Recommendations for Funding College

[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.

Are you in the DMV area? If so, then you probably scored a 1500+ on your SAT, even if you’re just average. This means you’re absolutely familiar with the concept of a geometric series. You’re probably also aware of the rapidly changing time horizon on college savings and, as such, the lower achievable growth due to the slightly more conservative mix of investments. Maybe 6% (r = 1.06) YoY on average over 18 years?

Okay, of course you are! So then you know that the $400,000 you saved must have taken yearly DCA contributions according to:

D = $400,000 * [(1 - r) / (1 - r^18)] = $12,943 per year = $1,079 in college savings per month over 18 years.

This is really impressive, especially considering your HHI was $100K when you first started. As with our other DCUM humblebragger, anyone saving this much for college is doing so after saving 20% for retirement. So, your gross HHI drops from $100K to $80K and this works out to maybe $68K after taxes? But you’re saving another $13K of top of that in college savings? Wonderfully done. You’re in the top 0.1% of savers. Your accomplishment is either not real or hardly able to be extrapolated to the remaining 99.9% of the population.

[Anonymous]

In any event, top universities are entirely overrated from a cost-value perspective. From a job perspective, maybe they help land that first interview. But starting on Day #1 until the day you retire, nobody cares where you went to college (with the exception of those who like to bore others at parties). State universities, while still costly, are much better value. Realistically, the OP has savings to fund a good percentage of it and the rest comes from current earnings. That's not a big deal.

[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?

Unlike OP, your kids are well positioned to get financial aid so I wouldn’t write off non state options. Congrats on saving so much relative to your hhi and best wishes for your kids!

Thank you. Surprisingly, our expected family contribution, when we enter into net calculators in CSS, is usually somewhere between 38 and 45k per kid. Meaning we have to come up with that much on our own per year, and then get an aid package which might be partial loans for the rest.

In state we only get a few hundred dollars, so basically nothing. Since state school is a little less than thirty thousand, it’s cheaper. We can’t cash flow enough to pay for the css schools. So that’s an extra almost one hundred thousand a year for the kids to go private. I don’t think we can or should take on that amount in parent plus loans.

I am surprised it’s not more, to be honest but oh well.

Something seems off here PP. do you have an extra home or substantial assets or something?

[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.

Are you in the DMV area? If so, then you probably scored a 1500+ on your SAT, even if you’re just average. This means you’re absolutely familiar with the concept of a geometric series. You’re probably also aware of the rapidly changing time horizon on college savings and, as such, the lower achievable growth due to the slightly more conservative mix of investments. Maybe 6% (r = 1.06) YoY on average over 18 years?

Okay, of course you are! So then you know that the $400,000 you saved must have taken yearly DCA contributions according to:

D = $400,000 * [(1 - r) / (1 - r^18)] = $12,943 per year = $1,079 in college savings per month over 18 years.

This is really impressive, especially considering your HHI was $100K when you first started. As with our other DCUM humblebragger, anyone saving this much for college is doing so after saving 20% for retirement. So, your gross HHI drops from $100K to $80K and this works out to maybe $68K after taxes? But you’re saving another $13K of top of that in college savings? Wonderfully done. You’re in the top 0.1% of savers. Your accomplishment is either not real or hardly able to be extrapolated to the remaining 99.9% of the population.

We did much better than 6%. We had the instate school amount locked in early and were thus able to be less conservative in our other investments. We do save quite a bit of our income, and apparently we are not the norm. We started saving one spouse’s total take home income and 10% of the other’s from the get go.

[Anonymous]

Anonymous wrote: 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.

It's like you are going to a Tesla dealership to buy a $70,000 car, and the dealer asks you for the $70,000 and you say "Whaaaaa-t? I don't have that in case! Do you expect me to liquidate my savings to pay for this? Take out a loan? How do you expect me to pay for this?"

[Anonymous]

Anonymous wrote:

Anonymous wrote: 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.

It's like you are going to a Tesla dealership to buy a $70,000 car, and the dealer asks you for the $70,000 and you say "Whaaaaa-t? I don't have that in case! Do you expect me to liquidate my savings to pay for this? Take out a loan? How do you expect me to pay for this?"

Best reply. We can all go home now!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

Different poster here and, sorry OP but you are definitely coming across as stupid, or at best mind boggling naive. I think many of us are struggling to understand how you and your husband can make the salaries you claim and yet be so financially/socially inept. I find it particularly hard to believe that your alleged T-20 graduate husband was unaware that ivys don’t give merit aid (and haven’t for at least the last 40 years).

NP. I think OP is sitting at a NW of some $3.2M+ in their mid-40s. I hardly think that constitutes being financially/socially inept! Maybe a little unbalanced distribution across financial instruments. Also, why would OP’s DH be aware that Ivys don’t give merit aid if he went to college as a student in financial need? Ivys DO give a ton of merit-based scholarships, but only to students that also exhibit a financial need. And no one getting a Ph.D. applies for or needs financial aid. It is all paid for out of research grants. How would the DH have acquired first-hand knowledge of this nuisance?

