Lately, I’ve been working on planning for college expenses for our three kids (ages 1, 3, and 4). We stopped contributing to their 529 plans a few years ago, as I felt they were fully funded.

Now, I’m working on optimizing the investments and planning for all the tax impacts and strategies.

At this point I have a lot more questions in my research than answers, but still wanted to open up the topic for discussion.

Here are some of the things I’m considering:

  • Integrated Asset Allocation. Whether or not to include the asset allocation of our dozens of 529 plans in with our overall asset allocation.
  • Fund Placement. Earmarking the amount set aside for school in 529s or mixing it with other tax deferred and taxable accounts to optimize the tax impacts using fund placement.
  • Optimizing EFC Formula. Researching all of the calculations for the EFC/FAFSA calculator and strategizing to take advantage of loopholes.
  • Prepaid Plans. Investigating prepaid plans vs 529s inspired by The Legal Dollar.
  • Giving Money After College. I’m also considering an incentive plan for the kids by paying off any student loan debt 2-5 years after college, instead of paying for everything up front.

But the biggest question (and the one that all of the discussion seems to come back to) that we’re stuck on right now is: How much college will we pay for?

Our College Funding

My parents saved for our college in dedicated accounts. When we were college age, they divided the amount by 4 and gave us that much each year. Whatever it covered was covered, and we were on our own for the rest of the bill. The amount ended up being less than tuition, but I had scholarships to provide for the majority of undergrad and all of grad school, and I had a few internships, so it worked out well financially. I also went to school in state.

My husband on the other hand went to school out of state and footed the bill for his entire education, working and taking out a lot of student loans. I know he feels that while he had to work hard during school to make ends meet, it wasn’t an ideal financial situation.

College Funding for Our Kids

Based on our very different experiences, we have different philosophies. My husband would like to foot the entire bill for our kids (at any school they choose). I would like to pay a fixed amount and let the kids be responsible for any amount over that (or maybe an in-state amount, and if they go out of state, they pay the excess).

We’re trying to decide how to compromise on this one. I’ve been doing a lot of reading to see what others are considering. Some of my inspiration comes from Brip Blap who is planning to pay for preschool, not college. I’d love to hear your thoughts on the topic!

What are you planning to pay for your children to go to college?

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Comments to Will You Pay for College for Your Kids?

  1. My parents paid 100% of my tuition for undergrad at any college. However, i had to get, and maintain my scholarship and i had to pay for all of my books. Also, i paid for my car, insurance, gas, repairs, etc while there, food and living expenses above and beyond college room and board. I know i was very lucky, but they did force me to make choice and have responsibility during school so i didn’t act like it was all a free ride. If i lost my scholarship, i knew i was responsible for paying the difference. That was incentive to keep getting good grades. Also, I was required to go to the school giving me the best package, or pay the difference myself. I also appreciated what they did, so i spent my summers working 3 jobs and taking summer classes to get out a semester early and save them more money.

    My hope for our kids is to pay 100% of a state school for them. They would need to pay for books, living expenses and maintain scholarships/grades or lose “parental funding”. If they chose to go to a school that costs more than a state school would, then they are responsible for the rest, or a plan (community college for two years and transfer to the private school) No plan is perfect, but anything we can do to give our kids a leg up in the future will be appreciated down the road!

    Anne Marie

  2. Thanks for the shout-out!

    I went to a state school and I intend to pay 100% for my kid to attend a state school. See this recent article in the Wall Stree Journal that state schools are prefered by corporate recruiters. http://online.wsj.com/article/.....63352.html
    No sense in paying for ivys if state schools are preferred. Also, my experience graduating from a state school has been great.

    Also, I note that another very important factor is the actual major. As I mentioned in this article here, http://thelegaldollar.blogspot.....loans.html
    engineering grads earn 60K at graduation while psychology grads earn 32K. I am considering some kind of inventivization to incentivize my kid to go for a higher-earning degree. I seem to recall that the the average salary of a high-school graduate was about $32K – so if they majored in psychology, college was a waste (at least as far as boosting their earning potential) – and I probably would have been better off just giving them the money (they could invest it and have a fairly decent bonus each year from the interest).

