It is not entirely clear whether from the OP’s question whether the OP really needs/wants to find more money or lower college costs, or if the OP really just wants to know if there is a better way of paying the college costs that they can afford than just paying it from current income.
If the school allows you to pay by credit card, get a good rewards card and get something back from the big outlay. Only makes sense if you pay off the balance every month, of course.
I’m paying out of current income but would have no qualms about tapping into home-equity loan since I have a very low rate of less than 3%. Also, I believe that loan may be tax-deductible.
With HELOC, one thing to be aware of is whether the rate is adjustable or not.
Every college I’ve been associated with associates a fee for paying by credit card, presumably to make up for the cost to the college for accepting it. I would think that cancels out any rewards one might earn.
I would like to second the suggestion of going through your family budget, and eliminating extraneous expenses. If you start now to practice the belt-tightening that could be necessary next year in order to pay out-of-pocket, then next year won’t be remotely as painful. You will already have cut your financial bad habits down to size. Go through your expenses with a fine-toothed comb. You may find that you needn’t alter your current retirement savings plan at all.
Each month, do your level best to slap 1/12 of the annual Cost of Attendance at the most likely UC right into some type of savings. If you feel like it, and there are any tax advantages for you, go ahead and set up a 529, but an plain old savings account will work too.
I was able to pay my daughter’s tuition with American Express and got back 1.5 %. I don’t recall there was any charge at USC.
Wow, thank you for all the advice and encouragement; it’s greatly appreciated! This is a great group on here. Yes, my husband is a physician, and I work at a nonprofit. My older son’s stats are the ones posted above; he is unlikely to get any merit aid, and is also unlikely to get into a UC for Computer Science. He just found out today that he was admitted to ASU for Computer Science, but I’m sure it will be full pay. The applications haven’t opened yet for the CSUs, but these are probably his best option (SDSU is his first choice, but Sonoma is more realistic!), so he will apply widely there. He also applied to NAU, which has the WUE program. He doesn’t want to go further than a 6-8 hour drive from home. His younger brother (junior) is the opposite - All AP/Honors with “A” grades in every class ever taken, so 4.6 GPA currently, AP Calc in 9th grade, tons of leadership, music honors, etc. He really wants to go to Caltech or CMU, but is very cost-sensitive, and says that he would also be happy with Cal Poly SLO (such a good kid 
or one of the UCs. Both DH and I are UCLA grads, and we’ve committed to paying the equivalent of UC for both kids. We did just start putting away money to have a head start with the first tuition payments, and we’ll keep that going. It sounds like there’s nothing special as far as 529 plans, etc. (we never get a break!) so we’ll probably just put the money in a savings account for now. I like the idea of the UPromise card, but we already have cash-back cards that net us more cash than that. Despite our lack of college savings we’re good savers otherwise, with over $1.5m net worth and no debt. My 401k plan has a 8% match, so we’ll definitely at least keep that going through these college years. Thank you all!
Post #24 - both my kids’ schools allow me to pay with a credit card at no additional fee. One is a private, one is a public, 2000 miles apart. Every situation is different so just check.
Your second son should have plenty of UC and CSU choices (though he should apply widely, not just to UCB and UCLA), and probably plenty of merit scholarship choices to try for as well:
http://automaticfulltuition.yolasite.com/
http://competitivefulltuition.yolasite.com/
http://nmfscholarships.yolasite.com/
If he has a natural bent toward frugality, you may not need to worry too much about him spending more than UC costs, though be sure he does know that UC costs are your contribution limit. A natural bent toward frugality will also help him in other ways, since he more likely will not be forced to chase the money at every decision the way high spenders often need to in order just to stay financially afloat.
Your first son’s college may be more expensive if he does not go to a UC or CSU. Arizona State out-of-state list price is significantly higher than UC cost (probably by about $8,000 to $10,000 the first year in on-campus dorms, probably by a greater amount in later years when most UC students move to cheaper off-campus housing). NAU with WUE pricing is a few thousand dollars lower than UC cost in the on-campus dorms. Another option is to start at a community college and then transfer, perhaps to a more desirable UC or CSU than he can get into as a frosh, if he does better in community college than in high school.
You may want to see how you stack up based on the definition of prodigious vs. average vs. under accumulator of wealth based on a formula in The Millionaire Next Door book:
http://www.savemillions.com/plan/expectnetworth.htm
Ucbalumnus, that was an interesting calculator; thank you for sharing! They classify us as just “average” savers, so I stand corrected; -).
