Recommendations for Funding College

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Does anyone have any tips or recommendations for funding what will sure to be an expensive college experience for our kids?

We have two kids in high school, rising senior and rising sophomore. We’ve got $90K and $83K in 529 plans for them each, respectively. There is no chance we will qualify for need-based financial aid, even when both are in college at the same time. Several of the schools we’re contemplating are places like Cornell and Carnegie Mellon that no longer or simply don’t offer merit-based scholarships. So, we’re looking at $80K+ per year. 529 will cover about a fourth of the cost, but this is still $450K or so over 6 years. Kind of a lot to absorb as part of our monthly budget. What do most people do?

Outside, independent scholarships? Bonuses from work? Exercise stock options? Kids get student loans? Parents get loans? Refinance or second mortgage? Temporarily halt retirement contributions?

Are your kids rockstars or just regular DCUM smart? If the latter, then your state school, lower tier state schools that give you merit (Alabama, Kansas etc), or low tier privates that heavily discount. You choose which environment you want. This advice has been repeated nine thousand times on this forum.

Don’t know, but my rising senior has taken nearly every AP class available and has an unweighted GPA of 3.98 and a weighted one a lot higher. Took the SAT as a junior and got a 790 on math and a 740 on reading / writing on his first attempt. These seem like Cornell-worthy results.

Maybe, but not a shoe-in at all. Our kid with a 1560 single sitting SAT and similar GPA/course rigor didn't. Cornell has a lot of applicants of this caliber and only accepts 10%. So unless you're a legacy or have some other outstanding factor beyond grades and test scores it's a crapshoot. Make sure to apply to some genuine safeties too.

[Anonymous]

Anonymous wrote:So you have a HHI of $400-460K and only have $173K saved for college for you sophomore and senior? We have a HHI that is one third of yours and have $180K saved for a freshman and junior. You either need to find big stuff you can cut from your monthly budget, do a home equity loan, or let them know you can't afford those colleges.

I don't even get this post. They have plenty of money to pay for college and there was zero excuse not to save and their lifestyle was more important than college. We have 1/3 income too but live a very modest lifestyle so we could have about what this poster has saved, maybe more for our one child. We have been clear we can comfortably pay for a state school, maybe private and no loans for college or graduate school.

You need to make school the priority and cut back on everything or take from savings.

[Anonymous]

Anonymous wrote:

Anonymous wrote:op, my household makes 110k but used to make more like ninety and we currently have sixty thousand saved for our ninth grader and sixty five thousand saved for our tenth grader. Which we are now realizing isn’t enough. We are going to have each kid go instate, take the maximum of 5k per year of loans, and tighten our belts and cash flow the rest.

The fact that you have saved so little while making 400k and assumed your kids would get scholarships to cover much of the costs is just insane. Why should YOUR kids get scholarships to places like Cornell?

Can you step through the math on this for us? How have you been able to amass $125K for college savings over the course of about 15 years on a $90-$110K HHI? Even at an aggressive ROI of 8%, this means you’ve been saving $5K of your net HHI per year on average. But, you wouldn’t be doing this unless your were first contributing 20% of your gross HHI to retirement savings, as all financial advisors recommended. So, on a $110K HHI, you’ve been operating on a MAGI of $88K, a take home of maybe $72K and then an available budget of roughly $67K after your college savings. So all your remaining expenses are covered by $5,600/month, including your mortgage and/or rent?!? Seems unlikely. Explain it to us.

How hard is this to understand? We are doing it as well. Our income has gone up over the years but its simple. You aren't taking vacations, you drive older paid off cars till they basically die or not worth fixing, shop at Aldi's and Marshalls, Target, Walmart and buy a small house close in or a larger house further out. Our mortgage has always been $2K or under (less with refinancing and recasting). So, yes, we could cover everything on that and save. We did prepaid college funds when our kids were born and put off things like house repairs that we could not DIY till we could save for that too and pay cash.

At $400K, there is zero excuse for OP not to have $200-300K per child saved over 18 years.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:What is your HHI and what savings do you have outside of IRAs and 401ks?

OP here. We have about $150K in taxable brokerage and checking / savings accounts accounts, but a lot of this is earmarked as our emergency savings, not that a college would care. Our house is probably worth about $1.2M and we have a mortgage with an outstanding balance of $530K. Our base HHI is $400K, with $60K in annual bonus potential. DH and I both work and he also receives monthly ISOs from his company and quarterly RSUs as well. At the current share price for his company, the quarterly RSUs are worth about $7K. The ISOs would be worth $2K per month based on the strike price, if exercised. But, these need to vest over time and who can predict the stock price? Next quarter the RSUs could be valued at $4K.