    I think that it has not yet sunk in that just “going to college” does not boost your kid’s earnings unless they major in one of the more lucrative majors.

    Managing Partner

  3. My experience was similar to your husband’s – I had to pay for college myself. As hard as that was, the work experience I gained during college was invaluable in launching my career afterwards. I also recognize that college fees and living expenses are a lot higher now than when I went to school. Therefore I saved enough for an in-state school and she will have to pay anything above that. Plus she will need to work for spending money and extras as I think there are some things you learn at work that you don’t learn at school.

    LAURA

  4. Yes, we will pay for undergrad but we hope our kids will understand the value by working hard during summers to earn money. We will absolutely not pay for grad school, although we will encourage it. I did not come from a family with lots of $ so the fact that my mother sent three kids to private school is AMAZING in my mind (now that I sit in her position). However, I learned a lot about money and financial responsibility (there is such a thing as “good debt”). So, you see, it was a team effort and that lesson has stuck with me for almost twenty years now and hopefully a lifetime…thanks for the thoughtful post.

    Marnie Craycroft

  5. I’m divided about this. I would love to be able to pay — and I think we’ll go ahead and invest in a 529 — but I don’t think we’ll tell the kid we’re going to pay. I think it’s important that our child have some perspective about choosing schools. I was early acceptance to Cornell but it was $30,000 a year. So I opted for University of Washington.

    Oh, and my parents and I had a sort of reverse deal from what a lot of you had: I paid tuition, they paid rent. I think that makes a lot more sense in some ways, since the idea is that parents keep you in basic needs until you’re ready to go off on your own. And, ok, age 22 is a little late to start taking care of yourself. But this way they were contributing without a) breaking the bank and b) letting me coast.

    Abigail

  6. My parents paid for college as it would be impossible for an international student to pay 4 years of out-of-state tuition in a midwest public university because I could not work off campus or work more than 20 hrs a week. However, if I have kids and they are going to go to college here, it would be a very different scenario. I will only agree to pay for tuition if they maintain a certain GPA, and if they want to go to private college and are absolutely brilliant, I am sure there are scholarships out there for them to apply for.

    Diana

  7. I applied for a ton of scholarships and even though I had amazing grades, etc. I only ever got two valued at $500 total. One my teachers submitted my name for so I’m not holding my breath that my kids will get scholarships as we are not stinking poor nor have a good sob story to go with them.

    My spouse and I both paid 100% everything and would love to pay for our kids so that they don’t go through that but research seems to think it will ruin the kids. Our current compromise is a defined contribution program to their 529s and what is there is there. They will have to hold an on campus job during the school year as well as work during the summers. I have heard from many sources that recruiters would prefer to hire a kid who was at least a janitor throughought school rather than a kid whose first job ever would be in the professional world. I just want to save my kids the stress I went through trying to survive while trying to study – it didn’t work out so well.

    Marie

  8. My parents paid for most of my tuition and I picked up the rest with scholarships and covered my own expenses. I can’t imagine if I would’ve had to foot the bill myself completely. My twenties would have been radically different and I would’ve been focused on debt management rather than saving for a home and retirement.

    I’m so thankful they did what they did. If you can afford it, it will make a radical difference in your child’s life.

    Car Negotiation Coach

  9. I’m currently attending college at a private school as a returning student and wish my parents had been willing to help me when I was younger, even if they just signed the Fafsa so I had the chance to apply for student loans on my own. Because they refused, and I couldn’t get aid and loans on my own until I was 24 (and at that point employed and getting married) I didn’t finish. It has definitely held me back.

    I intend to help my kids with their college, but I also intend to help them find alternative sources of funding. For example, community college classes are free for high school students and some classes can count both as high school and college at the same time. I’ll highly encourage them to take a course or two over the summer at community college to get at least a semester out of the way before graduating from high school.

    I’m definitely going to recommend that they have jobs and help them find ways to avoid student loans, but I don’t feel like a college diploma is optional and even at their young ages, they know that college is expected from them.

