@Momzie LOL “a week or two” you are so right.
I think the IRS has caught onto this one because they caution 529 account holders that the accounts may be subject to the generation-skipping tax. But I don’t know how this would be handled if you just change the beneficiary from one generation member to the next one when the time comes for college many years later. You can freely change the beneficiary whenever you want, so I don’t know how the IRS would ever know that. Interesting.
@momzie I would not do that, by the time our grandkids are going to college this country will be so broke that the government will seize all private savings and retirement accounts. Better to tell your kids to settle in a state with a good economy and good state colleges. Or even better, move to Canada or Germany. 
Eyeroll.
@honestmom - Scary thought! That would be absolutely awful but seriously not surprising. Sadly, the current government is trying to gain complete control over us and our money.
"I don’t think college is often other than rarely affordable for the very poor. Where can you go to a four-year college for $5780 per year? "
-Tax payer subsidized need based FA
-Full tuition Merit Award
-Employer covered tuition
-Student loans
…most likely I missed many other options…
Many people who haven’t looked into college costs at all probably don’t realize how much room and board is. Then their thinking may be it is ‘cash flowable’ if the kid stays in-state. Maybe some also are having so much trouble paying their bills already that they stick their head in the sand.
If a student is in a really strenuous curriculum, I think a part time job may hurt them academically unless they maybe don’t take a full load (one class less may still be full time, but not able to finish in four). Some students that have been use to having free time in HS may not mature enough during college to be ‘all work and no play’. I have talked to 6 year students who worked part-time and realized that they would have been better concentrating on getting their requirements done much earlier. I bet it doesn’t help their opportunities with after graduating jobs either.
Even with full tuition merit, unless the student is eligible for Pell grant, the freshman student loan would not cover first year room and board. However those students do have to be motivated and work the campus job to make the numbers work.
Glad my kids are in college and the plan in place should get them through UG. I do feel for families with talented students who may have very limited school options due to limited money. A friend with a handicapped son (100% disabled) has three attending local public colleges and living at home (one was NMS but liked the local option). One was seeking military option after doing HS ROTC, but that must have fallen through with the funding cuts this year. Parents were both in military.
We had private college pretty much covered by the time my 2 dcs applied. Yup, that’s a lot of money socked away in the 529s.
We were both high earners in our early years of marriage and then when the kids were younger. We picked high stress, high pay careers, mostly because of the financial rewards, and worked incredibly hard while we had that energy and drive. That worked for about 15 years but then you get burnt out and parenting gets a lot harder.
So at 40, I finally took a break when a small inheritance could be saved and then went back to work in a field that is much more to my liking but not to my pocketbook. By then, we were mostly funded and we let the stock market do the rest.
Looking at today’s job market, a lot of my children’s generation will be making their big money early in their careers. Too hard to retool after a certain age and you just can’t be working those 15 hour days and racking up FF miles in your 40’s. Strike while the iron is hot and save when the paychecks are large and the expenses are low. No need to over extend and buy into the expensive neighborhood with the good schools until your dc’s are in the early elementary years.
I know quite a few 27 year olds who could easily put 25K or more in the bank if they didn’t feel justified in spending it on great stuff, apartments, and trips because they are working so hard and deserve it. Many women dial down when the baby is born, but that may be time to put it in high gear if you want the larger nest egg.
I often was scared and felt guilty that I wasn’t around enough, had them in daycare, after-school care and with babysitters too much. Employed sleep away camps so that I could work extra hard without feeling guilty in the summer.
In the end, everything really worked out and as a bonus, I have independent and hard working children who appreciate our sacrifices and have a great college education.
I know not many would opt for this choice but I write it so that it may resonate with some families.
@flyaround – your plan was also ours. Both DH and I worked in high paying but high stress jobs when the kids were young (actually DH still does but it’s different because now he’s the guy in charge). Worked like crazy, saved like crazy. Enough saved to pay in full for private school for 2 kids, with some left over if they get merit aid. Older kid did get nice merit aid and we are putting the extra money into his retirement savings now so he has a nice head start on that.
