We had/have about 25k saved up for each of our four kids and the rest we have funded out of our income, using a home equity credit line to cash flow big payments, then paying it back over the course of the year. We thought as young parents we were doing a decent job saving for the kids college, but we were no where close. I don’t think we realized how expensive college had gotten since we graduated in the early 90s. Our older two kids made economical college choices and we’ve already spent 250k on two bachelors degrees, with two more kids to go.
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Cost have escalated for sure. Thanks for sharing.
The advice that I was given from multiple sources is that with a limited income if the choice is between saving for retirement and saving for one’s kids’ colleges, it is more prudent to save for retirement. Of course, it is even better to be able to do both…
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I agree with that advice.
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Many don’t, or can’t, save (sufficiently) for their own retirement in this country. How can they be expected to save (sufficiently) for their kids’ colleges?
I think most would be shocked at how many people (raw numbers, as a percentage of population it would be very small) can pay college costs out of pocket. There are a lot more than most of us would think.
I agree completely with @blossom that saving gives more options and we don’t regret our choice to save at all.
At the same time, I try to not look at what other people have consumed over the years as a proxy for what they could have been saving. Trips to Disney, Hawaii and the like could have been funded by other family members or could have been put on credit (and still be in the process of being paid off), same as with expensive cars or any other consumer product. What someone chooses to buy/consume doesn’t always track with actual money available that could have been saved.
The only person’s money situation I know well enough to judge the saving rate of is my own. And I’ve made plenty of money ‘mistakes’ over the years, I think the big difference between our family being able to save is we’ve had a consistent, good-enough income that hasn’t been negatively affected by layoffs combined with a lot of luck of not having any kind of catastrophic bill/money need come up.
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But please, please please-- your retirement savings need to be in an actual retirement account- IRA,401K, etc. You cannot wave a magic wand over your brokerage account when it comes time to fill out the financial aid forms and designate which assets are your retirement assets and should be excluded.
And take EVERY nickel of free money from your employer, AKA the match. Tens of thousands of people leave that money on the table every year.
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I acknowledged that many families can’t save for college. But many families can and still do not even attempt to do so, expecting financial aid and/or merit will be forthcoming without doing a heckuva lot of research.
Yes, savings provides options! I also do not regret saving for college. I know what you mean about others’ personal finances but I am referring to people I actually know something about. I have read commentary also that people feel they will be adversely affected by saving money for college.
If tax incentives (401k, 529, etc.) are insufficient to cause many people to save, mandatory taxation may be the only alternative, but that’s almost certainly too controversial.
The alternative system is one in which the federal government will provide tax deductions or credits for any family to afford their kids’ colleges, any colleges (if they are accepted). The government will have to regulate the cost of higher education (even at “private” institutions) and collect some special educational taxes based on incomes.
Tax deductions would not be of much help against college costs to middle income and lower income people. Refundable tax credits would be of more help.
But does it really make sense to add additional complexity to the income tax system rather than (for example) increasing Pell grants (both the amount and the range of eligible income)?
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To me, educational tax credits and expanded Pell grants are nearly synonymous. But we also need to provide tax deductions for those who earn “enough” to owe sufficient taxes but still can’t afford the high cost of higher education.
I think some people have a pie in the sky attitude - they don’t realize their income alone (plus any home equity and non-college savings) will often preclude them from receiving any financial aid whether or not they start a 529. Many UMC folks I know are shocked at the EFC that comes back - because we live in a high cost of living area many people don’t “feel” wealthy and assume they are going to get financial aid when there is just no way.
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Is anyone not shocked by the EFC? We aren’t full pay for private schools or out of state public. When older S went to college, our EFC was around $25K. Trying to pay $25K out of our budget was laughable. No way. But that meant almost everything was off the table except in-state publics or very large merit aid offers.
We (or S) had to turn down Duke because need based aid brought it to $28K. But that was only for the first year. We didn’t know what would happen for the remainders. And there was no way to bring that number down lower with scholarships. Fortunately S wasn’t that bummed. He got a great offer elsewhere.
And note in my community, I’m considered well off! But our standards are much lower here
Edit - william and Mary was also too $$$ too. So was UVA, but at least he could have used his local scholarships there.
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Exactly! I think the EFCs are just too high for nearly any middle class and even upper middle class family. Things are broken.
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Totally agree. It seems that the EFC calculation basically forces the parents to just rely on their retirement funds and cash everything out for college tuition without using any logic that people need to save for rainy days, people need to pay their property taxes, the market value of the house doesn’t mean that you can just sell the house - you still need to find a new house to live and with this kind of housing market, you’ll probably have to pay more. And even if you have a high priced house, how much of it comes from the jump in price, not the reasonable price.
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Our EFC is over half of our take home. And yes we did save and have a 529. The calculations make no sense for us. We worked with a financial advisor who recommended we spend like 1/3 of our EFC based on our entire portfolio and age to retirement.
We actually intentionally paid off our mortgage the year before my oldest started college so we could cash flow some of it. We live in a 3 bedroom house and I drive a Kia and have no other properties. Yes, our house has gone up in value but we have to live somewhere. I don’t think people should have to deny themselves a middle class lifestyle to afford college. We are upper middle class, live pretty conservatively and pretty much on the edge of full pay everywhere. Taking your kid to Disney a couple times on the cheap during their childhood is not going to touch these numbers. Yes we did do that, but no that wouldn’t make high end privates achievable for us.
If the calculators made sense, they’d use an average of your salary from the birth of your child for starters. I can tell you our EFC would be a lot less.
Agree it’s broken.
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But everyone saying it’s broken found affordable options for your students, right? It may not have been their first choice, but they did get to go to college.
It doesn’t have to be a flagship. In California, even if you call both Cal and UCLA the flagships, many many students go to other schools and get great educations for a reasonable price. Same in Florida, Wisconsin, Michigan, Virginia.
My kids had to go cheap. We figured it out, we did everything we could to save a dime (lowest meal plan, no cars, used books, no spring breaks to Mexico). They didn’t go to ‘dream’ schools but they did graduate and start their adult lives. And they had fun too.
I don’t think that it is unfair to think a student might have to go to a non-flagship and that the family will have to pay for it, that the student may have to go part time and work part time, or live like a poor college student in a building without a lazy river.
My daughter is in grad school, shares her house with 4 others, and pays $400/mo in rent. I can’t even describe how unluxurious her living situation is. No garage, self shoveling - that’s rough at 4 am when she’s heading off to her job at Starbucks. I think it will be about 20 below tomorrow morning.
100% agree!
Caveat: That path to college seems patently unfair if others get full financial aid b/c they can afford even less. Yeah I know, life is unfair is also a good lesson.