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

[Anonymous]

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.

[Anonymous]

We didn't begin to save in 529 until 8th grade, but we did save in 401 K and pay down (not off) mortgage. Oldest son now going into 10th grade. We have a pretty good picture of how much money we could help him out with: 4 years of instate tuition and 1-2 years of dorm. That is our reality and we have shared this with him. Better off than some families, worse off than others. That is life...

[Anonymous]

OP- you start talking about in-state colleges. You establish the family expectation that in-state publics are where they will go. (If you decide otherwise later, let that be a discussion for later) Right now, stay firm.

And I say this when mine both went OOS and we thought it was worth it, but you are in a different situation.

[Anonymous]

It is better to fund your own retirement than your kids' college. Worse comes to worse, they can borrow. You can't borrow to fund retirement.

Focus on the most affordable state schools. Agree with PP that you need to talk to your kids about what you can afford, and what you can't.

[Anonymous]

Loans. Grandparents die.

[Anonymous]

You are not a donut hole and there is absolutely no reason you cannot pay for both kids instate. You have a nice age gap. We make less and have managed to save for ours. I don't get it. Even when we had to pay child care we still managed to save retirement and college. You choose to have three kids on that income. You cut back spending, buy a cheaper house with a smaller mortgage, etc.

[Anonymous]

Daycare costs will end. The minute it does, plow that money into college and retirement saving.

Consider moving to a less expensive home. Cut household expenses aggressively.

Also - state schools. No CSS involved.

[Anonymous]

Save for retirement. They can borrow for college (in state) or get merit. You can't borrow for retirement.

[Anonymous]

Anonymous wrote:Save for retirement. They can borrow for college (in state) or get merit. You can't borrow for retirement.

Selfish. $3500 with three kids on that income a month plus utilities is very high. Ours is $2K a month. $1500 there for college.

[Anonymous]

Start at community college and transfer after 2 years to in-state school.

Don’t want to do CC? Stick to in-state.

I’m in a few FB groups where parents have kids going to schools that are over $50k/year, many much more solely because their kid stomped their feet and just had to go there. With no clue how to pay for any of it (and these are not the 1% here in DC, people who really don’t make any money. So foolish. So at least you’re thinking about it.

[Anonymous]

First, how much do you have saved for retirement? Max out your ROTH IRAs

You really have too much house on that income.

Fed parent should actively look for a promotion ideally. Try to aim to be at a 12/13/14 in 6-8 years.

In state or community college transfer to in state. Yes, even with a bright eighth grader.

[Anonymous]

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.

[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.

Your mortgage is too high. If you just bought two years ago, you should have been thinking about college savings when you got locked into that mortgage.
I am a single mom with one child in 8th grade, and a similar income to yours. I will just about manage to save 4 years of in state tuition/room/board by the time college starts. But my mortgage is literally half of yours. And we live in a 3 bedroom house. We live in a very nice neighborhood, but apart of the county where many in DCUMland look down on the schools. We really like the schools. But what good is buying a more expensive house in an area with so called better schools if you can't afford to send your kids to college?

[Anonymous]

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.

[Anonymous]

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.