I retired in my 40s two years ago and DH will retire in about 8 years. As you said, too hard to keep up the pace. And I wanted to be around physically during the teen years. So we did it backwards from many families, where one spouse stays home during the early years and then goes back to work as the kids get older.
We started late on the “kid thing” - I’m now 60+ with our only son graduating high school this year. We started early on retirement savings so we haven’t had to prioritize education vs. retirement. We have the FL Prepaid Tuition including housing and fees, so instate is paid for. He also has scholarships: Florida Bright Futures, National Merit (assuming he goes to a school that offers it) and a Florida Incentive scholarship that is tied to NM. But… all bets are off if he goes OOS.
I envy you early retirees! We will need to slog on a bit longer to pay of debt related to elderly mother’s ALF and out-of-pocket health costs.
We were very unrealistic about paying for college. I “assumed” DS1 would have his pick of National Merit and state merit scholarships. Well, guess what - he didn’t qualify. Due to many job transitions which depleted savings, we had only a few thousand in a 529 plan. Fortunately, my dad saved the day and gave us $45K for each kid (he did the same for all his grandchildren). We put most of this into the 529s and were upfront with DS1 about his college budget. He ended up going out of state but paying in-state rates through the Academic Common Market due to his choice of major. This also allows him to use the small amount of state merit money he did receive. He got some merit money from the college as well. We are fortunate that his school of choice is very affordable and we are able to cover most of the cost with $11K/year from the 529. We do pay enough OOP to get the AOC tax credit. He also has 16 credit hours from AP, CLEP and his ACT score which got him out of 2 freshman English classes! He may not graduate early but I hope the extra hours will keep him from going longer than 4 years.
I hope that the money we have for DS2 will grow enough to keep up with tuition costs. He is only in 8th grade and likely to go in a different direction from his brother. We are staying more focused on the GPA as that kept DS1 from having more merit options.
I worked FT until my job ended when kids were 3 and 5. Fortunately we had a mix of very good in-state scholarships, in-state prepaid tuition program (which we paid a lump sum when kids were newborns), and college fund which was boosted when the grandchildren received a split of two small life insurance policies from my mom - and the investment has grown nicely. Both will finish UG w/o debt as long as they keep their academic scholarships, and they are doing great at school. We participated heavily with max in 401k as soon as that presented itself in work life; we have cut back a lot with H’s amount in the past few years to just a little more than what is matched, because retirement funds look pretty good and we have to pay the bills in the years between now and retirement (7 years away). I still want to go back to work (after stage III cancer, now 5 years cancer free), so that will help both on the income and the savings if I can secure something (I have good qualifications, but being out of the job market for such a gap, it is harder to get back in). Fortunately our early retirement monies have grown, and even tapering off on contributions going in show us we have healthy retirement savings. Our remaining home mortgage is 2.5% interest; in our early married years we had very high interest rates on 30 year mortgages (for 2nd home in 1980, we were ‘locked in’ at 12.25% interest, and 4 months later at closing had to pay 4 discount points to get that rate which totally sucked) - we didn’t know we would be relocating after that home because in hindsight we may have been better renting - however we did make money on those first two homes even with getting screwed on the mortgage discount points paid (company paid moves, which does hit on taxes but company did give us an additional check to cover some of that). On our 3rd house, we assumed the current mortgage because we didn’t want to get socked again with higher closing costs and some years have been paid down on the mortgage. That house had us learn be in best school district in this community - we had to wait to sell, but did break even once we sold (would have made money on the house in a better school district). We are now in our 4th house that we have been in 22 years. We always assumed we both would work. If we had, our house would have been paid off 10 years ago. When H’s salary didn’t grow with inflation, we refinanced the home. When I saw a window of opportunity for low closing costs and the great low interest rate with one of our credit unions, we jumped on that. Overall, our current home has been great.
