college savings questions

rebeccalynn · 2009-04-16

We have just began to save for our kids college and dh & I have been kicking back and forth about how much college will really cost when our 4, 2 & baby due this summer will attend and how much of that do we want to save and is it reasonable for us to save that amount. Is it just me or do those college savings calculators seem crazy off and differ greatly? It might be that college costs vary so much by state and if a school is public or private but I just keep thinking that there has to be a better way to figure out a ball park of what your kid will need to pay for college dependent on the type of school, location, and years until attendance. We do expect our kids to pay for some of their college and/or get scholarships but we also expect to take each of their situations in consideration and would like to help them where it is feasible and beneficial. Any parents there (kid in college or about to attend college) and have advice or know someone else who is there? Thanks!

mightymoo

· #2 · Apr 16, 2009

One of the things I've read is that college tuition is increasing at a much higher rate than inflation, which probably part of the reason why the calculators seem so crazy. But no one can really know exactly how much it will increase I'm sure they all make different assumptions. A few years ago a financial advisor told us that tuition was increasing at a 7% yearly rate, so that if we actually had the money right now and wanted to set aside enough for our kids college, we'd have to put aside 75% of the cost of a college education today and earn an average 10% rate of return to have enough money when they were ready to go. (They were babies at that time)

I have been thinking a lot about this and we've decided that we are going to work to save the equivalent of a state college education for each child. If the child wants to go to an ivy league school, they can do that on their own dime or perhaps we'll have extra money later in order to fund that, but I don't feel its necessary.

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RetroGeekGirl

· #3 · Apr 16, 2009

Those calcuators may be using differing critereia when it calculates the amount to save - some may be counting tuition only, while others may be including other expenses like room and board, textbooks, etc.

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jeliphish

· #4 · Apr 16, 2009

Find a good educational savings acount which will invest money into a nice growth stock mutual fund. MAKE SURE that the growth stock mutual fund has a sturdy history...like 10-15 years worth of nice, consistant growth. Any good financial planner will be able to help you with this and you can find a good FP in your area off of Dave Ramsey's website.
Investing 1500-2000 per year/per child will insure that their college will be fully funded. The money however will be heavily taxed if it is used for anything other than education since it is an educational savings account.

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dex_millie

· #5 · Apr 16, 2009

I have been thinking about this also, though I have a while before I start.

I was thinking like mightymoo said and save up the amount need for instate tution for each child.

If the child wants to go to an out-state college, I am thinking I would have to go on a monthly payment plan for the remaining balance or take the loan for the rest and pay on it while it is interest-free or have them go a Community college for the first year or two (cause it is cheaper) then on to the big university.

We will see how things go. But right now that is what I think of.

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annethcz

· #6 · Apr 16, 2009

But college costs DO vary by a staggering amount. This year, you could attend a community college for $5,000 or you could attend a private university for $50,000. While it is true that tuition costs have risen faster than inflation, the amount you need to save will vary depending on the type of instituion you're paying for.

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rebeccalynn

Discussion Starter · #7 · Apr 16, 2009

Quote:

Originally Posted by mightymoo

One of the things I've read is that college tuition is increasing at a much higher rate than inflation, which probably part of the reason why the calculators seem so crazy. But no one can really know exactly how much it will increase

This is what is so frustrating.

We are fortunate enough to live within commuting distance to 2 of our states best instate schools so our kids probably will find themselves commuting unless they can get some scholarships or work to make up the difference. I know that many people think that the "college" experience is vital, but I think that a lot of those life lessons can be learned in other ways.

We are planning on taking advantage of our state's 529 this year b/c it has some decent mutual funds and up to a 5K tax deduction but above that we are not sure what we want to do. Part of me is just thinking about putting any extra money toward paying off the house.

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rebeccalynn

Discussion Starter · #8 · Apr 17, 2009

Quote:

Originally Posted by annethcz

But college costs DO vary by a staggering amount. This year, you could attend a community college for $5,000 or you could attend a private university for $50,000. While it is true that tuition costs have risen faster than inflation, the amount you need to save will vary depending on the type of instituion you're paying for.

