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College

March 29th, 2017 at 02:52 pm

I figured I should start a "college" category in my blog. Still got a ways to go, but it's creeping up on us.

The *big picture* is that no one in my family has ever borrowed for college, so the road to a debt-free college is crystal clear to me. & I don't mean at all from a wealth/means standpoint. I put myself through college. Putting my kids through college should be infinitely easier, in comparison. They will have significantly more options than we had. It also probably helps to live in a state with abundant and affordable college choices.

Some of the ways that we expect to keep college costs down:

--Saving money ahead of time for college
--Scholarships
--MH working more while kids are in college
--Possibly finding an employer who will chip in with college costs
--Kids working in high school/college, even if just during summers
--Thinking outside the box as to housing (which is important with the high housing costs here)
--Mostly considering public colleges
--Community college (this is really what all the regional public colleges prefer these days, getting first two years done at CC, so motivation is more than just saving money)

Certainly not meant to be an all inclusive list, but in general sums up how we stayed out of college debt.

My husband and I actually had completely opposite college experience. Our parents were both opposite extremes, and so we seem to end up meeting in the middle. We both agree that we expect the kids to work significantly during high school and college, that our own financial health comes first, and that we don't want to borrow a penny for college. We don't want them to graduate with any student loan debt. We are willing to help our kids in any way we can as long as we are within these parameters.

I'd say that when our eldest was ages 0-10 that college was not on our radar at all. Part of the reason is that in-laws were providing college money. They gift the kids $1k per year, each, since birth. Initially they invested with their super pricey broker (load funds + ridiculous advisory fees) but for whatever reason they gave us the money to manage in recent years. Which means the money is actually growing instead of being eaten away by fees. Phew! At this point we are quickly closing in on $40k, which would cover two public college degrees, and allows for future price increases as they continue to receive gift money.

We personally have not tied up this money in college type funds because we don't have any incentive to. We would rather have free use of the money. We don't have a big enough income, but I do have enough tax knowledge, to not bother with 529 plans or other college savings options. To be clear, we are not paying any taxes on these investment gains. So we don't need the trade-off of extra hoops to jump through for tax breaks that we don't need.

Along the same lines, MH and I both used our "college money" for a home down payment instead. In a state where college cost pennies and housing costs are sky high, I think it seems very likely our kids will experience the same. So I don't want to be penalized for tying up their gift money for college when they more likely will use it for post-college housing. Ideally, we'd actually really like to pay it forward and save this in-law money to give them as a lump sum *after* college. I don't know if we will be able to swing it, but this is what we would like to do. & if we can't, we definitely want to do something like this for our grandkids. (I think if it was not for the in-law money, this would just be a "pay it forward to grandkids" goal).

Anyway, the "generous in-law situation" sums up ages 0-10 with our kids. Between that and the low cost of college here, and my hubby's prolonged unemployment, it just hasn't been on our financial radar at all.

That said, we have in the past put ridiculous percentages of our income into ROTHs knowing that we could use that money for college. I can't say it would have been our financial priority to tie up *all* our money in retirement funds, otherwise. So I am sure for a while that was our college strategy, and I did discuss in this blog during those times.

In 2014 we were in a position to start putting money away into taxable investment accounts again (in addition to fully funding IRAs). I guess college is the only goal at this point, besides retirement. Though I don't consider this *all* to be college money, it is certainly accessible if we need it for college. We are putting away about $7,500 per year. I think matching the in-law college money is a good place to start. It probably works out too that we will probably get there in another couple of years. At that point we may just back off and figure that $40,000/each is a phenomenal start. I think we'd probably most likely just focus on cash flowing the rest (if there is anything left to cash flow).

Since I worked my way through college, I think the idea of MH working + kids working seems easiest on some level (would be a LOT of cash that we could put towards college). But, I think the "saving ahead" is important just because you never know. Relying on future income streams is a little outside of my comfort zone. So while some part of me thinks that "cash flowing with several jobs" is really the most obvious and the easiest, we always have a Plan A + Plan B + Plan C, etc.

Edited to add: I didn't mention financial aid. With the high wage/low college cost combo, regionally, I don't expect it to come up. I know it's infinitely more complicated than that, but that's just the short answer. It will be a better use of our energy to seek out scholarships that aren't based on need.

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In other news, I am sure I have discussed in the past about MH thinking of returning to college. I mentioned in my blog several years ago that nothing about the timing was right. With the economy in particular, it seemed like a particularly poor time to invest any money into a degree.

Today, things are lining up to make a lot more sense on this front. So I know it's something we will discuss more seriously as to the next two school years. I will have to leave that for my next post on the college topic.

9 Responses to “College”

  1. creditcardfree Says:

    I think many people don't look at multiple ways to pay for college. And if they think they can't save the full amount, they don't save at all! I've told people I know personally to save what they can, expect to add some money from current cash flow, hope for a few scholarships, have the kids save something, and if absolutely necessary, take out some loans (but by no means the full amount). If we didn't have the Post 911 GI Bill, I would have been more inclined to insist on community college to save on some costs.

  2. MonkeyMama Says:

    @ccfree - interesting how people just give up. Though I guess it's just being overwhelmed.

  3. My English Castle Says:

    I agree--lots of my friends have just given up. Some of my friends work at certain schools that help the children of their employees with college costs. In my chat with the advisor last week, we talked a lot about college. She said we should plan (gulp) about 30K/year if DD got NO help and went to a public university in our state, living on campus. We're also investigating some other options for housing, especially if we return to Minnesota. Save, save, save.

  4. LivingAlmostLarge Says:

    How did you double the $2k/year in 10 years to $40k? We've been doing the $2k/year and it's nowhere near to double what we put in. DK1 is $18k age 7 and DK2 is $11k age 4. We've done the ESA and they are in VTI

  5. MonkeyMama Says:

    LAL - It's been 14 years, and the gifts started at birth, so my eldest has received $15k already. I've invested fairly conservatively because it isn't "our" money (so I wanted to be super careful with it to avoid any problems with my in-laws, which is a whole other thing).

    MEC - Your comment reminds me that I have some really good info re: nailing down college costs. I should probably make that my next post. & to be clear, I am only focused on *college* costs. Not on the housing costs. Which I know, seems weird due to high cost of living. But I think the long and the short of it is that dorms are completely absurd ($$$$) and probably won't seriously be considered in our household. Which means more of a divide between college and living costs. My kids are also super independent. I Really doubt we will be paying their living costs all through college, so that might be a lot of it.

  6. Kiki Says:

    If MH was to get a job at UC Davis or similar school the tuition would be waived for students. That was a perk that was there when I worked there. Wish I'd known about it when I was in college!

  7. Bluebird Says:

    We've contributed $2K per yr, or a little more, for each child since birth, with grandparents contributing $500/yr for each child in a 529 plan. Current balances are $50K for DS1 (12) and $46K for DS2 (10). Hoping they get scholarships though, so they can use it for a house down payment or grandkids college.

  8. Buendia Says:

    I grew up in CA and went to college there - you are so right about college options there! I paid $210 a quarter (ok, it was a while ago) to go to Architecture school at Cal Poly San Luis Obispo. It was amazing. I think you're right that it's a combination of several things (a job, saving, etc).

  9. Hawaii Planner Says:

    We are in northern California as well, and was just discussing this today. We will likely continue to max out our 529, for the tax benefit, as we don't expect the kids to receive any federal aid due to income. If we sell our rental house this summer, we will fully max out the remainder of the contribution, which should be around $100K/kid.

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