College Savings: Thoughts?

[snowsprite]

What do you think about the concept of saving for/financing college for kids?

I've had some (somewhat startling) conversations with different people on this topic lately, and throughout my life, and the answers run the gammut from "Kids should finance their own college education" to "I'm going to see to it that my child never has to worry about paying back a student loan."

So what's right? And what *is* a parent's duty and obligation? Furthermore...are all children entitled to a college education by default? What if they don't want one? As a parent, are you obligated to pressure them anyway?

I look back at my college experience. It was a good experience, and I'm glad I had it. My parents were able to pay my way, so I was very lucky. At the same time, I feel very sad that in retrospect I did not appreciate this as much as I should have...nor did I make the best of it. I blame it on my immaturity and the fact that I don't feel I knew what I really wanted at that point in my life.

Another thought is along the lines of financial management. I've heard quite a few people say something like "It's financial suicide to finance your kid's college at the cost of investing in your own retirement." I'm not sure I understand that, but presumably it's because then when you're old you may have to rely on your kids to help you survive (yikes!)?

And is financial aid really as difficult to get as I have heard? Supposedly, there's a "formula" used that is not very rational. And access to even student loans can be limited. So how does a kid with little savings get to go to school?

Anyway, I was just wondering what type of opinions folks here had on this topic. My son won't be college-bound for another five years...but I am thinking about this a lot because that's really right around the bend!

What do I think? I really want to pay for my kid's college (he really wants to go). So I buy a Powerball ticket each week.

Sprite

[Affix Snow]

My parents paid for all my housing, food, Books, and general living. I got loans for actual tuition. Would have been great if they could have footed the WHOLE bill, but im in no way complaining.

I think it was a good compromise. They did what they could.

If i had kids, i think i might do the same thing. Granted, if i had a better job i would save more to pay the whole bills, but that is not the case.

I say do what you can afford to do. If you can save for them, do it.

[tex1230]

529 plans are good

[Brock Landers]

Tell him to do real well in high school and get a scholarship or Pell Grant or whatever. Financial Aid is based on need, but you can usually get around 18000 a year (not sure if this is state by state).

My parents gave me 6000 a year, plus 15000 in scholarships, plus ~17500 in loans per year. Loans suck but whats the alternative. General expenses and books came from mowing lawns and cooking fish all summer. ALSO, in-state schools, for at least 2 years, and then transfer. Might help narrow down a career too at a cheaper rate, then finish up at a school more known for that subject.

As for financial things you can do- 529 plans.

[StoneCold]

I'd like to pay for my kid's college education when the time comes, but I refuse to pay $30,000/year for my kid to go a mid-level liberal arts college when they could go to "State" for less than half the price. Aside from going to an Ivy League school which opens doors for people, I don't believe a good name means you'll have a better quality of life than if you go to a less expensive lesser known school.
For example, and I apologize to anyone who graduated from there, if I lived in Connecticut and my kid wanted to go to Quinnipiac College it would cost me $40,000 a year. UCONN would be $17k year. I would try to pay for UCONN and I would flat out refuse to pay for Quinnipiac.
I also understand that college isn't for everyone. I will not FORCE my kids to go to college if they don't want to or don't feel they are ready, but I will encourage them to try it at the very least.

[Buzzworthy]

Sprite, I was in the same boat as you. Parents paid for 4 years of college (I paid the extra year). Did I make the best of it, no. Did I take college serious enough, not really. I was told to go to college. Really.

Erica on the other hand paid her way all the way to a PhD. No help from her mom ever. Had scholarships as well.

What we are doing: We have a savings account for Taylor, currently 2.5 years old. My parents are throwing in some every year and so are we. So far she is up $2k. We plan to pay for as much as we can, but also make her pay for some so she feels accountable and does not just go to college to play, like me.

My dad is our financial planner for this and has it in some sort of special account.


We want to make sure Taylor has the means to go to college, bottom line.

[jbach]

I'd say don't put money away specifically for a child's college education. The more you save the less you qualify for under the FAFSA.

My parents paid one semester of tuition for me, but that's all. After that, I worked full time during school and 60 hours a week during breaks to pay for tuition and living expenses. I eventually got a job working for the research arm of the university where they picked up the tab for tuition. There are plenty of ways to pay your way through college if you actually go for it.

I'd suggest stocking away any money for education in a Roth IRA. You can withdraw from it penalty free for qualified education expenses if you want to bail your kid out of a lifetime of student loans, but you also don't have to pigeonhole savings for strictly educational purposes, so if you end up not needing the money for college you can use it for retirement. Best of all, retirement money is off-limits for the FAFSA.

[Dromond]

College savings plans that limit the school choices seem shortsighted IMHO. I don't know much about college savings plans.

I believe th

General expenses and books came from mowing lawns and cooking fish all summer.

I think this is a really good idea, at least for the first couple years of school. It definitely can help intill the idea in the kid that this is their education, without saddling them with ludicrous expense. That said, the summer after my junior year I got the opportunity to do an unpaid internship in my (very competetive) field. My parents were kind enough to finance that summer. The result: my current, totally excellent job.

...Another thought is along the lines of financial management. I've heard quite a few people say something like "It's financial suicide to finance your kid's college at the cost of investing in your own retirement." I'm not sure I understand that, but presumably it's because then when you're old you may have to rely on your kids to help you survive (yikes!)?