NP. Wow that’s a lot of income and very little savings. You spend too much. With that income you can tighten your belt and pay quite a bit from that as you go.

This makes zero sense. Sounds like you need to sell the house and cut back on everything. No more vacations, no more help, change your shopping habits as you should have plenty left over each month.

[Anonymous]

Anonymous wrote:

Anonymous wrote:op, my household makes 110k but used to make more like ninety and we currently have sixty thousand saved for our ninth grader and sixty five thousand saved for our tenth grader. Which we are now realizing isn’t enough. We are going to have each kid go instate, take the maximum of 5k per year of loans, and tighten our belts and cash flow the rest.

The fact that you have saved so little while making 400k and assumed your kids would get scholarships to cover much of the costs is just insane. Why should YOUR kids get scholarships to places like Cornell?

Can you step through the math on this for us? How have you been able to amass $125K for college savings over the course of about 15 years on a $90-$110K HHI? Even at an aggressive ROI of 8%, this means you’ve been saving $5K of your net HHI per year on average. But, you wouldn’t be doing this unless your were first contributing 20% of your gross HHI to retirement savings, as all financial advisors recommended. So, on a $110K HHI, you’ve been operating on a MAGI of $88K, a take home of maybe $72K and then an available budget of roughly $67K after your college savings. So all your remaining expenses are covered by $5,600/month, including your mortgage and/or rent?!? Seems unlikely. Explain it to us.

Not PP, but we have somewhat similar numbers. When kids were first born, our HHI was about 80k. For awhile, it was around $125k. It’s now higher, but only in the last three months. I don’t know how they did it, but we bought a very small house in a less desirable DC suburb a while ago. Mortgage is around $1400 per month. No childcare when kids were babies. Spouse and I worked different schedules. It is possible, but you have to reduce the costs of the two largest ticket items: housing snd childcare.

OP- it’s really best to rework your mindset towards seeing those schools as possibilities for your children to consider for graduate school (with graduate funding) rather than undergraduate. If your rising senior is that talented, they’ll still be that talented in four more years.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We’re you not making over $150,000 until very recently? If you didn’t want to save for college, then you either need to take parent plus loans or look at less expensive schools.

No, we’ve been making quite a bit more than this for some time. We have clearly underfunded our 529. Too late to fix it now and, honestly, we didn’t realize until just a year or two ago that many colleges don’t offer merit-only-based scholarships. There must also be a demonstrated financial need. DH grew up dirt poor and received a full scholarship to a T20 school and then a full ride after through to a Ph.D. I went to a cheap in-state school.

But…we ran multiple college financial aid net price calculators and even with our below-par 529 balances, we’re told our net price is whatever the college charges and that our affordability is more than double the actual $80K cost. So, sure seems like the colleges think we can easily afford to send our kids there. Just wondering what levers they’re expecting us to pull?

They were expecting you to save more. College is not a surprise expense. You could have easily saved more. Our income started near $100k when our children were born and is now around $200k. We were able to save around $400k. We knew college was coming up and we saved as much as we could from the start. Not all of it was in 529s - we kept those to the expected cost of our in state options. In the end, we ended up spending around $360k. Both graduated in the past two years.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Does anyone have any tips or recommendations for funding what will sure to be an expensive college experience for our kids?

We have two kids in high school, rising senior and rising sophomore. We’ve got $90K and $83K in 529 plans for them each, respectively. There is no chance we will qualify for need-based financial aid, even when both are in college at the same time. Several of the schools we’re contemplating are places like Cornell and Carnegie Mellon that no longer or simply don’t offer merit-based scholarships. So, we’re looking at $80K+ per year. 529 will cover about a fourth of the cost, but this is still $450K or so over 6 years. Kind of a lot to absorb as part of our monthly budget. What do most people do?

Outside, independent scholarships? Bonuses from work? Exercise stock options? Kids get student loans? Parents get loans? Refinance or second mortgage? Temporarily halt retirement contributions?

Are your kids rockstars or just regular DCUM smart? If the latter, then your state school, lower tier state schools that give you merit (Alabama, Kansas etc), or low tier privates that heavily discount. You choose which environment you want. This advice has been repeated nine thousand times on this forum.

Don’t know, but my rising senior has taken nearly every AP class available and has an unweighted GPA of 3.98 and a weighted one a lot higher. Took the SAT as a junior and got a 790 on math and a 740 on reading / writing on his first attempt. These seem like Cornell-worthy results.

Maybe, maybe not. You will probably have more luck as an ED. My DC had similar stats and it is DH’s alma mater and they were waitlisted.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Does anyone have any tips or recommendations for funding what will sure to be an expensive college experience for our kids?

