Parents of little kids: What are your college savings goals?

[Anonymous]

^ sorry responding to a PP not to the OP

[Anonymous]

Anonymous wrote:

Anonymous wrote:I like to give a more middle class perspective because I think it's important to see everyone's budget. I am a nurse, make 72k, and have 2 kids. Currently have no financial support from ex dh. I contribute 1200 a year per kid. So 100 a month per kiddo. It seems like peanuts comparatively but it's a sacrifice and something I am still proud of. Even if it's only a semester my kids will know that I saved their whole life for college.

This is excellent. They will likely also benefit from financial aid whereas the other poster's children will not.

+1. I have similar stats to PP. I make 84k with one kid and contribute 3k a year. It might cover a year of undergrad. I figure DC will qualify for some need and merit based aid that could fill much of the gap. If I made more, I would save to pay for 100%.

[Anonymous]

Well, this is an artful mischaracterization. I don't think my kids are immature, nor did I ever imply as much. I think teaching a kid that the important things in life is free is a bad lesson, and false, and doesn't instill the values that are important to me. I don't think the kids I watched mess around in college and switch majors and skip class and drag their feet were irresponsible simply because it was paid for, I think it was because they came from the kind of family where it was understood it would be paid for. It was never going to be their problem if they failed out, or got kicked out, or even simply failed to distinguish themselves.

Like I said, if I hit the Powerball I'd probably pay off their loans as a graduation present. Furthermore, if they can get scholarships to cover more than a third, that comes out of their share. Making them carry debt after school isn't the issue. Making them take ownership of their college choices, from choosing a school to choosing a major to determining how much effort they put in once they're there, is the issue. "Kids" in college are actually adults, and I plan to treat them accordingly.

So much BS. If you don't want to pay, just say so you cheapskate.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My DH wants to cover 100%, I think 33% from us, 33% from the kid, 34% from scholarships is reasonable. Honestly loans aren't the worst thing that can happen to a kid and I think knowing going in that they have to pay for part of it will make them think longer and harder about public vs private, what major they want to pick and what their first job out of college will pay, the works.

I've told him that even if we hit the Powerball I'd stick to this plan, and then just pay off their loans as a graduation present. I really think having a kid be personally invested in their college education on the financial side makes them take it more seriously.

Maybe so in old days when cost was under control. With COA of 25k (instate public) to 70k (private) per year, there's no way kids can contribute in a meaningful way. Don't rely on that approach. It's a really outdated thinking.

If you truly believe there's no way for kids to contribute in a meaningful way to their own education, I'm sure your kids will live down to your expectations. The people on this board really have an insular mindset about college -- not only is it necessary for everyone but also everyone has the ability to pay full freight and therefore doing anything less is tantamount to child abuse. The kids of these parents are the ones I watched stretch "Communications" degrees into 6 year programs, knowing that mom and dad would never cut off the money flow because their precious angel absolutely had to have the best possible start in life.

How old are your kids? Have you actually done what you are preaching? If you have done it, and ONLY if you have done it, explain to us how you did it so we can learn from it.

What's to explain? Do you need a tutorial on applying for loans or something? Save the amount you want to cover, and let your kids make up the rest. Having your kid pay for part of their education is not child abuse, nor is it "outdated thinking." That's what I did in college -- my parents could cover zero, so I earned a full ride. For grad school my parents could cover zero, so I got some scholarships and took out loans for the rest. Somehow CPS never got involved.

You don't want to learn from it, you want to discredit it. Pay your kids' way, I'm not stopping you. I'm answering OP to show that there's a different way than just refueling the helicopter until the kid hits 30.

There is surely a middle ground OP. If you can't afford to pay 100% then I would understand it if you said here is what we can do and if you want to go to a more expensive place you need to apply for scholarships. I don't really understand why you would want your child to take on debt to finish their undergraduate degree. Perhaps I am being overprotective but I really don't think an 18 year old can make a truly mature decision about taking on debt.
If you want your child to take some responsibility for their education which seems like a fine idea why not insist they get a part time job (say 10 hours a week) while in school and that they work for most of their summer vacation unless they have a worthwhile internship position lined up.
You know your children better than people on an anonymous forum. If you are worried they are too immature to take their studies seriously and might take too long to graduate, why not insist they start out at community college. I really don't see how the "cure" for immaturity and irresponsibility is to require your child to take out a student loan.

