I’m told I need to INVEST $259k over 18 years

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The cost of college goes up a lot every year.

It has to stop at a point because more and more people will default on student loans. Student loans are what allowed the cost to increase so much anyway.

Yep. Remember the mortgage loan crisis and how lenders were making loans buyers couldn’t afford to repay? How buyers were gambling that real estate values would continue to climb quickly?

Lenders are now focusing on student loans. Students expect they will be able to get a high paying job upon graduation (good luck with that!), while lenders and schools are making money hand over fist.

It’s like the mortgage crisis all over again, but this time with our children. Many young adults will never be able to buy homes, will delay marriage and children, and will struggle financially for decades.

A college degree used to be a good financial investment, but now you really have to run the numbers and choose a major with a good return on investment.

It is different because people can default on a mortgage and eventually walk away. Cannot do that with student loans. Cannot be discharged.

That’s why the greedy student loan lenders LOVE it. Want money for an expensive private college, to major in an obscure subject with no actual job market - sure, why not?!
Need to borrow even more for grad school, since you couldn’t find work with just a bachelors degree? Go right ahead! You’ll get a good job and have years to pay it off, right?

It’s definitely gambling.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The cost of college goes up a lot every year.

It has to stop at a point because more and more people will default on student loans. Student loans are what allowed the cost to increase so much anyway.

Schools are not funding student loans so they will not care. Again, it really will just be for the rich who can pay cash and the poor or really smart who get aide.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: I admit I’m confused by the amount we are supposed to invest ($1,200 per month) for each child to fund private college. That means we will be investing approximately $259k over 18 years. That is enough to pay for private college now at 60k per year. Is the calculator not including any appreciation?!?

Our goal is to invest at least 60k by age three. This is one year of tuition. I sure hope this would grow to at least two years of tuition by age 18, which would be in 15 years.

The cost of college has been outpacing appreciation, inflation, damn near every financial sector in the last 10 years, and there's no real indication it's going to stop. So if your kid is under 5 now, you should assume college will be closer to $100k/year when s/he is ready to go.

College is becoming a giant pyramid scheme.

Amen to that.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The cost of college goes up a lot every year.

It has to stop at a point because more and more people will default on student loans. Student loans are what allowed the cost to increase so much anyway.

Schools are not funding student loans so they will not care. Again, it really will just be for the rich who can pay cash and the poor or really smart who get aide.

Schools care because abundant student loans allow them to charge whatever they like. They can raise tuition and fees, embark on building sprees, recruit athletes, etc. because student loans allow a “borrow now, pay later” mentality.

Meanwhile, graduates are competing for fewer and fewer good-paying jobs with benefits. The younger generation is screwed. They enter a job market in which pensions are obsolete. They face rising healthcare costs and a “gig” economy that encourages people to work until they literally die.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: I admit I’m confused by the amount we are supposed to invest ($1,200 per month) for each child to fund private college. That means we will be investing approximately $259k over 18 years. That is enough to pay for private college now at 60k per year. Is the calculator not including any appreciation?!?

Our goal is to invest at least 60k by age three. This is one year of tuition. I sure hope this would grow to at least two years of tuition by age 18, which would be in 15 years.

The cost of college has been outpacing appreciation, inflation, damn near every financial sector in the last 10 years, and there's no real indication it's going to stop. So if your kid is under 5 now, you should assume college will be closer to $100k/year when s/he is ready to go.

College is becoming a giant pyramid scheme.

Amen to that.

+1

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The cost of college goes up a lot every year.

It has to stop at a point because more and more people will default on student loans. Student loans are what allowed the cost to increase so much anyway.

Yep. Remember the mortgage loan crisis and how lenders were making loans buyers couldn’t afford to repay? How buyers were gambling that real estate values would continue to climb quickly?

Lenders are now focusing on student loans. Students expect they will be able to get a high paying job upon graduation (good luck with that!), while lenders and schools are making money hand over fist.

It’s like the mortgage crisis all over again, but this time with our children. Many young adults will never be able to buy homes, will delay marriage and children, and will struggle financially for decades.

A college degree used to be a good financial investment, but now you really have to run the numbers and choose a major with a good return on investment.

You. It is the next loan crisis. That's what they are teaching in economics right now. Luckily, just like I wasn't stupid enough to take a home loan I couldn't afford to pay back, my kids aren't stupid enough to foot the difference in cost for a private or out of state education. It's the financial Darwin rule.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The cost of college goes up a lot every year.

It has to stop at a point because more and more people will default on student loans. Student loans are what allowed the cost to increase so much anyway.

