College Savings: Thoughts?

**snowsprite** · 06-12-2007, 12:10 PM

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** · 06-12-2007, 12:14 PM

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** · 06-12-2007, 12:15 PM

529 plans are good

**Brock Landers** · 06-12-2007, 12:52 PM

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** · 06-12-2007, 01:02 PM

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** · 06-12-2007, 01:02 PM

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** · 06-12-2007, 01:18 PM

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** · 06-12-2007, 01:22 PM

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

I believe th

Originally Posted by Brock Landers

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.

Originally Posted by snowsprite

...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** · 06-12-2007, 01:23 PM

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 · 06-12-2007, 01:24 PM

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** · 06-12-2007, 01:34 PM

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** · 06-12-2007, 01:41 PM

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** · 06-12-2007, 01:47 PM

Originally Posted by 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.

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** · 06-12-2007, 01:55 PM

Originally Posted by PassTheDutchie

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** · 06-12-2007, 01:56 PM

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.

**Dromond** · 06-12-2007, 02:00 PM

Originally Posted by PassTheDutchie

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.

Having attended classes at several universities through curriculum exchange and study abroad I would agree with you. It definitely depends on the school, however. I grew up in a town with a small liberal arts college. I took a class there in highschool actually, The students - whiile friendly - were painfully unmotivated and.... no the brightest. I also had some of my favorite arts + humanities classes at Umass and Victoria Uni. (Both rather huge.)

Quality of education counts for something.

**The AD** · 06-12-2007, 02:01 PM

I don't think you should feel obligated to pay for your kids' entire education. Yeah, it's great if you can foot part or most of the bill, but they can work, too. They can also explore whatever financial aid they can get their hands on, scholarships, etc. College shouldn't be a free ride.

**Jer** · 06-12-2007, 02:13 PM

An education isn't a right, but it sure is handy - and not just for the kids, either. So:

(1) Get hired on at the nearest state University & send your kids there on the faculty/staff program.

(2) Raise a healthy, smart, well-adjusted kid, figure out what they're interested in and keep them focused on it, plug them into a similarly healthy peer group, and make sure they practice all the skills needed to score a fat scholarship (read: grades, essays, interviews, test performance.)

(3) Donate heavily to the alumni association of your target school and to politicians that graduated there. Show up at the fundraising dinners, introduce your kid to the chieftains as a future graduate of the school. ... oh wait ... that's an admissions strategy. Nevermind. Better off investing the money in stocks.

'Course it does pay off if they can get into a University that guarantees that its students will graduate debt free. There are some.

(4) Have the kid take out the loans to cover the balance. It's the cheapest money you can borrow, with the most lenient payback terms imaginable. If they can graduate from college, they can pay it off, easy. If not ... well, they got bigger problems than a bad loan.

(5) Work? Don't do it, at least not during semesters. You ain't sending the kid to college so he/she can learn to mop floors or sell t-shirts. Internships and traipsing around the planet on a shoestring are good uses for summers, but maybe not financially realistic.

(6) If money's so tight that your kid is contemplating a part time job, they should take a year off, get a real job, make some real money, then go back to school. Bonus: some serious perspective on the cost and value of education.

(7) Live cheap. Both for the students and the parents.
A lot of Americans live beyond their means, not because the cost of living is too high, but because they want a bigger house, another newer bigger car, a home theatre, etc. Opting for a smaller mortgage and smaller (or no) monthly car payments will free up enough to fund a college education.
Students can get trapped into working a part-time job to pay for a new car that they then use mainly to drive to work, where they can stack inventory until 2 am, knowing that they can make up the sleep during class tomorrow.
Weigh the costs and benefits. Most of the time, the answer is "no."

**Jer** · 06-12-2007, 02:18 PM

An education isn't a right, but it sure is handy - and not just for the kids, either. So:

(1) Get hired on at the nearest state University & send your kids there on the faculty/staff program.

(2) Raise a healthy, smart, well-adjusted kid, figure out what they're interested in and keep them focused on it, plug them into a similarly healthy peer group, and make sure they practice all the skills needed to score a fat scholarship (read: grades, essays, interviews, test performance.)

(3) Donate heavily to the alumni association of your target school and to politicians that graduated there. Show up at the fundraising dinners, introduce your kid to the chieftains as a future graduate of the school. ... oh wait ... that's an admissions strategy. Nevermind. Better off investing the money in stocks.

'Course it does pay off if they can get into a University that guarantees that its students will graduate debt free. There are some.

(4) Have the kid take out the loans to cover the balance. It's the cheapest money you can borrow, with the most lenient payback terms imaginable. If they can graduate from college, they can pay it off, easy. If not ... well, they got bigger problems than a bad loan.

(5) Work? Don't do it, especially not during semesters. You ain't sending the kid to college so he/she can learn to mop floors or sell t-shirts. Summers are for internships or traipsing around the planet on a shoestring - pay optional.

