Assuming there is a difference between what the college bill is and what your grants, school-based and outside scholarships, income and savings will cover, where do you start with determining funding?
I’m aware that kids can borrow up to $5500 their freshman year. Are there any recommended sources for student or parent loans besides Parents Plus? I’m told to watch out for high rates and added fees on those.
I know home equity is one avenue but I want to research all options to make an informed decision. Assuming excellent credit.Thank you.
We’re using our HELOC. Not thrilled about it, but the last few years have been rough on our business so we don’t have any choice. We’re having our two kids each take out $3k in loans every year.
I switched the 5-10% contribution of my gross pay, albeit low pay, from 401K contributions to a 529 when D was in middle school and it became very clear she was headed to college. Now granted my pay is low, probably very low to some here but the 529 has been a godsend. D also works a minimum of 40/hours week in the summer and does 10 hours/week work study, often more and buys all her own clothing, personal items, books and supplies, travel expenses, gas, and recreation. She takes her student loans as needed. This semester her school was very generous for her study abroad program. The 529 well is nearly dry now so her last year is going to be tight, very tight, but we’ll manage. I do have very good credit and can easily obtain a loan if necessary. I’m not sure we can tighten the belts anymore than we already have. Best financial decision ever?..Setting a realistic (for us) college budget and sticking to it regardless of where she was accepted.
While I commend NEPatsGirl for her early funding of 529’s, I don’t think this is a good strategy for most people. In particular, parents have to plan for their own retirements, and if at all possible they should contribute to 529’s on top of their 401k’s, IRA’s, or whatever. When my kids were approaching college admissions, 529’s had barely come into existence; so we never invested in them. But we got through the college graduations of two kids using regular savings and current income – just barely. We did use a HELOC for a small part of the last payment. But this was fairly easy to liquidate.
Savings
529 contributions
School Loans to the kids paid off from income of summer jobs.
Part time work, during the school year, of no more than 10 hours per week.
Budget-conscious decisions, i.e. used books online, driving old cars, limited leisure activities, self help house repairs, etc.
And we’re STILL paying!
No, did not touch any retirement.
My daughter planned years in advance to be in a position to get substantial academic merit scholarships which cover all of tuition and most of room and board. She provides for her own spending money in college by working in a lab (related to her major) about 12 hours per week (full-time in summers). Her dad pays the remainder, which comes up to about $6,000 a year and goes toward housing and health insurance. She does not have a car.
D will be a freshman next year, intending to major in engineering. If we have to adjust our finances, it will probably go in this order:
[ul]
[]529 Savings
[]Work-study and Co-op programs
[]Study abroad for a year (if she goes to an OOS public, she can get in-state tuition while abroad)
[]Spending cuts and budget savings (food budget, keep older cars that are paid off, loans being paid off in the next 2 years, etc.)
[]HELOC
[]Direct Loans (we won’t qualify for subsidized)
[]Reduce 401K to minimum contribution needed to max my employer’s match
[]Reduce or eliminate monthly contributions to charities
[li]Reduce 401K as little as possible[/li][/ul]
Given the tax benefits of the 401K contributions, the fact that HELOC rates are pretty low, interest payments are tax deductible, and the fact that you can borrow money for college but not for retirement, I put HELOC and Direct loans ahead of 401K contributions. Since she’s looking at engineering, I’m okay with her taking on Direct Student Loans up to the limit (it worked well for me). None of the schools that she’s applied to should require us to go all the way down the list.
We aren’t paying the bills yet (our oldest are twin juniors) but we were very open and up-front with the kids about college finances early on. Both have been working winter and summer breaks since they were legally old enough. They are not high-stats kids and fortunately neither have dreamed of attending particular private or expensive OOS schools, even though our in-state options are not ideal for their particular needs (nor are they particularly affordable). “Run the NPC” is like a game in our house now, and the kids do that before putting any schools on their lists. The goal is to have 100% of the schools on the list be affordable without question marks. DS in particular is researching 2+2 options in the CC system. Both kids have a deep understanding of what college costs and how the family is going to sacrifice to make it possible. Our hope is that by limiting the schools they apply to in this way, there won’t be a substantial gap, but we are purposefully not including the grandparents’ offer of $2K/year per kid in our overall budget in case of a small gap. I would really like to avoid the Parent Plus loans if we can.
If you’ve got balance left after all aid,including outside scholarships and direct loans, is applied, and you’ve squeezed what you can out savings and income…look for a cheaper school. Might be 2 years at cc and 2 at state school. Might undermatch to get more merit.
If you can’t afford to pay then you should tell your kid to get the best grades possible, study like crazy for standardized tests, and look for next tier down schools.
We looked at our budget, and told Happykid that it would need to be CC for two years then transfer to an in-state public. She always worked, and she graduated with only the standard federal loan debt for junior and senior years.
My kids are seniors and I’m pretty proud of how their college financing has worked out. Believe me, we had not idea how complicated it would all be when we started. First, they chose their colleges very wisely, one an affordable OOS public with enough merit and financial aid to make her loans under the federal limits. She’s not graduating yet, but should be able to finish without breaking the bank. The other chose a very expensive private school but received a lot of merit aid, athletic aid and some other grants that has her graduating with very little in federal loans. I told them I could afford $15k/ea per year, and I thought I could, but in the end I couldn’t because of a job loss. Everyone pinched a few more pennies, we got some need based aid, and it worked out.
I’ve seen a lot of ‘it will all work out’ kids graduating with $50k in loans. That’s really a tough way to start your young working life, with $250 loan payments for TWENTY years (on income based repayment, or $500/mo if not).
Kid1 had a enough scholarships and merit to cover her first two years 100%. Kid2 will be getting a true full ride so actually saving us money on food, utilites and no more high school fees (AP tests, clubs fees, sport fees, school lunch fees…) We plan to use those savings to help suppliment kid1’s living costs for the next two years. She is in an off campus appartment and very frugal. Her scholarship covers tutiton and she works a part time on campus job and will continue to apply to any additional scholarships she can find. We hope kid1 will be out of school by the time kid3 starts college and we can use the money we had been giving to kid1 to help out kid3. He’ll likley get good merit too (likely full tuition) but not a full ride. Our three kids are all two years apart. So high school fees saved from kid1 just shifted to kid3.
I had thought we’d have some additional savings from paying off a car loan but that just got shifted to car repairs
We have some funds in 529 for each kid but not much we hope to save that for gradschool. Chasing merit is/was our best chance of getting the kids out of college without debt.
Our kids all have to take the max guaranteed student loans. We then told them the budget beyond that (which we pay as we go)-- and they have to find a school that fits it.
Save all tax refunds/bonuses/gifts for college expenses. Try to alternate semesters with co-ops and some tax years you may only end up with a single semester, or at least some spacing between the bill.
Oldest did poorly in high school, so she is commuting to a local college, working part time, and taking out federal loans.
We have used car that we let her use, we usually pick up the major expenses with that including insurance.
Middle is on full tuition + engineering scholarships at Bama. He will also have full federal loans to pay back. We have cash flowed travel expenses, computers, etc.
Youngest going to state school, received scholarships