<p>Mom2…great comments. I didn’t see it coming that I’d have to look at the college communications with the same jaundiced eye that I’d cast on a Mercedes dealer!</p>
<p>**Great **input on the distribution of “talented” students, thank you. I’ve not seen this information anywhere else.</p>
<p>Happymom, I think you nailed the “naive/innocent” problem as accurately as anyone could.</p>
<p>Mom4, you’re right, we *can *swing it–and others like us can. That’s how NU stays in business. It does comes down to a matter of choice, as Mom2 has stated well. We could beg or borrow if we wanted to. My wife has always worked part time; with one out of the nest, she might be able to take on more hours. Etc. Etc.</p>
<p>Sunny, jnm, IUmom–thank you for the excellent feedback. We are fortunate to have a great state school. Regardless of price, my son’s early criteria included finding a small- to mid-size school; he only applied to UofI as a safety. (But that’s another discussion for another thread.)</p>
<p>Lookingforward–good point, and yes, rechecking the forms was the first thing I did!</p>
<p>Cpt, I appreciate your candor and the time you took to articulate the evolving thought process of a typical “dumbparent.”</p>
<p>FooMonChew answered your last question. We’re now really clear on who pays for need-based aid at private institutions. </p>
<p>Your other questions, some earlier posed by Mom2, you answered for me yourself, quite accurately. We started saving early (and so did the kids–the allowance, the summer job money, etc., all stashed away–enough to buy freshman-year books, maybe) and thought we were doing pretty good at it. Hey: We did do pretty good. We saved enough to send both kids to UofI–all the while buying into the “myth” that, because our kids were so darned talented, someone else would help make the pricey schools happen. </p>
<p>*We are now thoroughly disabused of that notion, thank you! *</p>
<p>Like you and your son, we will make up our minds, and we may do the combined cutting/saving/working/borrowing that, as you point out, many folks in our situation do.</p>
Sorry, this is just not true. The actual cost of education is subsidized by endowments for private schools and the states for public schools. Vossron has stated Reed published data stating full pay families at Reed only pay 72% of the cost to put the student through.</p>
<p>This was a dope slap for me, actually. I thought I knew what they would cost and I had been saving for it.</p>
<p>I don’t know when the cost of private college jumped from ~30K/year to >$50K/year, but that took me completely off-guard.</p>
<p>I was also a very, very lucky person who stumbled upon the EFC calculators and whatnot and an understanding of how colleges define “need” early enough to help my kid build a college list with our eyes wide open about costs.</p>
<p>This was our first admission cycle. We saw a lot of kids with amazing stats not get into their top pick colleges. These brilliant kids will be at the lower ranked schools. And the majority of them will be happy.</p>
<p>There are a lot of ways to save significant amounts of your income. I recommend the Tightwad Gazette by Amy Dacyzyn. Make it a game so it doesn’t feel like a hardship. Books and movies free from the library. Wash clothes in cold water and hang dry. We buy printer ink cartridges from ebay for around $2 a cartridge, and then cash them in at Staples for $2 store credit. Go over everything you spend money on and try to find a lower cost alternative. Small amounts add up quickly.</p>
<p>In college buy books used. Work as an RA after freshman year. Show proof of health insurance and get a fee waiver. See if AP or community college classes can be used for credit.</p>
<p>Nicekidsmom, I think you hit the nail on the head. Upper income people like the OP aren’t looking for a free ride, simply for a fraction of the affordability that others are getting at top schools. Assuming two kids from NU with the same good job offers - one can move on with life owing perhaps the equivalent of an auto loan. The other, whose parents were able to fund a big chunk out of savings/cash, might be left wrestling something bigger than my mortgage! That is a huge burden for any kid. That would be the case for my oldest as we have two more children to educate. </p>
<p>Naturally, not knowing how college costs would grow exponentially we spaced our children so we could more easily afford to fund college. Of course, this was all wrong too! When i see all the money going to families with kids tightly spaced i know I should have tried for triplets ;). </p>
<p>My wish is that college savings contributions could be allocated pretax, like contributing to a 401k. Money that I could spend for college will simply go to taxes if I stop funding my retirement. </p>
<p>Very grateful to have options, but my head spins trying to think how to work this all out. Excellent comments here about looking at colleges properly. I would never allow myself to get fleeced on a car lot or think it was fair that the car’s cost changes depending on the income of the buyer. I would walk away very fast at such unscrupulous tactics. I will be pretty cynical in my approach to colleges thanks to you all.</p>
<p>We are in the same situation as OP. I’ve spent weeks on this board trying to figure out other options for DS’s consideration - merit aid, etc. and I believe I am finally to the point of realizing that the search will need to be limited to state schools. It’s a bit of a relief, actually. </p>
<p>I guess I am happy that my son doesn’t seem to care where he goes to college and will be perfectly content at a state school. As his parent, though, I look at how hard he has worked to achieve great grades and test scores and would like to be able to open up greater opportunities for him…but alas…we are unable to afford to do so. </p>
<p>(There is nothing wrong with our state school options, but none of them seem to be a perfect ‘fit’ for DS…we will just have to find the best 'fit.)</p>
That’s one example. Two points (1) I’d think at state school OOS tuition should cover the total cost, otherwise state taxpayers in additions to subsidizing instate are subsidizing OOS… with state budgets streched I don’t think they’d do this.</p>
