Federal loan/529/private loan -when to use what

We are deciding between two schools:

1 Pitt (instate) COA $34,260- no Merit

2 U of MD Honors College COA $51,180- 12,500 merit so real COA is 38,680 (I think we are leaning here)

Ways we have to pay:
Unsub Federal loan 5500, 6500, 6500, 7500
Total of 529 money as of now $80K
Expect daughter to contribute 3K each year via earnings or any scholarships she may acquire

This is our first child in college. Our current EFC is 68K. It is possible our EFC may drop to around 35K when #2 enters. I do not know what that means for financial aid at either of the above two schools. We have child #2 entering in 2021, child #3 in 2023, and child#4 2027…whew. Child #2 529 is 86K (my DH said something about hit in stock market as to why hers is higher). For children 3, and 4 we have a roth that is about 110K right now. We were not sure all kids would go to school and still aren’t. Assuming for now they are.

What is the best strategy here? We have good credit but just consolidated a lot of CC debt and have a mortgage, heloc and home loan so really can’t co-sign for a ton. Plus we have 3 other children to consider if cosigning is needed. Does it make sense to use up all the 529 money first and then take out a loan? Do we move some 529 money from child #2?

Thanks for your help!

I posted this on you other thread…

I’m a little concerned that you have $80,000 in the bank for college costs…for child number one…but it doesn’t sound like you have anything for the other kids. Is that correct?

Even IF your FAFSA EFC drops to half of what it is…that does not translate into additional aid for this student attending Pitt or UMD, as neither college meets full need for all with their institutional funds. Even a $30,000 EFC per kid would not put you in line for any federally funded grant money…and probably not any institutional either for an upperclassman.

Our first kid had an EFC that exceeded the cost of attendance at his college. Like you, he got no need based aid. When little sis was also enrolled in college, his EFC was half the cost of attendance ($22,000 EFC for a school which, at the time, was $44,000 or so). He got $250 increase to his merit aid that last year. Clearly a drop on the bucket but every penny helps.

As noted…you seem to have the money in place for your oldest kid for college…without $184,000 in loans.

But what about the rest of you kids?

The COA is the COA; it doesn’t change based on how much or what type of financial aid is received. What you want to say is:

U of MD Honors College COA $51,180- 12,500 merit so the net cost is 38,680.

@BelknapPoint Gotcha. I am new to the lingo. Thoughts on my question?

If you will borrow, take the federal loans every year. You can’t “go back” and borrow the previous year amounts if you didn’t take them in the year offered. Next stop, 529. Finally private loans. As interest accrues as soon you take them, delay these until the very end. Maybe you can some cost savings and not need them at all.

You haven’t said how much you can contribute from current income. If you use all the 529 money for the first kid, can you replenish it for the next? Could you afford $1000/mo to go either toward current costs or into the 529?

The COA includes a lot of costs you control, not just tuition and room and board. It includes books, which you can rent or buy used, it includes travel which you can go first class or pay a friend gas money. Usually there is $2-3k in optional expenses - beer, pizza, concerts, clothing, incidentals. If they have a car at school, the expenses go way up.

When my kids started school 5 years ago, I thought the $3000 estimate for summer earnings was a little high. Now I think they can earn more than that. Minimum wage has gone up. My daughter made over $3000 last summer and she was in school full time and only worked until mid Aug. She could have earned more. Other daughter never worked during the school year until her final semester when she had a project working for a professor. She found she really liked it and wished she would have worked during the school year starting as a junior. She was an athlete so was really busy, but finding 10-15 hours a week to work on campus wasn’t difficult. Many of her teammates had jobs even during the season. They learn to be organized.

If she wants to go to UMd over Pitt, she needs to recognize that it is $4500 more and needs to have a plan to cover that $4500. Work, get a scholarship, scrimp on expenses.

The best strategy for paying college expenses from various sources, which might include a 529 account, is so situation dependent that it’s really hard to give meaningful/useful advice without knowing a lot of specific information. There are just too many moving parts.