonymous]

Anonymous wrote:Middle class = 100-200K per year (only in DC I know)

I had a horrible experience paying for college. My parents made about 160k per year when I went to college.

My experience was that I qualified for virtually no aid and when I did the university stripped the aid because I got outside scholarships. I'm 30 and still have 100K in loans.

Anyway, who here had a positive experience paying for college with a 529? How have you rationalized (with an accountant) the possible negative impacts of the account on financial aid vs tax savings?[/quote]

I'm not sure I understand the question - what is the alternative to the possible negative impacts of a 529? No college savings at all?

[Anonymous]

Anonymous wrote:OP again,

I went to a Harvard-type school and I can't imagine saving 150K for college. At 160K per year I had 10-20K in financial aid which would be much more today (after a congressional investigation). Anyway, I earned & applied for scholarships to help pay for college and all it did was replace the "need" award.

I know that 529 says it doesn't impact FAFSA (up to 5%) but the fine print is that each university gets to decide how to facto it in and the elite universities are tough to predict. I don't want to invest in the state tuition plan because no one in our family has attended state universities so it's likely my child will end up at a private school as well.

It seems like the logical solution in this case is for you to save as much money as possible for your kids' education(s), with the understanding that you will be unlikely to save up enough money to foot the entire bill. You can then share with them your experience--I went to XYZ school and had a 6-figure loan debt at age 30. It was/was not worth it to me because...etc, etc. You can also encourage them to try for need-based aid, knowing it is unlikely they'll get it, and also for merit-based aid. But to not open a 529 because you think that they will/should be entitled to need-based aid at some incredibly expensive school seems very short-sighted.

I will just say that I went to state schools all the way through (including graduate) and while you may feel like it's not the route your kid(s) will/should take, it is a very valid way to go.

[Anonymous]

Anonymous wrote:OP again,

I went to a Harvard-type school and I can't imagine saving 150K for college. At 160K per year I had 10-20K in financial aid which would be much more today (after a congressional investigation). Anyway, I earned & applied for scholarships to help pay for college and all it did was replace the "need" award.

I know that 529 says it doesn't impact FAFSA (up to 5%) but the fine print is that each university gets to decide how to facto it in and the elite universities are tough to predict. I don't want to invest in the state tuition plan because no one in our family has attended state universities so it's likely my child will end up at a private school as well.

I'm being blunt, but these posts beg the question: why not a state school? Doesn't sound like your private education had the value you had imagined if it left you with huge loans. I assume your parents with their private educations didn't have salaries or the financial acumen to finance your private school, either. And now you are talking about repeating the process.

Finding a state school that's a good fit would give your child the huge gift of being debt free. A college degree with tons of debt is pretty worthless.

[Anonymous]

State school all the way.

[Anonymous]

To summarize OP's posts:

She makes somewhere in the six figures, although she is unwilling or unable to tell us whether it's $100,000 or $200,000.

She had a "terrible time" paying for college because her parents either didn't step up or were horrible with money. (Many people who make far less than $160,000 managed to pay for their kids' college educations.)

She is upset that her need-based aid was reduced when she received merit scholarships. This demonstrates a shaky grasp of the concept of merit aid, which is inconsistent with her claim that she went to a "Harvard-type" school.

She now is wondering whether she should forego college savings because it will impact the merit aid her kids will receive. Translation: If I'm financially irresponsible, will someone bail out my kids and pay for their college educations?

She's turning up her nose at state schools because "no one in her family" ever went to one.

I never thought I'd write this, because it's trite and overdone, but it applies perfectly here:

Bitch, bye.

[Anonymous]

Thanks for the unhelpful post PP.

I estimated my salary because it changes every year. Merit aid is not offered at the private colleges I am familiar with (Harvard included). I said outside merit scholarships and it's true that they took away my need based award because I received outside scholarships. I also had college savings from my parents, but when your college bills topple 60K per year, there is no amount of savings to prevent the six-figure bill.