That is definitely part of it. The tax savings for investing in your retirement plan is HUGE. I'm not up to date on tax savings for college funds, but my understanding is that they are less advantageous. Also, being a future financial liability for your kids is not cool, and well as inefficient. I'm 24 and hope to start an IRA this year.

I think one of the biggest arguments against college savings is that during the financial aid review process they take money saved for college into account. i.e. if little johnny has a $40K college savings then he'll qaulify for significantly less financial aid. Parental retirement accounts on the other hand are generally NOT factored into this.

If the parents (that would be you) happen to make enough money and/or have enough assets that you don't qualify, and you'll get slapped with the whole bill. Each financial aid office is a bit different. Applying to many different schools and even some haggling CAN work. Looking at other students at an expensive liberal arts college, it seemed that middle class people got punished the most byt the system. They had just enough money to be disqualified from much financial aid, btu their families were too strapped by mortgages, car payments, other kids, etc. to contribute much.

A good friend of mine hase $99K of loans at a high, non-federal interest rate, and makes little money. It's a problem.

When it came to college iI was lucky enough to be come from an essentially dirt poor one parent household. (It sounds crazy, i know.) Navigating the financial aid process without help was very difficult at 17 - and there were all sorts of roadblocks - but ti panned out. Street value of my 4 years of college: $168K. What I paid/pay, in loans and cash: ~$40K.

My reccomendation would be to max out your retirement accounts first. But more importantly learn the financial aid systems inside and out and try to estimate how you'll be evaluated.

[lemon boy]

I seem to recall that the formulas mostly kicked you out of grants for having too much money but that you could still basically borrow all you needed (been a while though eh).

My folks paid for housing and food, I paid tuition and dicking off money (worked all through college).

My non-child-owning-opinion:
Have the $ to flat out send them to school (or pay for a large % of it) but don't tell them you have that $ make them take on the financial burden of going to college and at the end pick up all the notes. I'm sure you'll need a bunch of planning advice for that.

[advres]

From listening to a lot of finance shows recently, it seems that the basic consensus was, you need to worry about your own retirement first. If you can save enough for your retirement and your childs education, go for it. If you can't afford both, take care of yourself.

Anyone can get student loans and if they are motivated enough, scholarships or grants. I paid my own way and turned out fine. If I didn't pay for it myself I don't think I would've taken it as seriously and actually spent more then 4 years in.

[cranked]

When I have kids, I feel part of my duties as a parent will be to educate my children. To that end, I am going to put away about $500/month per kid until the day they go to school. If they decide not to go to school, I will have mad retirement savings, and will have an excuse to beat my children about the head and face.

This is an issue that varies by family, but education was stressed in mine, and I will continue that...just personal preference - no judgement on other ways of going about it.

I went to school with kids on full loans and kids that had huge trust funds...all seemed to be in the same place mentally at the time and all have turned out to be decent people...

[mcsquared]

Save the money to be able to pay for it if you can. But have the kid take out loans. Loan debt is the cheapest unsecured debt you can find. Let that money accrue interest while they are in school. When (if?) they graduate, decide then if you want to help them out. Either pay off the loan, help them out with a downpayment on a house or retire yourself a few years early.

[PassTheDutchie]

I'd like to pay for my kid's college education when the time comes, but I refuse to pay $30,000/year for my kid to go a mid-level liberal arts college when they could go to "State" for less than half the price. Aside from going to an Ivy League school which opens doors for people, I don't believe a good name means you'll have a better quality of life than if you go to a less expensive lesser known school.
For example, and I apologize to anyone who graduated from there, if I lived in Connecticut and my kid wanted to go to Quinnipiac College it would cost me $40,000 a year. UCONN would be $17k year. I would try to pay for UCONN and I would flat out refuse to pay for Quinnipiac.
I also understand that college isn't for everyone. I will not FORCE my kids to go to college if they don't want to or don't feel they are ready, but I will encourage them to try it at the very least.

Tuition at most liberal arts schools is usually discounted on a sliding scale via financial aid/scholarships with only the wealthiest paying full tuition.

My two cents, having gone to one of the better large state schools in the country and having spent the last 15 years working in/with/for small liberal arts colleges and in higher ed: the education at a smallish liberal arts school is head and shoulders above that of big state u.

[snowsprite]

My two cents, having gone to one of the better large state schools in the country and having spent the last 15 years working in/with/for small liberal arts colleges and in higher ed: the education at a smallish liberal arts school is head and shoulders above that of big state u.

In what regard? Critical thinking skills? Problem solving? Seeking out hookers and blow?

Sprite

(PS-I'm a big state U grad...and what I found is you could very be easily "overlooked." You had to grow a level of self-motivation or risk falling thru the cracks. Also, to be noticed you really had to be something unique and even still you had to fight for recognition/attention. Just like being in a big family.)

[Van_skier]

My parents paid for all my undergrad degree (3 yrs), but I guess the amount is minimal in Canada compared to the US. Tuition at McGill was about 3000$/year.

I suppose having my parents paying didn't stop me from making the most of it since I still worked my ass off so I'd get good scholarships for grad school.

My parents had put money into an education savings fund over the years and basically when the money was taken out for me and my brother, they got the principal back and me and my bro got the interest that had accumulated over the years (I think they started when we were very young).
I guess you need quite a bit more in the US though...

In terms of student loans, I've heard from many friends that they take into account your parents' income so if your parents make good money but decide that you should pay for yourself, you could be screwed.