Well, this is an artful mischaracterization. I don't think my kids are immature, nor did I ever imply as much. I think teaching a kid that the important things in life is free is a bad lesson, and false, and doesn't instill the values that are important to me. I don't think the kids I watched mess around in college and switch majors and skip class and drag their feet were irresponsible simply because it was paid for, I think it was because they came from the kind of family where it was understood it would be paid for. It was never going to be their problem if they failed out, or got kicked out, or even simply failed to distinguish themselves.

Like I said, if I hit the Powerball I'd probably pay off their loans as a graduation present. Furthermore, if they can get scholarships to cover more than a third, that comes out of their share. Making them carry debt after school isn't the issue. Making them take ownership of their college choices, from choosing a school to choosing a major to determining how much effort they put in once they're there, is the issue. "Kids" in college are actually adults, and I plan to treat them accordingly.

Wow you are a blowhard.

[Anonymous]

As someone who works in actual financial aid, I’m amazed how many of you have no clue about how the system works, DESPITE likely having substantial loans of your own.

If you are middle or UMC your kinds are unlikely to be eligible for much except for federal unsubsidized Direct alone (aka Staffords) and private loans. I hope you don’t have a ton of cash in the bank or in non residential assets because it will count against your child’s eligibility unless you can find a way to financially emancipate them.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My DH wants to cover 100%, I think 33% from us, 33% from the kid, 34% from scholarships is reasonable. Honestly loans aren't the worst thing that can happen to a kid and I think knowing going in that they have to pay for part of it will make them think longer and harder about public vs private, what major they want to pick and what their first job out of college will pay, the works.

I've told him that even if we hit the Powerball I'd stick to this plan, and then just pay off their loans as a graduation present. I really think having a kid be personally invested in their college education on the financial side makes them take it more seriously.

Maybe so in old days when cost was under control. With COA of 25k (instate public) to 70k (private) per year, there's no way kids can contribute in a meaningful way. Don't rely on that approach. It's a really outdated thinking.

If you truly believe there's no way for kids to contribute in a meaningful way to their own education, I'm sure your kids will live down to your expectations. The people on this board really have an insular mindset about college -- not only is it necessary for everyone but also everyone has the ability to pay full freight and therefore doing anything less is tantamount to child abuse. The kids of these parents are the ones I watched stretch "Communications" degrees into 6 year programs, knowing that mom and dad would never cut off the money flow because their precious angel absolutely had to have the best possible start in life.

How old are your kids? Have you actually done what you are preaching? If you have done it, and ONLY if you have done it, explain to us how you did it so we can learn from it.

What's to explain? Do you need a tutorial on applying for loans or something? Save the amount you want to cover, and let your kids make up the rest. Having your kid pay for part of their education is not child abuse, nor is it "outdated thinking." That's what I did in college -- my parents could cover zero, so I earned a full ride. For grad school my parents could cover zero, so I got some scholarships and took out loans for the rest. Somehow CPS never got involved.

You don't want to learn from it, you want to discredit it. Pay your kids' way, I'm not stopping you. I'm answering OP to show that there's a different way than just refueling the helicopter until the kid hits 30.

I put three kids thru college. While I understand your points, your post shows you are completely clueless. Good luck when the time comes.

+1

Our experience from the 1980s and 90s is completely irrelevant to what we can expect in 2018 vis-à-vis paying for higher education. Apples and oranges. The economics are completely different, and it is neither realistic nor rational to expect a teenager to make a contribution of any significance towards the costs.

https://www.theatlantic.com/education/archive/2014/04/the-myth-of-working-your-way-through-college/359735/

Back in 1981, my summer earnings paid for about 25% of my $8k annual tuition, room and board at an expensive NESCAC school. Today, my son would have to save $17,000 or so over a summer to make the same proportional dent in the cost.

My kids are 20 and 17, and we are putting them through OOS private schools debt free because we want them to begin their adult lives un encumbered by debt. We want to give them the financial freedom to choose work they love, go to graduate school, get married, save for retirement, buy a house without having to service student debt.

They are responsible for books, $2k of tuition, and their own spending money. We cover tuition, room and board. They do have “skin in the game” because they are good stewards of the money they know we worked hard to save for their higher education. They both earned merit scholarships, and are earning excellent grades.