I never said I wouldn't save for college, I just am suspicious that a 529 is another way of deciding to take away financial aid. Thank you to the other posters re:Roth IRA. I'll go that route.

[Anonymous]

529s do impact financial aid slightly, but not nearly to the degree that a custodial account for you child or regular investment account would...they are factored in differently. I think the responsible thing would be to save as much as possible in these vehicles because in the long run if you don't take advantage of the tax savings and compound interest you are taking a gamble on financial aid being available.

[Anonymous]

Anonymous wrote:Thanks for the unhelpful post PP.

I estimated my salary because it changes every year. Merit aid is not offered at the private colleges I am familiar with (Harvard included). I said outside merit scholarships and it's true that they took away my need based award because I received outside scholarships. I also had college savings from my parents, but when your college bills topple 60K per year, there is no amount of savings to prevent the six-figure bill.

I never said I wouldn't save for college, I just am suspicious that a 529 is another way of deciding to take away financial aid. Thank you to the other posters re:Roth IRA. I'll go that route.

I don't understand why you think that you will get financial aid if your income remains between 100-200k.

[Anonymous]

Private college tuition is now a scam. Look at how harvard will bankroll the people who can't afford it (even if it is due to lifestyle and debt choices) and slide the scale up to those that can.

[Anonymous]

Anonymous wrote:OP again,

I went to a Harvard-type school and I can't imagine saving 150K for college. At 160K per year I had 10-20K in financial aid which would be much more today (after a congressional investigation). Anyway, I earned & applied for scholarships to help pay for college and all it did was replace the "need" award.

I know that 529 says it doesn't impact FAFSA (up to 5%) but the fine print is that each university gets to decide how to facto it in and the elite universities are tough to predict. I don't want to invest in the state tuition plan because no one in our family has attended state universities so it's likely my child will end up at a private school as well.

Our HHI is $180k and we have saved $250k for our two kids, ages 16 and 14, mostly in 529s. It can be done.

We max out retirement savings.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Thanks for the unhelpful post PP.

I estimated my salary because it changes every year. Merit aid is not offered at the private colleges I am familiar with (Harvard included). I said outside merit scholarships and it's true that they took away my need based award because I received outside scholarships. I also had college savings from my parents, but when your college bills topple 60K per year, there is no amount of savings to prevent the six-figure bill.

I never said I wouldn't save for college, I just am suspicious that a 529 is another way of deciding to take away financial aid. Thank you to the other posters re:Roth IRA. I'll go that route.

I don't understand why you think that you will get financial aid if your income remains between 100-200k.

+1

You will not get need-based aid with that HHI.

[Anonymous]

You can type in your income into the Harvard calculator. We make in the low 200's have a net worth of 2.0 and won't qualify for aid.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP again,

I went to a Harvard-type school and I can't imagine saving 150K for college. At 160K per year I had 10-20K in financial aid which would be much more today (after a congressional investigation). Anyway, I earned & applied for scholarships to help pay for college and all it did was replace the "need" award.

I know that 529 says it doesn't impact FAFSA (up to 5%) but the fine print is that each university gets to decide how to facto it in and the elite universities are tough to predict. I don't want to invest in the state tuition plan because no one in our family has attended state universities so it's likely my child will end up at a private school as well.

Our HHI is $180k and we have saved $250k for our two kids, ages 16 and 14, mostly in 529s. It can be done.

We max out retirement savings.

How did you do this? Seriously can you tell me your monthly budget breakdown? We have a similar HHI (about 20K less but we're younger) and have three young kids, all still in daycare. We save a lot for retirement -- not quite maxing out but close -- but haven't saved a penny for college yet. Our plan was to throw most of the daycare money into college savings when daycare expenses end, but many people on this board and elsewhere say that between aftercare, summer camps, and other expenses things just don't get much cheaper, which is a scary thought.

How did you manage to save so much? Please inspire me!