We have two kids in high school, rising senior and rising sophomore. We’ve got $90K and $83K in 529 plans for them each, respectively. There is no chance we will qualify for need-based financial aid, even when both are in college at the same time. Several of the schools we’re contemplating are places like Cornell and Carnegie Mellon that no longer or simply don’t offer merit-based scholarships. So, we’re looking at $80K+ per year. 529 will cover about a fourth of the cost, but this is still $450K or so over 6 years. Kind of a lot to absorb as part of our monthly budget. What do most people do?

Outside, independent scholarships? Bonuses from work? Exercise stock options? Kids get student loans? Parents get loans? Refinance or second mortgage? Temporarily halt retirement contributions?

Are your kids rockstars or just regular DCUM smart? If the latter, then your state school, lower tier state schools that give you merit (Alabama, Kansas etc), or low tier privates that heavily discount. You choose which environment you want. This advice has been repeated nine thousand times on this forum.

Don’t know, but my rising senior has taken nearly every AP class available and has an unweighted GPA of 3.98 and a weighted one a lot higher. Took the SAT as a junior and got a 790 on math and a 740 on reading / writing on his first attempt. These seem like Cornell-worthy results.

That's regular DCUM/NoVA/MoCo smart. Smart kid, plays by the rules, hard worker. Still like buying a lottery ticket to get into a T20.

The lack of research you've done on college seems both broad and deep.

This. You should probably do some research if you don’t know this. Without a hook, it’s very much a crapshoot and chances are not good.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We’re you not making over $150,000 until very recently? If you didn’t want to save for college, then you either need to take parent plus loans or look at less expensive schools.

No, we’ve been making quite a bit more than this for some time. We have clearly underfunded our 529. Too late to fix it now and, honestly, we didn’t realize until just a year or two ago that many colleges don’t offer merit-only-based scholarships. There must also be a demonstrated financial need. DH grew up dirt poor and received a full scholarship to a T20 school and then a full ride after through to a Ph.D. I went to a cheap in-state school.

But…we ran multiple college financial aid net price calculators and even with our below-par 529 balances, we’re told our net price is whatever the college charges and that our affordability is more than double the actual $80K cost. So, sure seems like the colleges think we can easily afford to send our kids there. Just wondering what levers they’re expecting us to pull?

They were expecting you to save more. College is not a surprise expense. You could have easily saved more. Our income started near $100k when our children were born and is now around $200k. We were able to save around $400k. We knew college was coming up and we saved as much as we could from the start. Not all of it was in 529s - we kept those to the expected cost of our in state options. In the end, we ended up spending around $360k. Both graduated in the past two years.

This is not entirely true. Run through a few financial aid calculations and zero out all parental and student assets, investments, college savings, and home ownership. Then enter a parental AGI of $400K. Even with $0 saved for college, $0 in other savings, and no home to borrow against, colleges will still expect a family with this kind of income to make it happen through cash flow or loans. The lack of OP’s sufficient 529 savings really doesn’t matter – except it forces taking from cash flow to be their only real option.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We’re you not making over $150,000 until very recently? If you didn’t want to save for college, then you either need to take parent plus loans or look at less expensive schools.

No, we’ve been making quite a bit more than this for some time. We have clearly underfunded our 529. Too late to fix it now and, honestly, we didn’t realize until just a year or two ago that many colleges don’t offer merit-only-based scholarships. There must also be a demonstrated financial need. DH grew up dirt poor and received a full scholarship to a T20 school and then a full ride after through to a Ph.D. I went to a cheap in-state school.

But…we ran multiple college financial aid net price calculators and even with our below-par 529 balances, we’re told our net price is whatever the college charges and that our affordability is more than double the actual $80K cost. So, sure seems like the colleges think we can easily afford to send our kids there. Just wondering what levers they’re expecting us to pull?

They were expecting you to save more. College is not a surprise expense. You could have easily saved more. Our income started near $100k when our children were born and is now around $200k. We were able to save around $400k. We knew college was coming up and we saved as much as we could from the start. Not all of it was in 529s - we kept those to the expected cost of our in state options. In the end, we ended up spending around $360k. Both graduated in the past two years.

This is not entirely true. Run through a few financial aid calculations and zero out all parental and student assets, investments, college savings, and home ownership. Then enter a parental AGI of $400K. Even with $0 saved for college, $0 in other savings, and no home to borrow against, colleges will still expect a family with this kind of income to make it happen through cash flow or loans. The lack of OP’s sufficient 529 savings really doesn’t matter – except it forces taking from cash flow to be their only real option.