FYI--that is not Merit aid then, it's Financial aid

[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.

Funny that you’re choosing to criticize/question this rather than the op with a hhi of 400k+ who is whining about not being able to afford top colleges

This 1000X

plenty of people live on 100K/year and still save some for college. Plenty live on way less than 100K. They are able to do it because they set PRIORITIES, and college was apparently one of those. The HHI of 400k+should easily have saved $300K for each kid if they set their priorities.

[Anonymous]

Anonymous wrote:

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.

Funny that you’re choosing to criticize/question this rather than the op with a hhi of 400k+ who is whining about not being able to afford top colleges

I’m not the OP and I’m not this PP either, but OMG the OP never whined about not being able to afford top colleges. The post was asking how people end up funding college when there is a 529 shortfall? Sounds like the answers range from picking a cheaper college to taking it from monthly cash flow with substantial trimming of unnecessary or optional expenses vs. from home equity or new loans. No reason to be so judgy and pretentious. FWIW, OP has a ton more saved in 529 plans than the average American.

But with their HHI, if they wanted their kids to attend an "elite" or private university, they could have easily saved fully for it. For someone of that income level, the "how would you fund college" should not really be a question. They should have been able to save $250-300K for each kid. Much smarter to do that than to try and figure out how to "cash flow" it.

[Anonymous]

Anonymous wrote:

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%.

Patting themselves on the back for being responsible adults, setting a budget and planning for the future. That's what responsible people do---they don't take vacations they can't afford (and by afford, I mean until they have saved for retirement/college/whatever expenses they see as needed). They live within their means and have a complete budget---ie. a budget that includes college and retirement and picking a house that is not 3x their salary.
Basically, you are calling them smart, intelligent people and you seem a bit jealous you have not been able to manage it yourself?

[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.

Doesn't matter if it's only been 1 year. They could easily cash flow $80K with that income, if they are not living above their means.

[Anonymous]

Top colleges basically compete for money from the wealthy/strivers/UMC. They intentionally limit the growth of their institutions to keep their status (and prices) high. The wealthy end of subsidizing the less wealthy likes the father’s scholarships in the Ops case. Time to pay up!

[Anonymous]

Anonymous wrote:

Anonymous wrote:$20,000/year from your 529
$30,000 parent cashflow (from a $400,000 HHI is not unreasonable)
$15,000/ from parent savings
$ 5,500/year student loan
$ 5,000/year student earnings (summer and school year)

$75,000/year

This. But you will have two in college for two years. Which means you need to start the $30k per year parent cashflow THIS YEAR so you have that additional $60k for one of the years when you've got two there. Then you'll probably have to take out a parent plus loan for the other double year. So the parent cashflow really looks like:

10th grade/12th grade - save $30k
11th grade/Freshman - $30k cash flow
12th grade/Sophomore - $30k cash flow
Freshman/Junior - $30k cash flow and spend the $30k that you saved that first year
Sophomore/Senior - $30k cash flow and a $30k parent plus loan
Junior - $30k cash flow
Senior - $30k cash flow
First year of no college bill - $30k from budget pays off the plus loan in its entirety.

I find this post extremely helpful. We have four children to fund through college and we will have overlapping tuitions for more than a handful of those years. The calculations here are helpful. Now I need to scale it for our situation.

[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?

Ok, so your husband got a cheap education and got a good job as a result. Now he needs to pay full price for his kids to go to school.

I can’t believe you thought you’d be able to solve this problem with merit aid. Plus merit aid means your kid is going to a school that they are overqualified for. You make 400k a year. Prioritize education. No one else should be paying for your kids educations just because you didn’t plan well.

+1

How is it possible to make so much money and be so clueless?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

Different poster here and, sorry OP but you are definitely coming across as stupid, or at best mind boggling naive. I think many of us are struggling to understand how you and your husband can make the salaries you claim and yet be so financially/socially inept. I find it particularly hard to believe that your alleged T-20 graduate husband was unaware that ivys don’t give merit aid (and haven’t for at least the last 40 years).

NP. I think OP is sitting at a NW of some $3.2M+ in their mid-40s. I hardly think that constitutes being financially/socially inept! Maybe a little unbalanced distribution across financial instruments. Also, why would OP’s DH be aware that Ivys don’t give merit aid if he went to college as a student in financial need? Ivys DO give a ton of merit-based scholarships, but only to students that also exhibit a financial need. And no one getting a Ph.D. applies for or needs financial aid. It is all paid for out of research grants. How would the DH have acquired first-hand knowledge of this nuisance?

FYI--that is not Merit aid then, it's Financial aid

You don’t need to acquire knowledge first hand in order to have that knowledge. In fact, most people acquire knowledge in ways other them through personal experience. For heaven sake.