I do think our kids realize the sacrifices we have made for them to be in the activities and opportunities they have had. We have only had a home mortgage as debt after we paid off H’s relatively low student loans and our first home second mortgage (assumed a low interest rate at the time, 1979, 8.5%). It was a relief to get the second child off to college and enjoying empty nest (quiet when H comes home from work so he can unwind and enjoy his time). The advantage of being older parents (first one born after 15 years of marriage) is that we weren’t burning the candle on both ends in the early years (building up retirement and college savings in those lean years with near starter career salaries), but the disadvantage is the energy level with being older. The cancer treatments were very fatiguing (and I qualified for disability payments from my privately held disability insurance) so I got the experience of how ‘old age’ may feel like. Being good at parenting is a sacrifice, but hopefully all that are parents feel good about that sacrifice.
In our state (AL) we had very good in-state options for both students’ majors (nursing and engineering). Never would have thought about that when we moved to AL in 1983. So we have had financial circumstances that have benefited us and have worked against us over the years. Thankfully our children are making good choices in doing well at school and living life in a good way.
Don’t beat yourself up if financial circumstances have worked against you along the way. Hindsight is 20-20.
@jeannemar - that is very helpful to read - would you please explain, what are the restrictions to get the AOC tax credit? Would 529 money spent not count toward that?
@fretfulmother - We used the 529 money to pay room and board, and paid OOP for the remaining tuition and fees after the scholarships. You can’t claim the AOC on room and board or on anything paid with 529 funds. Check the IRS website for detailed information. Disclaimer: This is our first year and we haven’t done our taxes yet, so this is based on my understanding of how it works and hasn’t been put to the test!
We were already $88K in the hole (from infertility treatments & finally adoption) when S came - so the first 5 years of his life was spent paying down that debt. Then we had to start funding H’s 403B. Then there was sleep-away camp for 8 years@$10K a year and private high school @$18K/yr for 4 years. By the time he was in high school we knew we could pay instate tuition at a SUNY out of present income since we were practically paying that already for high school. After all was said and done with acceptances he got into a meets full need school. Our contribution plus his came to about the same amount as instate tuition. We were completely shocked about the amount of FA he received.
Except for sending him to camp (a luxury, obviously) and private high school, we have lived quite frugally. Never moved to bigger house, drive used cars, take inexpensive vacations, etc. We did refinance mortgage 8 years ago and took out a very large sum of money (approx $150K) and did remodel & addition to our home - but our mortgage payment is still only $1000/month.
We have been paying from present income for all four years and I made final tuition payment last month. It now feels like we just got a huge raise.
We haven’t been fully funding H’s 403B for the last four years but H has a guaranteed pension so it’s not as critical for us. We haven’t decided if we are going to up contribution to the max now since the State doesn’t do any matching.
Our goal was to have $60K per kid saved by the time each started college, and we figured we would cash-flow the rest, which would be about $7K per kid per year assuming in-state tuition at a public university. Several of my co-workers planned to pay cash for their kids’ entire education, and based on income thought that would be easily doable. That would make me nervous! I mean, you never know what the future will hold.
Yes, paying for college out of cashflow is a tight-rope walk with no net. And how do you know that your kid won’t end up going to a private school? In my D’s case, tuition, room and board is around $59,500 per year, and that’s before other out-of-pocket expenses like books and living expenses.
@emilybee, congrats on that last payment. I don’t know when I will be more excited, when we have no more college expenses or no more mortgage. Right now we pay much more for college each year, with 3 kids in at once.
How do you know? You tell them, “No, it doesn’t fit our budget.”
@spayurpets @Mom2aphysicsgeek
You can’t tell them where they can go to college; they’ll be 18 and adults, and this will pretty much be their first real adult decision of any consequence. You can only tell them how much you are able to contribute towards costs.
If the cost of attendance after grants and scholarships is $60k, and you can only provide $15k… they’ll probably catch on pretty quickly that the school won’t enroll them if there is no money available.
The much harder choice is between a cheap school that she doesn’t like much, a reasonably good school that can be paid with the parents’ contribution, a great school that requires the student to max out loans in her own name on top of that, and a “prestige name” school that is just a little bit more expensive than that.