(6) If money's so tight that your kid is contemplating a part time job, they should take a year off, get a real job, make some real money, then go back to school. Bonus: some serious perspective on the cost and value of education.

(7) Live cheap. Both for the students and the parents.
A lot of Americans live beyond their means, not because the cost of living is too high, but because they want a bigger house, another newer bigger car, a home theatre, etc. Opting for a smaller mortgage and smaller (or no) monthly car payments will free up enough to fund a college education.
Students can get trapped into working a part-time job to pay for a new car that they then use mainly to drive to work, where they can stack inventory until 2 am, knowing that they can make up the sleep during class tomorrow.
Weigh the costs and benefits. Most of the time, the answer is "no."

**Odin** · 06-12-2007, 02:19 PM

My parents didn't pay for a dime of my school and it was the best thing for me. I ran into too many kids who didn't take school seriously and wanted to f off with their parents money. I don't think it is the parents obligation to pay for a kids school, it is a parents obligation to impart on a child the importance of GOING to school. If the childs wants to go to college than they can learn life lessons quickly by paying for it themselves.

Alot of the hardest working, most well-adjusted kids that I knew were the ones who put themselves through school, and some of those kids parents had money. They still appreciated and cared about the education they got and learned more about themselves other than how to build a bong out of hamster tubing and tin foil.

Most of the kids that went through school on their parents dime didn't figure out what they wanted to do, didn't show an interest in doing anything during or after school and basically floated into a career of some kind.

**lemon boy** · 06-12-2007, 02:24 PM

I totally disagree about not working.

There are tons of jobs that can further one's life experience available to college students, I learned easily as much in the 5 years of non-degree-related job as I learned getting a bachelors and a masters. Of course, I didn't work at dairy queen. That and there are almost always jobs available related to a chosen career path that can be a great "in" with prospective employers or provide great real world training.

**PassTheDutchie** · 06-12-2007, 02:27 PM

Originally Posted by snowsprite

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.)

You are right about the getting "lost in the crowd" aspect... Beyond that, much of it comes down to class size/student:teacher ratio & the expectation of faculty (teaching vs. research). It effects everything from the type of work that can be assigned, to class structure (discussion vs. lecture, etc.), the opportunity to get individualized attention, etc.

Another aspect is just the aim of "education." I am a huge fan of the classic liberal arts curricula (broad based and aimed at teaching critical thinking skills). I know this is attempted at Big U, but its just very difficult to pull this off on a large scale (see my first point). Even if you wanted a more professionally oriented or purely scientific degree, it's generally going to be more difficult to find a scholarly mentor (who can really give you the lay of the land in a chosen field) at a big school than at a small one--again, just because of the scales (class size/ratio) and aims (teaching vs. research) of the operations.

Having said all that, there is no way a school of 1,500 can compare with the social opportunities I had as an undergrad...

**snowsprite** · 06-12-2007, 02:27 PM

My son has started talking about instead of going straight to college upon graduation, that he wants to learn Japanese and move to Japan and living there for a few years after HS. I'm actually excited about this possibility, and I support him in it. Moreover, it will give me more time to save up some $$ to help him!

He also stated that he might be interested in working first, because he could save some $$. Now, I'm not sure how true that is...as decent paying jobs w/ no degree are not the easiest thing to come by for a kid.

However, kiddo is spending time here @ the technology dept this summer (as he did last summer) helping the interns repair computers...and he has a real propensity for computers and designing cool gadgets. So who knows, he could get lucky.

Anyway, I'm willing to look at unusual options. Though I'd be more comfortable if he learns Japanese before his 18th b-day and spends at least one high school semester there on exchange before I'm 100% behind him moving there upon HS graduation.

I'm not ready to pooh-pooh his evolving dream though simply due to the fact that he's only a seventh grader. This may have the seeds of a cool future for him, once he refines what is really necessary to get him there...

I gotta let him dream.

Sprite

**Odin** · 06-12-2007, 02:29 PM

Originally Posted by snowsprite

Now, I'm not sure how true that is...as decent paying jobs w/ no degree are not the easiest thing to come by for a kid.

However, kiddo is spending time here @ the technology dept helping the interns repair computers...and he has a real propensity for computers and designing cool gadgets. So who knows, he could get lucky.

Those two paragraphs are mutually helpfull to you. Computers are the one thing that takes a learned skill over a degree based education. While he should focus on the degree he could still make 25 to 30 grand a year as a help desk flunky. or more.

**StoneCold** · 06-12-2007, 02:35 PM

Originally Posted by PassTheDutchie

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.

Well, I would agree if we're talking about Colby, Rice, etc.. But, I'm thinking about places like Daniel Webster College, St. Edwards University, etc.. There is no way (generalization) that those folks got a better education value than I did at the largest university in the country.