Our HHI is $220k. FWIW.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My DH wants to cover 100%, I think 33% from us, 33% from the kid, 34% from scholarships is reasonable. Honestly loans aren't the worst thing that can happen to a kid and I think knowing going in that they have to pay for part of it will make them think longer and harder about public vs private, what major they want to pick and what their first job out of college will pay, the works.

I've told him that even if we hit the Powerball I'd stick to this plan, and then just pay off their loans as a graduation present. I really think having a kid be personally invested in their college education on the financial side makes them take it more seriously.

Maybe so in old days when cost was under control. With COA of 25k (instate public) to 70k (private) per year, there's no way kids can contribute in a meaningful way. Don't rely on that approach. It's a really outdated thinking.

I don't know. I think if kids are contributing (through loans) about $5-10k per year, it's meaningful for them without crushing their future with burdensome loan costs. Our plan is to fully cover in-state public. But if kids wanna go to private, I think they're gonna have to finance something like $7.5k per year. They should understand that it costs a lot more to go private.

They cannot take out student loans for $7,500 per year Until they were junior and senior years. The federal limit is $5500 the first year and $6500 the following year.

For anything beyond those amounts, you would need to take out a parent PLUS loan.

[Anonymous]

I agree with your priorities: emergency fund, retirement first then college.

With That being said, I came from a cultural that parents expect to pay for 100% of kid education. ( my parents did that for me) So my goal is to pay 100% for my kid. This is why I can only afford 1 kid. I don’t want to work forever.

[Anonymous]

I don’t have a firm goal, because I’m just putting in what I can. Right now, that’s $100 a month per kid (6 and 4) plus whatever monetary gifts they get and sometimes random windfalls (they’ll both get $1000 when I get my tax refund). My ex puts in another $100 a month between them.

I’m working on increasing my retirement contributions to the max before I increase 529s anymore. I hope to be there next year. Once the youngest is done with daycare, I’m hoping to steer some of that money to college savings as well which should boost the monthly amounts by a decent chunk.

What will happen by the time they are college age, who knows. My parents will most likely have passed away, and they may leave money for the kids. If I ever remarry my financial picture may be completely different. My ex could have more kids which would divert money from his side. I’m just plugging away with whatever I can for now.

[Anonymous]

My parents paid for about a third of my college tuition, which is what they could afford. I got a scholarship for a third, and took out loans for the rest. I got a work-study job to pay for books and stuff. I have no doubt that if they could have paid for more (they had to take out loans to pay their third), they would have, because they valued education. My husband's parents paid his full tuition.

We earn more money than my parents, but I do feel an obligation to pay it forward. Right now we are on track to save about $100K in my kid's 529. Hopefully the gains will increase that amount, and if we are able to contribute more in the future, we will. We also own a rental property that we refinanced so it will be paid off by the time she turns 18, and will therefore generate more monthly income (or can be sold) to help with college costs.

We might not be able to cover everything, and I'm not opposed to her taking out some loans to have skin in the game, but I want her to graduate without having crippling debt that limits her options.

[Anonymous]

One wildcard that no one has mentioned here is the superior returns from equities in recent years. Many 529 contributors have benefitted from the strong market, and may be further ahead on reaching their contribution goals than they may have expected when deciding how much to save each month.

Conversely, some 529 contributors with very young kids might have additional worries that we are due for a reversion to the mean, and returns in upcoming years may be lower or even negative for some period of time.

Has anyone changed their 529 asset allocation based on recent returns, or expected returns? I have a freshman and sixth grader, and I have hit my goals (funding likely cost (including expected inflation) for an in-state flagship school) for them as they enter college. But I still haven't shifted out of equity, or even out of international equity, towards more bonds or cash, as I wouldn't mind having some funds available for grad school if possible.

FWIW, I tend to favor more risk in investments generally, but still via broad, low-cost/passively-managed funds and ETF, not individual stocks. In particular, I think the asset allocation in the automatically-adjusting funds offered in the VA 529 plan (much like the L-funds in the TSP), shift too heavily towards bonds and cash too early during the lifespan of the student (or employee).