That calculator is inaccurate for recent college graduates.
Also, for a married couple do you do his and hers separately and then add together?
The fee for paying with a credit card at my son’s school is 2.65%. The credit card (Fidelity College Rewards) puts 2% of purchases into the 529 directly. It is not a win for me to pay tuition with a credit card. I’ve also noticed more colleges have been adding a fee over the years (I was in grad school 2009-2013 and in the first year there was no fee and then they added it.)
The calculator also doesn’t work for people who have had any major change in income (military retirees). It assumes some kind of nominal or linear change.
We also pay costs out of income. This is more of a “mental” thing than actual additional savings but it helps me to feel more in control and know where we are… We have a separate money market (so it earns some interest) savings account that we deposit into every month. Then tuition is paid directly from that. If you start now, you could have next year’s tuition ready to go before classes even start!
I’m jealous of those of you who can pay by credit card without fees…I’d love to earn those points. Neither of my kids’ schools even offer credit card (with or without fees).
Once your two kids are out of the house you’ll probably want to downsize. So given that fact plus you mention having significant equity, I think a HELOC makes a lot of sense. Adjustable HELOCs are around 2% these days, IIRC. And with the way the global economy is going it’s highly doubtful interest rates are going to skyrocket in the next few years. Plus your HELOC interest is tax deductible. So I’d get the HELOC, or at least open one (you don’t need to borrow until you need it). Then just carry the loans until you sell and downsize in a few years and pay it off then. Or you can slowly pay it off over time.
Compared to pulling back on the 401k, it’s much cheaper. At 300k your marginal tax rate (fed plus California) is probably around 38%. So for every dollar you dial back from the 401k you take home 62 cents. Plus that 8% company match you mention makes it even less but doing that extra bit of math hurts my head.
We’re in a similar situation with no specific college savings account. But we have been putting money into stocks for quite a while as general savings, so we just sell off assets as needed. We also have a HELOC which I might dip into for the Fall 2015 bill as the market is down right now, then later I can sell some stocks to pay off the HELOC. Or not, as the HELOC rate is so low it’s practically a free loan.
It cost me $35 per year or semester to sign up for 2008-2012. I got back above $4000 and stock market helped it go up to $5000 plus. Kid #2 got all this money as graduation gift including lap top money. So maybe she got $3000 for spending money.
Edit to add the kid has no natural bent toward frugality.
Don’t stop saving for retirement. You probably don’t need a 529 at this late date, but you might want to consider opening a separate savings account for college money, and start “paying for college out of current income” now, rather than a year from now, by making regular monthly deposits into that account. At $300K in income, you should be able to afford college for two kids, but it will be easier to spread that cost over 7 years rather than 6 by putting 1/7th of your expected total cost into savings this year. I’d put it in a separate account that’s “hands-off” for any other expenses, just for clarity in accounting purposes. It could even be a 529 that you essentially use as a revolving fund, but that’s your call. This will also get you in the habit of actually setting aside the money you’ll need for college on a regular basis, with a slightly smaller adjustment to your lifestyle now than you’d otherwise need to make next year. And keep paying in at the same rate–1/7th of total expected cost–when your first child starts college next fall. That will leave you with a small surplus in the short term (next year’s costs should only be 1/8 of the total), but it will be less painful to spread the total cost over 7 years, rather than having 2 relatively affordable years of (college cost X 1), then 2 painful years of (college cost X 2), followed by 2 more years of (college cost X 1). Those 2 years in the middle will come as a real shock to the system unless you spread the cost evenly.
Got it? Next, consider whether you want to spread the cost over some additional years at the back end. You say you have a lot of equity in your home. A HELOC might be a sensible way to go. Interest rates are quite low, and with your income you should have no difficulty repaying whatever you borrow once the kids are out of school. With immediate savings on the front end (1 year), combined with a HELOC and 3-5 years of repayment on the back end, you could easily spread the cost of 8 years of college (compressed into 6 years of actual payments to the schools) into 10 to 12 years of payments out of current income, adding only the modest interest you’d pay on the HELOC. And you should be able to do this without doing any damage to your retirement savings, and fully recapturing your equity in our home by the end of the HELOC repayment.
Kids can look for jobs, either off campus, on campus, or private jobs ,like one to one tutor.