When you can’t do it all, how to save for college?

[Anonymous]

Anonymous wrote:

Anonymous wrote:First, you have too much house. That’s more than we are paying with a HHI of 300k. We underbought but in an excellent school district with college in mind.

Not sure what the ages of your kids are, and whether you have overlap. If one is 14 (8th) and one is 3-4 (daycare), and your spread is 4, 9, 14 that sucks. You might qualify for aid any years your kids overlap in college.

I would pay daycare, pay 401k to get the match, and then put any remaining money away for the oldest for now. When daycare ends, shift all the money to college, 2/3 to oldest, 1/3 middle kid. Put all step raises (not COlA raises) towards college. Put all windfalls, like tax returns and bonuses towards college.

Once the oldest is taken care of, 2/3 to the middle and 1/3 to the youngest.

By the time your daycare kid starts college, you will have two kids out of the house, possibly out of college, and hopefully self supporting, will need less house and should have higher incomes. Which makes you better able to pay out of cash flow for the last kid.

Also, GS 10 is low. That parent might want to start thinking about a better paying job.

Your kids will need to have the expectation they will work starting summer after junior year in HS. That you will not be paying for things like nice vacations, cars for them to drive and travel sports. That they will go in state. And in your position, I would strongly consider the 2 years of community college to UVA/ WM, etc route, which save a ton of money and gets them a brand name degree.

Honestly, a lot of house, plus 3 kids, plus a parent capped at GS 10 is going to make it tough. You can’t give back a kid. So think long and hard about whether you can do anything about the GS 10 job or high house payment.

Not OP, but I think she was saying step 10, not GS-10. The person could be GS-13 step 10 in a job that doesn't qualify to be graded gs14 or 15.

As GS 13-10 pays almost $130,000/year. That means that means the other parent is earning only $40,000– while paying for daycare. So, I guess I need to change my answer. The $40,000 a year parent needs to think long and hard about how they can increase their income if they want to have E kids and live in an expensive house in the DMV.

[Anonymous]

The advice I come across over and over is to max out retirement savings. I've heard you can borrow against it for college but maybe someone can corroborate this? That should come before college savings accounts. Be sure college accounts are in a parent's name, not child, especially if someone else like grandparents might contribute. Take the college savings tax deductions if your state does that. I've heard you can take a home equity line of credit if needed. Something to fall back on. Where did you get the 47% figure? I've never heard that and it doesn't jibe with EFC calculators I've used. In any case, it'll work out OP.

[Anonymous]

Anonymous wrote:Agree that you bought too much house. Sorry, but little sympathy. On similar HHI, we are putting four through out of state and private universities, and we have well-funded retirement accounts.

How is this helpful?

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Not OP

[Anonymous]

Anonymous wrote:I’m looking for advice from parents who are “donut hole” like I expect we’ll be. HHI is currently $170 or so, 3 kids, still have one in daycare but oldest is rising 8th grader. We don’t max out 401(k)s but should, retirement is really behind the curve, both parents early 40s. Contributing a few hundred in 529s per month, skewed toward the oldest, PITI is $3500 and we aren’t (yet) paying extra. Only purchased home two years ago, so will have mortgage during college years, which I understand FAFSA EFC won’t factor in, but CSS schools will.

I am not trying to game the system by any means, but if EFC assumes 47% of HHI to put toward child #1 college costs, we will have a huge deficit. HHI increase over the next five years will likely be modest at best (one parent Fed, capped at step 10 unless a promotion opportunity materializes, other parent in sales, sporadic and fluctuating income, but not likely to have significant boost of more than 5% annually, averaged over the next few years). Do we throw it all in college savings, forgoing increasing retirement (which at our age, scares me). Do we just drip,drip what we can in the 529, knowing we won’t even have enough to cover our in-state fully paid? DC #1 is bright, may perhaps be offered merit aid but for this discussion I am assuming none. How do you we best prepare for this? From websites I have read, the prior, and prior-prior years retirement contributions are counted as gross income, to ostensibly be used to pay for college? I just don’t understand how that can be considered, us MC folks have to save for retirement, right?

I’d love to hear from any families with similar situations, HHI, and tell me how you figured it out. If we devoted all extra available $ after just 401(k) match to 529 for DC #1 for the next 5 years, that might cover close to in-state. But kids 2 &3 would have a pittance in 529s; and retirement saving would be very, very behind. I feel as though there are no good options here, would love any insight to help figure out the next few years of savings.

You have made choices that result in your not saving for college. 3 children and a large mortgage for your income come at a price. They are valid choices, but you have to own them and not complain about being in the "donut hole". You have a FED employee, which comes with a pension (and more importantly- healthcare in retirement)- so you do not have to save as much for retirement. You can afford to put more in for college with the amount you were planning on upping for retirement. I would seriously think about offering your children free R&B at your house and go to NOVA/MCC for two years and transferring to a four year after -to save money- but that will be their choice. Plan on them having some loan burden too. I would also plow the sporadic sales income (and any Fed bonuses) into college savings too- don't count on it for your monthly nut. Explain this early to your children so that they can work harder in HS to try to get good merit aid too. Plus, have them work, at least summers, to save.

