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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