Anonymous wrote:

OP here - this sounds interesting. Answer to question 1 - yes, 2 - no, 3 - I don't know but can find out. So you're suggesting putting as much as possible in the 401k's and then borrowing from that for college? Why is that different from investing in a 529?

There are two times at which 401k loans can work in your favor.

1) You are not contributing to your yearly maximum limit because you need to save money for other purposes. In this case save that money to your 401k and loan it out to yourselves when you need it. This preserves your yearly contribution space.

2)You've socked away a lot of money in your 401k, but the investment options contained therein suck due to high management fees or even loads. What do do? Take out a pile and invest it somewhere else- Vanguard 529s, Fidelity Spartan Funds, your next house purchase, etc.

These options are only to be taken if you are confident enough in your monthly cashflow that you will be able to pay your monthly payments no matter what, otherwise you'll be hit with taxes and a 10% penalty. Only borrow as much as you can repay or, in situation 2, as much as you can repay without dropping pretax contributions. Only invest in things that show immediate return (debt payment, debt avoidance) or that you intend on keeping until retirement (Mutual Funds, house, etc), and make sure your asset allocation remains to plan.

OP here - I'm also desperate to find CFP to help me with our financial planning but I'm paralyzed with uncertainty about who use and how much they'll cost. Any suggestions?

Anonymous wrote:Why have you been paying extra towards your mortgage when you have a home equity loan at a higher interest rate?

Honestly, because it was the path of least of resistance. But now I'm motivated to stop doing that and pay off the HE

Anonymous wrote:Three part question:

Do you feel very secure in your jobs and
Are you not yet maxing out 401ks and
Does your 401k plan allow payment of loans to continue after separation from employment?

Anyone who can answer yes to all three parts is a good candidate for stashing college money into a 401k. Bond fund returns are going to suck for the next decade so "investing" in a loan to yourself can be a good deal.

OP here - this sounds interesting. Answer to question 1 - yes, 2 - no, 3 - I don't know but can find out. So you're suggesting putting as much as possible in the 401k's and then borrowing from that for college? Why is that different from investing in a 529?

Three part question:

Do you feel very secure in your jobs and
Are you not yet maxing out 401ks and
Does your 401k plan allow payment of loans to continue after separation from employment?

Anyone who can answer yes to all three parts is a good candidate for stashing college money into a 401k. Bond fund returns are going to suck for the next decade so "investing" in a loan to yourself can be a good deal.

Why have you been paying extra towards your mortgage when you have a home equity loan at a higher interest rate?

OP here - income too high to qualify for any need based aid. I don't think we'll qualify for any direct (subsidized?) student loans and the ones I see available have rates of 6% or more. Seems really high.

Doesn't make sense to add $200 to your mortgage payment when your home equity loan has a higher rate.

Sounds like you're stretched too thin already and therefore can't afford private school.

If your income is low enough to qualify for fafsa help, then pay off the home equity loan. If your income is high enough that you're not likely to qualify no matter what, max out I bonds for the next two years (including tax refund if you can) and then put excess money into 529s.

The reason I suggest I Bonds over 529s is that the only sufficiently conservative investments likely to be available in the 529 are short to intermediate term bond funds which might take a bit of a beating going forward. Some 529s might give you access to CDs that will have a fixed interest rate but I Bonds will adjust to keep up with inflation.

If the student loan rate is lower than your home equity rate (usually it is...but Congress jsut passed some legislation on this today actually), then pay off the home equity loan.

Also if you do put money away for college, use your state's own 529 plan (Coverdell). Has both fed and state tax benefits.

We have 60k left on equity loan at5% interest. I e been putting an extra 200 toward our 500k mortgage every month but its interest rate is only 3.9%. We need to save more for college which s coming up in 4 years. Now that private college costs are like $60k year I don't know what to do we have total of 50k saved so far. Any advice from the experts outs there? Thx