But most of the "good" calculators ask the current cost of the institution that your child is seeking to attend. Even then, they seem to vary greatly on their projections.

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1growingsprout

· #9 · Apr 17, 2009

Costs vary greatly and who really knows what 'college' will be like in 10-15 years. When I was in college 15 years ago there was little to no internet souce for books so you were stuck with campus prices. Now you can get textbooks for next to nothing (last years edition etc) so that saves mega bucks. 15 years ago there were really only brick and mortar schools now there are online schools which remove the commutting, room and board etc costs. Some schools even have different tuition for online classes vs traditional classes.

Our children have healthy education funds however they are expected to apply for scholarships and grants as well. They can also work and hopefully find an employer that offers tuition reimbursement.

So how much you want to save or how much you can save is a matter of personal preference and investment vehicle. I do recommend interviewing at least 3 financial planners and seeing what they have to say.

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mightymoo

· #10 · Apr 18, 2009

Quote:

Originally Posted by rebeccalynn

This is what is so frustrating.

We are fortunate enough to live within commuting distance to 2 of our states best instate schools so our kids probably will find themselves commuting unless they can get some scholarships or work to make up the difference. I know that many people think that the "college" experience is vital, but I think that a lot of those life lessons can be learned in other ways.

We are planning on taking advantage of our state's 529 this year b/c it has some decent mutual funds and up to a 5K tax deduction but above that we are not sure what we want to do. Part of me is just thinking about putting any extra money toward paying off the house.

Another way to give your child the 'college' experience but save is to tell them you will pay for the first year of housing in the dorms at a local school, but that after that they will have to commute. They get to have the experience, they make the friends, then after the first year they have plenty of couches to crash on, etc. Because they lived on campus the first year, they know kids who live there, rather than just commuters and can still have pretty much the same experience even though they now live off campus.

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graceomalley

· #11 · Apr 18, 2009

I don't live in the US, so it's different here. We can defer the tuition fees and have it taken out of our wages once you reach a minimum salary (DH thinks it's about $30,000 a year). So it's like having extra tax taken out. I didn't do that for my degree, but my DH did. You get a discount if you pay your tuition fees upfront.

For us, the biggest cost will be living expenses/housing. We're planning to have around $50,000 for each child saved for their 4 year degree. If they decide not to go to college they'll receive the money when they buy their first house.

If they decide to do a postgraduate degree they'll be paying for it ourselves. We'll pay for one degree, they can pay for the rest!!

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sanguine_speed

· #12 · Apr 18, 2009

Our college/university fees are pretty predictable across the province and even country-wide. They are public and funded partly by the government so tuition isn't as extremely high as some other places. For instance, my current degree program is about $5,000 a year. That said, Canadian tuition predictor tools use the average increase over the last 10 years to predict future increases. Tuition 10 years ago was about half what it is now. There is a lot of resistance to tuition fee increases however and I don't think it's going to go up to the $20,000 predicted in 12-15 years.
That said, we are saving in Registered Education Savings Plans. Investments grow tax-free and the government matches 20%-40% of your contribution up to a maximum per year and per lifetime. And, if none of your kids uses the money for schooling, you can transfer the money to a Registered Retirement Savings Plan for yourself.
We still focus on our RRSPs however because we get a tax cut on our contributions (max contribution is 18% of last year's total income). We basically get 45% of our contributions back at tax-time as it's fully deductible. We know if we're prepared for our own future we'll be in a better position to help our kids with any shortfalls.

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rebeccalynn

Discussion Starter · #13 · Apr 18, 2009

Quote:

Originally Posted by mightymoo

Another way to give your child the 'college' experience but save is to tell them you will pay for the first year of housing in the dorms at a local school, but that after that they will have to commute. They get to have the experience, they make the friends, then after the first year they have plenty of couches to crash on, etc. Because they lived on campus the first year, they know kids who live there, rather than just commuters and can still have pretty much the same experience even though they now live off campus.

I had not really thought about that thanks for the suggestion. Rreally a lot of students end up "off campus" after the first year or two anyway around here.

The closest state school around here (also has a really great reputation) is currently 17K per year but only 6K of that is tuition and the other 11K is room/board, meal plan, and misc. on-campus fees.

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