[Anonymous]

If you have nothing helpful to say, say nothing (clearly most of you were raised in a barn!).
-always save for retirement first (you can borrow for college, not for retirement), as much as you can, whenever you can
-make sure it is clear to all of your children that their choices for college will be: in-state (with loans); CC for 2 years then 2 years in-state; getting a full-ride on their own (recruited athlete or merit)

[Anonymous]

Sorry, OP - this board is harsh when it comes to people with a $130-170K income (despite the rest of DCUM insisting that anyone making under $200K is poor in this area). We're in a similar situation but with 2 kids in elementary, a slightly lower income, and a lower mortgage because we bought in 2010. But it's still tight and we don't have enough in either retirement or college savings (although we will have a federal pension). We're looking at a less expensive house but the reality is that there is not much available at a lower price point that is in decent shape, with a decent commute, and in a decent school district. I don't have any answers, just sympathy.

[Anonymous]

Relying on an expected inheritance.

[Anonymous]

Colleges won’t expect you to pay 100%. They’ll offer loans.

[Anonymous]

OP and spouse really need to meet with an independent (not selling something) financial planner and get some really specific and tailored advice.

There are a bunch of questions and considerations that are not being mentioned here including whether life, disability, and long-term care insurance makes sense, whether they have aging parents they will be expected to help care for.

It is more than just 529s, the TSP, mortgage, and daycare.

[Anonymous]

OP, I'm not going to lecture you like others. A couple thoughts, though. I would max out your 401k. I know you feel like you can't, but its before tax money, so the hit is not as big as you think it is. That would be my #1 priority.

For there 529s, start one if you don't have one already. Direct pay from your paycheck. Even if it's $50, it's something. We did that (it was more than $50, but it works). Put any tax refunds or other "found" money (that's what I call the random reimbursement checks from health insurance, etc. that come in the mail) into the 529, even if it's $5. It's daunting, but you don't have to save enough to pay for all kids all the way through college. You will be able to pay something out of your earnings, you can get loans, and one may choose not to go to college. You just need as much as you can to offset the expenses.

Instead of being paralyzed, take action and do what you can. I'm sure there are a couple small things you could target that would add up. Even if you put an extra $50 a month in, it builds over time.

[Anonymous]

I would put every cent into the 401K(s) and not worry about college. When the kid actually starts in 4 years you can figure it out. If he's bright he'll get merit aid somewhere and there are other ways of figuring out college: community college, loans, home equity, etc.

[Anonymous]

Anonymous wrote:Relying on an expected inheritance.

How does that work? What if the person doesn't die as "expected?"

[Anonymous]

Save for retirement now, not college. You can't afford to pay for college at this point.

[Anonymous]

Anonymous wrote:Sorry, OP - this board is harsh when it comes to people with a $130-170K income (despite the rest of DCUM insisting that anyone making under $200K is poor in this area). We're in a similar situation but with 2 kids in elementary, a slightly lower income, and a lower mortgage because we bought in 2010. But it's still tight and we don't have enough in either retirement or college savings (although we will have a federal pension). We're looking at a less expensive house but the reality is that there is not much available at a lower price point that is in decent shape, with a decent commute, and in a decent school district. I don't have any answers, just sympathy.

+1
Also OP you did not say how much you have in child #1's account and which state you are in.
I would agree that your best option (as it is for most donut hole families in this very high COL area) is in state. In Maryland the flagship university (UMD-CP) costs around $25K a year for tuition, room and board. It is getting harder to get in however so you do have to be realistic about this. You will get a clearer sense of how likely your child is to gain admittance to your state's flagship university once they are in high school and you have high school grades and some standardized test scores to look at. If you are confident your child would like to attend in state and has a good chance of being admitted, you might want to consider purchasing a prepaid tuition plan. If you are already managing to pay for daycare you could transfer those funds to cover R and B for dc #1 (assuming dc#3 would be out of daycare by then) so your 529 funds would only need to cover tuition which would be approximately $50K for four years. Does that sound doable?
I would agree that you have to talk to your child about in state probably being the default choice. This is the financial reality for most people earning between $100-200K in the DMV who bought a home after the year 2000.
The other option would be to look at all the threads about how to secure merit based aid (since you are unlikely to get much need based aid). Bottom line you need to search for colleges which are a tier below your child's stats and see if they are generous with merit based aid.
I personally would not allow my child to take any loans for their undergraduate degree. We have managed to save enough for in state and that feels great! I think you should be able to do the same which is wonderful when you consider you have three children.

[Anonymous]

Anonymous wrote:Sorry, OP - this board is harsh when it comes to people with a $130-170K income (despite the rest of DCUM insisting that anyone making under $200K is poor in this area). We're in a similar situation but with 2 kids in elementary, a slightly lower income, and a lower mortgage because we bought in 2010. But it's still tight and we don't have enough in either retirement or college savings (although we will have a federal pension). We're looking at a less expensive house but the reality is that there is not much available at a lower price point that is in decent shape, with a decent commute, and in a decent school district. I don't have any answers, just sympathy.

Then something is off. We bough in 09, had incomes from $110-160K with a payment of $2K a month and we are comfortable. We a decent amount in the college fund, save for retirement and pay extra into the mortgage each month so I'm not sure how those of you are living but I'm missing something if its a struggle.