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

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01/31/2018 10:01

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

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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 It's a really outdated thinking.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.

Neat. That doesn't really affect my post or my plans though. As I said, if my kids go private, they're gonna have to finance something like $7.5k per year. So, maybe they'll do $5500 in their own student loans, and cover the other $2k in some other way.

That's a reasonable amount but what is your assumption on how much your kids' private will cost?

I think $220k in 2018, which might be something like $350-450k in 2035.

I explained this up-thread, but I'm planning to have our 529 cover 100% of public in-state, maybe $120k in today's dollars or $200-300k in 2035. If the kid chooses to go private, we will have a shortfall of something like $100k in 2018 dollars (maybe $150k in 2035 dollars). That shortfall will be something we'll cover through a combination of (1) cash flow, (2) other non-529 savings, and (3) my kid's own funding (student loan or otherwise).

In other words, our deal to our kids (which will be explained when they're 15 or so) is: hey we've saved up enough money (in the 529 account) to fully cover public university. That's YOUR money. If you go to community college for 2 years or get some scholarship or something so there is extra in the 529, it's still all YOUR money. Congrats for doing well and being cost-conscious. You can save it for grad school or pay the penalty to use it for a house, or whatever. It's your choice.

If you want to go to something more expensive than public university, we'll help you do it to the best of our ability. But, you'll have to take on some of the cost of doing that on your own. Private school is more expensive, and it's YOUR choice if you want to do that more expensive thing, but you're going to bear some of the costs. We'll work with you to make sure that it's not an unreasonable cost for you to bear. And my aim would be to keep their loans below $40k total in 2018 dollars.

That said, the amount to which we agree to "help" on private school may depend on whether the private school is Harvard vs. GW. But, we shall see.