The problem is they are not willing to save or change their lifestyle and expect a handout when their income is a half a million a year. You cannot expect them to reduce spending. Their comfort is more important. In reality they could easily pay and live on half that.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP are you insane or just stupid? You make $400k, have $2m+ in retirement accounts, and you're stumped about how to pay for college for your kids? You've been banking on the (mistaken) assumption that your kids would get merit scholarships to Ivy League and near peer schools?

I've got to say, as a two-nonprofit household that has forgone every luxury to be able to afford the best schools that our two kids might be able to get into, people like you just blow my mind.

OP again. I’m definitely not stupid nor am I insane, but I do appreciate your candor. We’ve programmed a great deal of discretionary spending into our budget. We have no debt with the exception of our mortgage, which is less than 20% of our base take home pay. I think we can make some significant spending cuts to make this work and augment, if necessary, with temporary cuts to our retirement contributions. Sort of feels like colleges expect parents to liquidate all savings and take out both loans and second mortgages, which is something I just didn’t see coming when we started putting money into 529 plans 16+ years ago.

And, yes, I was definitely surprised to learn that merit-based scholarships are not available at Ivy League and comparable schools.

Sorry, OP, colleges don’t hand out merit-based scholarships like they did 25 years ago. The world has changed and now, more than ever, we’re living in a society where only those with a demonstrated need or perceived disadvantage are able to receive financial assistance and even relaxed entry admissions requirements (think recent TJ admissions changes and colleges ignoring SAT scores and taking a more wholistic, woke approach). You were naïve to not see college admissions for the scandalous game that it is.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:op, my household makes 110k but used to make more like ninety and we currently have sixty thousand saved for our ninth grader and sixty five thousand saved for our tenth grader. Which we are now realizing isn’t enough. We are going to have each kid go instate, take the maximum of 5k per year of loans, and tighten our belts and cash flow the rest.

The fact that you have saved so little while making 400k and assumed your kids would get scholarships to cover much of the costs is just insane. Why should YOUR kids get scholarships to places like Cornell?

Can you step through the math on this for us? How have you been able to amass $125K for college savings over the course of about 15 years on a $90-$110K HHI? Even at an aggressive ROI of 8%, this means you’ve been saving $5K of your net HHI per year on average. But, you wouldn’t be doing this unless your were first contributing 20% of your gross HHI to retirement savings, as all financial advisors recommended. So, on a $110K HHI, you’ve been operating on a MAGI of $88K, a take home of maybe $72K and then an available budget of roughly $67K after your college savings. So all your remaining expenses are covered by $5,600/month, including your mortgage and/or rent?!? Seems unlikely. Explain it to us.

How hard is this to understand? We are doing it as well. Our income has gone up over the years but its simple. You aren't taking vacations, you drive older paid off cars till they basically die or not worth fixing, shop at Aldi's and Marshalls, Target, Walmart and buy a small house close in or a larger house further out. Our mortgage has always been $2K or under (less with refinancing and recasting). So, yes, we could cover everything on that and save. We did prepaid college funds when our kids were born and put off things like house repairs that we could not DIY till we could save for that too and pay cash.

At $400K, there is zero excuse for OP not to have $200-300K per child saved over 18 years.

It is hard to not see past the classic DCUM humblebrag. “I make only the median HHI, yet I’m virtuous enough to have 3X the median college savings for my kids.” This puts you at the 99th percentile of college savers given your income level. So, you’re basically patting yourself on the back for being in the top 1%.

[Anonymous]

We make 400 k now but made less than half that when the kids were younger and daycare and mortgage ate up all our excess income. We could only start saving recently. People should stop assuming op has been at this income level for 20 years.

[Anonymous]

Anonymous wrote:We make 400 k now but made less than half that when the kids were younger and daycare and mortgage ate up all our excess income. We could only start saving recently. People should stop assuming op has been at this income level for 20 years.

If you have a sudden huge increase in HHI then it is even easier to save for college or cash flow it. All of the sudden you get this huge windfall so now you think ok my prayers have been answered. I know I haven’t been saving enough, but now I have all this extra money I can use for that.

[Anonymous]

It’s clear that OP dropped the ball in planning, but I also think that an important takeaway point of this thread should be that families should push back on this idea that an $80k school is necessary to do well in life. Or, worse, that it is a good idea to shell out that much money just because your friends’ families are. It sounds like OP’s kids have gotten a lot of what they wanted just handed to them, and this could be a good opportunity to help them understand the reality of having to make the best of what you can afford, which could still be a fully funded college experience at an absolutely fine but less expensive school.