My appetite for risk may be driven by the FERS pension I have been accumulating, or the access to other funding buckets beyond the 529 in general. To me, it's been helpful to think of the pension as filling up the fixed-income portion of the retirement portfolio instead of bonds or cash. Having a high-income, and ability to cash flow college expenses, may also have a similar effect. YMMV

[Anonymous]

Anonymous wrote:

Anonymous wrote:HHI is 500K. We put $500 in a month. We max our retirement and also put money into a brokerage account. We live in a state with no income tax so we don't get any state tax benefit from the 529. Whatever isn't in there by the time they go to college we will just pay for. I want them to go wherever they want - either state or private - and that we will cover it (something my parents were not able to do for me).

Now - will I pay for them to go to some crappy private college for 70K a year over our very good state school here? No. But if they get into an Ivy/same level, you better believe I will spring for it.

Once again, the main benefit of the 529 isn't the state income tax deduction. That's small potatoes. The main benefit is that all of the earnings in the 529 are completely tax-free. 18 years of compounding can yield a lot of earnings -- normally would be taxed at the capital gains rate. I mean very conservatively, if you put in $5k a year you could be looking at $90k in earnings very easily. If you do that in a regular brokerage account, depending on your tax rate, you could be paying $13-18k in capital gains tax on that when it comes time to withdraw and pay for college. That's a lot of money! Even moreso for people who intend to pay full freight for private school.

PP here. That's a good point. Will look into shifting more into 529's v. our investment account.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My DH wants to cover 100%, I think 33% from us, 33% from the kid, 34% from scholarships is reasonable. Honestly loans aren't the worst thing that can happen to a kid and I think knowing going in that they have to pay for part of it will make them think longer and harder about public vs private, what major they want to pick and what their first job out of college will pay, the works.

I've told him that even if we hit the Powerball I'd stick to this plan, and then just pay off their loans as a graduation present. I really think having a kid be personally invested in their college education on the financial side makes them take it more seriously.

Maybe so in old days when cost was under control. With COA of 25k (instate public) to 70k (private) per year, there's no way kids can contribute in a meaningful way. Don't rely on that approach. It's a really outdated thinking.

I don't know. I think if kids are contributing (through loans) about $5-10k per year, it's meaningful for them without crushing their future with burdensome loan costs. Our plan is to fully cover in-state public. But if kids wanna go to private, I think they're gonna have to finance something like $7.5k per year. They should understand that it costs a lot more to go private.

They cannot take out student loans for $7,500 per year Until they were junior and senior years. The federal limit is $5500 the first year and $6500 the following year.

For anything beyond those amounts, you would need to take out a parent PLUS loan.

huh? My DH didn't have any parental help (even though they could afford it) and he had 100% loans of 20k a year.

[Anonymous]

Right now we are maxing retirement and paying off a HELOC and car loans. Plan is to at least cover two years of in-state by fifth grade, so around 40k. Contributing about 5k a year per kid to 529s. Will increase once we have paid off debt and don’t need a nanny anymore. Medium goal is about 80k. Long term goal to cover any school, assuming it is worth it.

We make a good income but still, these are big numbers. Education costs are really out of control.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My DH wants to cover 100%, I think 33% from us, 33% from the kid, 34% from scholarships is reasonable. Honestly loans aren't the worst thing that can happen to a kid and I think knowing going in that they have to pay for part of it will make them think longer and harder about public vs private, what major they want to pick and what their first job out of college will pay, the works.

I've told him that even if we hit the Powerball I'd stick to this plan, and then just pay off their loans as a graduation present. I really think having a kid be personally invested in their college education on the financial side makes them take it more seriously.

Maybe so in old days when cost was under control. With COA of 25k (instate public) to 70k (private) per year, there's no way kids can contribute in a meaningful way. Don't rely on that approach. It's a really outdated thinking.

I don't know. I think if kids are contributing (through loans) about $5-10k per year, it's meaningful for them without crushing their future with burdensome loan costs. Our plan is to fully cover in-state public. But if kids wanna go to private, I think they're gonna have to finance something like $7.5k per year. They should understand that it costs a lot more to go private.

They cannot take out student loans for $7,500 per year Until they were junior and senior years. The federal limit is $5500 the first year and $6500 the following year.

For anything beyond those amounts, you would need to take out a parent PLUS loan.

huh? My DH didn't have any parental help (even though they could afford it) and he had 100% loans of 20k a year.

His parents signed those loans which were above and beyond the federal limit for student loans:

https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsidized#how-much