<p>(2) if a private claims total cost for the year (total budget all students) is X+Y where X is tuiton and Y is endowment. Then my point still holds true, X needs to be collected from all tuition payers, so if someone pays less then their portion (due to FA) then someone else is paying more.</p>
<p>I would like to see no-tax, no-penalty early IRA distributions for their kids’ college expenses. Right now there’s the 72t, which negates the 10% penalty part of it BUT you have to take the same periodic annual payments right up until you turn 59 and a half. And you’ll still have the distributions taxed as ordinary income. So…right now we’re paying the 7.9% ‘juice’ to the Dep’t of Ed, not happy about it though. Think this law will ever be changed? Maybe after a couple hundred thousand college loan defaults…</p>
<p>jrm123… I assume you mean the 7.9% interest on Parent Plus or Stafford Loans? For parent plus loans I think it’s an excessive rate given the loan can’t be discharged through bankruptcy. In fact with student and 2 parent co-signers there’s 3 people on the hook. All 3 would have to die before the loan became a non-recoverable default. Not sure why these aren’t like 3 or 4%.</p>
<p>Same situation re: annual income, great student, insanely pricey university (NYU), two kids. Part of the problem with the PLUS loan is the interest rate: 7.9% is just too high, especially juxtaposed against the rates on investments. There are more affordable options, and schools with bigger per-student endowments offer more. But the colossal cost disparity between selective private universities and more affordable public universities, which are being squeezed by legislatures, is contributing to the decline of this country. It’s advancing the split into an aristocracy and everyone else. It’s a sign, symptom and cause of decline. A shame.</p>
<p>An annual income of even $150k sounds like a lot, and it’s a helluva lot better than $50k, but in the NY metro area or other high-cost regions, it doesn’t buy anything approaching luxury, especially when it’s dedicated to higher education. And yes, it’s better to have an EFC of $48k than $0. But there’s a disconnect between what selective colleges charge and the rest of the economy. It’s like health care in that sense – it exists in its own context.</p>
<p>OK, what’s the alternative to the Parent PLUS loan when money saved for college over the years is tied up in the IRA? </p>
<p>Private loans? Hardly–read the horror stories about those type loans coming due on a whim by shady lenders. Do a home re-fi & tack the college cost amount to the home loan? Sure, you’d have a lower interest rate by maybe three points but see what happens when your home equity amount drops below your mortgage balance, now fattened by that extra college money. Or you lose your job, and you start missing payments. That’s right, foreclosure. Uh uh, that could happen WAY too easily; unfortunately already has for many folks. </p>
<p>And as I’ve said in other posts, a HELOC is only doable when a home is owned free & clear or there’s tons of equity. ‘Course, those in that position can usually handle paying for their kids’ college costs out-of-pocket anyway…:)</p>
<p>Nope, until there’s a better financial mousetrap built here, I’ll pay that shark-like creature called the US Gov’t. Yeah, Foo, it SHOULD be 3% or 4%, but it isn’t. They charge 7.9% because they CAN. Any other ideas?</p>
<p>Here’s another suggestion that we are utilizing. Find a parent or other relative who has significant cash and is unhappy with the rates they can earn on CDs these days. Borrow from them and pay something in the range of 4%. It’s a win-win situation. Relative is getting much higher rate of return than they would by having the money in the bank. And we are able to borrow what we need for college expenses with very favorable terms and minimal paperwork.</p>
<p>NoCook writes My wish is that college savings contributions could be allocated pretax, like contributing to a 401k. Money that I could spend for college will simply go to taxes if I stop funding my retirement. </p>
<p>Isn’t that what a 529 college savings plan does? It’s nice to save for college but the returns on those savings over the last ten years has been minimal. It’s not easy to come up with $200,000 for each kid X 3 = $600,000 when you are earning $150,000/yr. If you assume total savings of 20% (10% to college and 10% to retirement) it would take 30-40 years given the recent rates of return. Note that the OP has only been earning $150,000 for the last five years.</p>
<p>Colleges are selling a product that has increased in price far beyond inflation. It would be nice to go to the prestigious universities but not at the price. The problem with paying full freight for the first child is that there would be nothing left for kids 2 and 3.</p>
<p>I realized a couple of years ago that price was going to be a big issue for us. I started setting expectations so that my kids wouldn’t even consider those pricey schools. They’ll have to go to in-state public universities unless they earn significant merit aid elsewhere. If you earned your money the hard way the college experience has to provide value.</p>
<p>jnm123 - I think of it as the Bank of Mom and Dad. I like the fact that it is mutually beneficial - so that no one feels used or that there are unspoken strings attached, etc.</p>
<p>Unfortunately contributions to 529s are post tax unlike pretax contributions to 401ks. It’s one thing to earmark all your annual 401k contributions as found money for college but another to realize you will pay another $5-7K in taxes for not reducing your taxable income! Ouch!</p>
<p>NOW you’re on to something…definitely worth an exploration.</p>
<p>BTW, since opening this thread I looked again and found that the COA number I’d been using for NU was from 2010; it’s gone from $55,982 to $58,429.</p>
<p>I thought it was interesting, BTW, that WUStl is as expensive as NU but more aggressive on making the cost slightly more palatable: Tuition locked in for four years, pre-pay options, school-administered lending program at 6.25% (still high, but better than 7.9%), and yes, even $5K in merit scholarship. But still pretty crazy.</p>