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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Here is the answer to your question, OP.

Our combined household income is near 200K, but this is a recent development since I finished a degree.  Prior, between reduced job hours and paying tuition, we made under 150.  My husband's job is tenured, and mine is not.  I see no reason to assume that I will always be employed when my child attends college.  My husband's job, if it is our only income, would get us close to a free ride in a top private college since we have two children.  I make less after taxes than the HYPSM tuition, so if a child gets into a top school, my salary will add absolutely nothing to the table.  My salary is 90K, but remove taxes and do your math.

We never saved a penny for college, instead paying down our mortgage and our rental property mortgage instead.  Older child is an excellent student, and may opt to convert her smarts into a free ride in college.  If she gets into a tippy top private college with minimal financial aid, we'll open a line of credit from the house and borrow cheaply.  If I lose my job or something else arises, we'll get financial aid.  Whatever happens, I recommend that the child ONLY applies to colleges that commit to meet the financial aid requirements with grants, not loans.

Why would I EVER want to open a 529 account committing us to paying college tuition when so many factors can change overnight?  I view 529 accounts as a option once all other reasonable investment avenues have been exhausted.  Prepayment of UMD tuition is more sensible, honestly.

The 4 years my older child is in college may be great for going back to school myself for a PhD (reduce our income / expected family contribution), or perhaps joining a volunteer overseas organization as a resume builder / income reducer.  Worst case scenario, the child knows that we'll pay the equivalent of UMD tuition, and she takes out loans for the rest.  Two years in consulting of some kind, while living with a roommate and us paying for her utilities and food, and she'll pay it off.  [/quote]

Many top private colleges use the CSS profile for financial aid calculations, not EFC.  CSS looks at more factors well beyond your income - such as equity in your home, amount in retirement accounts, etc.  I would not count on a full ride to any school (full ride is tuition + room and board + books, etc.), let alone a top private one, which is very hard to get into. It is actually quite rare to get a full ride. Full tuition is more common and is usually given to students who go to a school that is a tier below their capabilities. Room, board, and books still need to be paid for.[/quote]

We don't have enough in assets to trigger any significant CSS penalty; neither do most families.  It looks like our EFC will be around 50K with both of us working.  We can cover half from income and the other half from an equity line of credit, which the kid will ideally replenish from a salary on graduation.   We only have to even consider this scenario if the kid gets into an Ivy; all other roads lead to UMD, which we can simply pay for, and so can many middle class families that did not save in advance.

If I lose my job or something else drastic happens, we will have our money in protected assets (mortgage, 401k), not in earmarked 529's.  If that happens, our EFC will plunge to reflect our strained circumstances.[/quote]

I don't know if I would call it a CSS penalty. It's just a different way of calculating a family's ability to pay. Colleges that use it can take into account your home equity, your retirement funds, etc. Both EFC and CSS will count your rental property as an asset plus any income you generate from it. UMD in state is about $25K with tuition and room and board. If you can simply pay it out of pocket, then what do you currently do with that extra $2K per month? Is it going towards your mortgage? Or is it being spent on stuff that you will cut back on. Genuinely curious.

I am on a Facebook page about paying for college that has thousands of members. And most "middle class" (which is a hard-to-define term) people on there cannot cash flow college to the tune of $25K. Those who did not save anything for college are scrambling, are shocked at their EFC numbers, are disappointed in how much colleges offer them, and can't believe the high interest rates on student loans. (I agree that a HELOC is the way to go.) It's good that you have the means to pay for it out of pocket.[/quote]

We are about to have our last child out of daycare and into public schools, improving our cash flow.  We are actually having a conversation on how to distribute that 1.5K per month as I write to you.  I think we'll put it into retirement savings, but it may end up in the mortgage; definitely not in 529.  The other $500 will come from not having to pay the older kid's extra-curricular fees once college starts.  Hence we can float $25K per year.  The rest is for the older kid to borrow if the kid matriculates into college worth borrowing for, and decides to pursue that path.

Following the recommendation on DCUM, I calculated EFC using MyInTuition with and without the rental property for several top schools.  Look like our penalty for retaining the rental would be about 3K across the Ivies.  We make more than that per year on the property, so unless our tenants want to buy it from us and save us the realtor fee, we'll continue to rent it.  There will be no asset penalty from owning and gradually paying down our modest townhouse. [/quote]

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