Middle class & 529

[Anonymous]

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?

[Anonymous]

If you make $100-$200K (which is not middle class), your kid is not going to get need-based financial aid. It doesn't matter if you have a 529 or not. We're doing a 529 for the tax-free growth.

[Anonymous]

Have you thought about the prepaid plan? You pay for college at today's prices. But you can use the money at any college nationwide.

[Anonymous]

Anonymous wrote:If you make $100-$200K (which is not middle class), your kid is not going to get need-based financial aid. It doesn't matter if you have a 529 or not. We're doing a 529 for the tax-free growth.

Harvard does give financial aid. I'm sure others do as well.

[Anonymous]

I am not worried about the negative effects on financial aid. If we can afford to send our children to college we are going to pay for them to go by saving their entire lives. If we don't qualify for financial aid, we don't and I will be fine with that. This is not an area where I want to take chances and have my kid in debt forever. They have grad school for that.

[Anonymous]

We just set one up for our 4yo last week. Our income is slightly higher (mid 200's), and we're sure we won't qualify for any need-based aid, barring some kind of financial catastrophe. If DD qualifies for something merit-based, fabulous, but that's never guaranteed. We'd much rather have the cushion of knowing there's something in an account just for this purpose.

[Anonymous]

You might want to talk to a financial planner or look in the archives of Money magazine, but I think that money in a 529 isn't counted the same way as money in a CD or ordinary investment acct in the formula for computing financial aid. But that's just my recollection. Either way, it's a good vehicle for saving for college if only because it grows tax free.

[Anonymous]

Anonymous wrote:You might want to talk to a financial planner or look in the archives of Money magazine, but I think that money in a 529 isn't counted the same way as money in a CD or ordinary investment acct in the formula for computing financial aid. But that's just my recollection. Either way, it's a good vehicle for saving for college if only because it grows tax free.

+1

[Anonymous]

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.

[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.

I am not a financial planner, but I think the down side of this is, since there is a limit on what you can set aside for retirement, you are funding your child's education at the expense of funding your retirement, which I think is to be avoided.

We make in the $100k-200k range and I doubt we will ever make much more. OP, I understand your point, and it sucks to have a lot of money in loans, but the reality is that need-based financial aid is for those who have an actual need. Very little exists in this arena anymore (i.e. Pell grant funding has been decimated), and Harvard may be able to offer aid to relatively wealthy families because it has a huge endowment. I was very fortunate to come from a middle class family (with an income FAR less than what your parents made) in which money was set aside for my education. I hope to do the same for my kids, and we are doing it via a 529. I don't know if we will have saved enough by the time they go to college to give them a full ride to any school they select, but we should be able to at least help substantially with a solid choice such as a state school, and this is more than many truly middle-class families can afford.

Also--a perk of the 529s are that they can be used pretty flexibly. If one kid chooses not to attend college, the money can go to a sibling and sometime even to another relative. And they can be used for community college, trade schools, etc.

[Anonymous]

Anonymous wrote:Have you thought about the prepaid plan? You pay for college at today's prices. But you can use the money at any college nationwide.

Indent think you can use a Virginia prepaid plan at the university of Michigan. Or, a Maryland prepaid plan at UCLA. The prepaid plans are for the state universities in the states that they are applicable.

[Anonymous]

Anonymous wrote:Have you thought about the prepaid plan? You pay for college at today's prices. But you can use the money at any college nationwide.

But you would have to make up the delta out of cost between what the plan covers and out-of-state or private school tuition.

[Anonymous]

Anonymous wrote:You might want to talk to a financial planner or look in the archives of Money magazine, but I think that money in a 529 isn't counted the same way as money in a CD or ordinary investment acct in the formula for computing financial aid. But that's just my recollection. Either way, it's a good vehicle for saving for college if only because it grows tax free.

http://www.savingforcollege.com/intro_to_529s/does-a-529-plan-affect-financial-aid.php

[Anonymous]

Anonymous wrote:

Anonymous wrote:Have you thought about the prepaid plan? You pay for college at today's prices. But you can use the money at any college nationwide.

Indent think you can use a Virginia prepaid plan at the university of Michigan. Or, a Maryland prepaid plan at UCLA. The prepaid plans are for the state universities in the states that they are applicable.

I don't know about Virginia. But maryland lets you use the cash anywhere. Prepay $45,000 at today's cost for UMD it covers it all even if the tuition is $120,000. But if for some reason you don't want to go to a state school, you have $45,000 plus interest to spend elsewhere.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Have you thought about the prepaid plan? You pay for college at today's prices. But you can use the money at any college nationwide.

But you would have to make up the delta out of cost between what the plan covers and out-of-state or private school tuition.

Yes. But if OP is worried about needing financial aid, the prepaid plan ensures she won't, at a state college.