    I’ll also encourage them to apply for those Ivy Leagues, especially if our income is still in the less-than-spectacular bracket, because some of those colleges offer full tuition coverage for families making less than a certain amount each year. Certainly my kids (now 5 and 2) will need to have good grades and other requirements for this to work, but I wouldn’t turn up my nose at Ivy League if they can get a full ride!

    The Saved Quarter

  10. I had my parents provide money for my tuition, room and board and books. But Dad put it in a checking account in my name and I managed it all. I was expected for to work for spending money. Dad paid my car insurance and I was able to use his gas card when at home. Worked for two of us. My youngest brother on the other hand, struggled in college and dropped out before going back as an adult on his own dime. Hubby has an experience where he went away to college for a year and got on probabtion and did not go back until his mid 30′s. So I am a bit worried abouthow get my boys to take the experience seriously. But they know we are paying on Hubby’s student loans and hopefully will be motivated to avoid them.

    I am in a position where I work at a large state university and one of my benefits is full tuition for my dependents. My oldest son is currently in a Parochial HS school and his tuition is about equal to a room and board charge, so provided hubby and I both stay employed, I plan to provide $$ for room and board and books. If they decide to go elsewhere, they are on their own. To get tuition remission, there is a minimum gpa they must maintain and there is a cap on the number of classes. A part time job for spending money is expected.

    Maggie

  11. My plan is to save up a fixed dollar amount for my children to use after high school. I think “paying for college” is too broad of a goal with too many variables. Will they even want to go to college? Or will they go to a trade school, military, start working, etc? If they go to college, will they go local or out of state? Scholarships? What about grad school, or just an associate’s degree? To cover all the possibilities would be difficult. Also if you plan to “pay for college” and have multiple children, if one child goes to a less expensive school than another child, one may feel cheated that you spent more on their sibling. So I think it’s best to plan for a specific dollar amount that you think is reasonable to cover the most likely situations.

    When my daughter turns 18/graduates high school, I will have a specific amount accumulated and we will discuss what her she wants to do and what her goals are, and I will turn that money over to her in the course of the following 4-6 years at my discretion, but ultimately to do with as she pleases. College will be an option but not the expectation. She can use the money for education, or to travel, or to help buy a home, etc.

    Cecil_T

  12. This is a tough one, I think people either do to their kids as they have had done or the polar opposite cause they felt damaged.

    I personally had my parents contribute whatever Fafsa made them according to their financial abilities. I was the only one in college when I went and later my siblings had the benefits of applying for fafsa with other people in school too. (it reduces the parents fees as well as makes them more elligible for tap and pell grants and what not).

    My fiance and I currently don’t have kids but I know we’ll support state school 100%. I’d like to think that by the time they’re college-aged that we’d be able to help them pay for undergrad. I believe in paying for undergrad and letting them pay for grad if its something they want to pursue.

    That being said.. I’m also a HUGE proponent of community college unless you have a specific field of interest settled at age 18. The vast majority of my friends paid or had their parents pay for school and never used the degree cause it was a degree in something they were good at but didnt have the ability or interest in getting a job in that area.

    No expensive school without a direction intended that will lead to a job intended.

    Danielle

  13. My parents paid 100% of my tuition for undergrad at any college. However, i had to get, and maintain my scholarship and i had to pay for all of my books. Also, i paid for my car, insurance, gas, repairs, etc while there, food and living expenses above and beyond college room and board. I know i was very lucky, but they did force me to make choice and have responsibility during school so i didn’t act like it was all a free ride. If i lost my scholarship, i knew i was responsible for paying the difference. That was incentive to keep getting good grades. Also, I was required to go to the school giving me the best package, or pay the difference myself. I also appreciated what they did, so i spent my summers working 3 jobs and taking summer classes to get out a semester early and save them more money.

    My hope for our kids is to pay 100% of a state school for them. They would need to pay for books, living expenses and maintain scholarships/grades or lose “parental funding”. If they chose to go to a school that costs more than a state school would, then they are responsible for the rest, or a plan (community college for two years and transfer to the private school) No plan is perfect, but anything we can do to give our kids a leg up in the future will be appreciated down the road!

    marine corps marathon


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