There will always be people rich enough to pay without loans n

[Anonymous]

Though student loans and cost of college are an issue, I think this thread is overblown. Cost of college has outpaced inflation (which has been unusually low in recent decade/s), but it hasn't outpaced appreciation if you invest in stocks. Also, the rate of undergraduate tuition increase has slowed in the last few years and at many institutions over 80% of students receive financial aid even in UMC families. Private schools award a lot of grants/scholarships--not all need-based.

Our approach was to save 60% of costs at the time when we started saving (we put lump sums for the first 5 years and invested mainly in stocks at the beginning, and then dribbled in just a few hundred here and there over the rest of the years from birthday gifts etc. so not ideal timing with putting everything in pre-2008, but it recovered and grew more) . We're now 1 year out from college, have switched to 75% in FDIC insured accounts and short term bonds and 25% stock indexes and we have enough to pay all of the expenses at a private school if DC goes that route, or in state public plus some grad school.

[Anonymous]

Anonymous wrote:Though student loans and cost of college are an issue, I think this thread is overblown. Cost of college has outpaced inflation (which has been unusually low in recent decade/s), but it hasn't outpaced appreciation if you invest in stocks. Also, the rate of undergraduate tuition increase has slowed in the last few years and at many institutions over 80% of students receive financial aid even in UMC families. Private schools award a lot of grants/scholarships--not all need-based.

I think there's a perfect storm brewing.

Fewer college aged students + many parents who are just realizing we haven't saved enough for our own retirement (yeah, not here on DCUM but in the real world, lots of us just haven't) + reluctance to let our kids accumulate much debt for college + availability of lower cost courses via community college/online courses = fare fewer people willing to pay inflated prices for private school tuition.

The average cost for room and board at a private 4 year school is something like $12,000 yearly. $1,000 a month for room and food for ONE person, living in a dorm with perhaps 3 other kids in a suite? This is ridiculously overpriced. Students should be able to live in a dorm for less than $800 a month and should be able to eat for less than $200 a month.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The cost of college goes up a lot every year.

It has to stop at a point because more and more people will default on student loans. Student loans are what allowed the cost to increase so much anyway.

Not really, for 2 reasons:

1. Plenty of international students willing to pay full price for the prestige. Last year, there were 600,000 students from China studying in the US for example.

2. Over half of US students receive some form of financial aid at most universities (int'l students are usually ineligible for most aid). So if tuition is $100k/year, only those in upper middle class and higher end up paying full price. Anyone making less than that will get some kind of price break or aid.

Yes, the system is messed up. Even worse is how the increased tuition isn't necessarily going to pay for more professors or instructional materials, but rather on new student centers, dorms, and athletic fields. I'm a donor to my top-25 university and I make sure the funds go to a specific program just for educational purposes.

[Anonymous]

Anonymous wrote:Though student loans and cost of college are an issue, I think this thread is overblown. Cost of college has outpaced inflation (which has been unusually low in recent decade/s), but it hasn't outpaced appreciation if you invest in stocks. Also, the rate of undergraduate tuition increase has slowed in the last few years and at many institutions over 80% of students receive financial aid even in UMC families. Private schools award a lot of grants/scholarships--not all need-based.

Our approach was to save 60% of costs at the time when we started saving (we put lump sums for the first 5 years and invested mainly in stocks at the beginning, and then dribbled in just a few hundred here and there over the rest of the years from birthday gifts etc. so not ideal timing with putting everything in pre-2008, but it recovered and grew more) . We're now 1 year out from college, have switched to 75% in FDIC insured accounts and short term bonds and 25% stock indexes and we have enough to pay all of the expenses at a private school if DC goes that route, or in state public plus some grad school.

This.

[Anonymous]

What about doing a private college 529? Lock in 4 years of tuition at today's prices.

[Anonymous]

Use the Vanguard calculator— it shows how much it predicts specific colleges will cost when your kid starts. For my alma mater they’re predicting $650,000 for four years. Oh boy. Better up the savings...

[Anonymous]

Anonymous wrote:

Anonymous wrote:The cost of college goes up a lot every year.

It has to stop at a point because more and more people will default on student loans. Student loans are what allowed the cost to increase so much anyway.

But since defaults on student loans are actually rare, since they aren't discharged in bankruptcy and they can go after your tax returns, SS, etc., this isn't a real problem yet -- the system needs to change first.

[Anonymous]

Need to invest more than that. Plain old out of state public schools in 2018 run 50k a year all in.

I have three kids so minimum needed 600k assuming tuition does not go up.