Our twins will soon start college. One of them will most likely go to in state public university and another to out-of-state public or private college.
The money we saved in two separate 529 with equal amount in each for each of them is more than cost of attendance for in-state public university but less than out-of-state public college and substantially less than private college.
What would be “fair” way to help them pay for college and most import how to communicate this to them so that this won’t cause any issues of being treated unfairly now and in the future?
They don’t know how much or even if we saved for their college. If we tell them now how much each of them has in 529 it means one will have extra funds and another will be in debt potentially in heavy debt in case of private college.
The reason one is heading to in-state universities and another to out-of-state is not because one wants more expensive option than another. It has only to do with their majors: in-state university is good option for one’s major but very bad for another’s.
The picture is even more complicated by our 3rd child who is younger and has his own 529 plan.
I think you need to discuss it with your kids. You might be surprised that the one who is staying instate will be fine with the sibling using the excess. If the instate kid is getting 100% paid, why should he/she care that the sibling is getting what he/she needs?
You can decide to let each keep what is in his/her account, and the instate kid can use any extra for grad school.
You can decide to pay 100% for the instate from the 529, and then use the extra for the OOS child, but require that child to take out loans for the rest.
We had this situation, without the 529 savings. I told my kids I’d pay the equivalent of instate costs, or about $15k each per year. One picked a very expensive private, but it was instate so she could use the state grants, school merit, and her athletic scholarship. Other aid was also added along the way and she ended up way under budget and only took the subsidized loans. The other was at an OOS public but it is very inexpensive. She has more in loans but it’s still doable. In the end, I paid more for the OOS public kid and I hope to be able to pay some of the loans for the private kid, but I’ve made no promises. They each got the school they wanted and that was a good fit for that child’s education. It was not financially even.
There really is not one answer. You need to do what feels right for your family. Fair doesn’t always mean each child gets exactly the same as another.
For the instate publick it will cost 160K total.
For the other, it will cost 280K.
So then I would say it is fair to completely pay for the instate, then use the extra 40K for the other kid, and then that kid is responsible for the remaining 40K
Keep in mind that you never told them that they would each get 200K…just that you as a parent would fund as much of their college as possible.
I think I would tell them both that you can definitely pay for the level of an in state…after that they are responsible and you may be able to help somewhat but that depends on the final costs. Also encourage them to find places where they can get merit scholarships.
Keep in mind also, that if these accounts are in your name, ALL will be listed as parent assets on ALL of the financial aid forms.
My suggestion…forget about the amounts you have available. YOU, the parents, need to determine what you can and will pay annually for college costs for each kiddo. Please, please communicate that amount to the students. Sure, they can apply wherever, but they need to understand that if the money is not forthcoming to cover the remaining costs, they will need to decline the admissions.
Would either twin qualify for merit aid someplace to ease the costs?
We had 3 529s for 3 kids. However, the money was still ours to do with as we wished. We freely took from child A’s account to pay for child C. Each child has different needs, and those needs will cost different amounts of money. We never believed in “each child gets $X for school.” Each child received according to their needs.
We have two kids, not twins, but two years apart who were in a similar situation. How we handled it was that we told them both separately that we would do the very best we could do to fund their college. The first one ended up choosing a local college specifically for career reasons. As a result, we paid everything without debt and bought her a car to commute to college. That was what she needed and she graduated with her dream job. The second child had a dream for a specific major at an out of state college. Based on her high school jobs and internships, we believed this was a carefully considered decision. Therefore, we paid for everything up to the amount of federal loans. That was the maximum we could do. She stayed in that major all the way through, excelled, and graduated with $27,000 in debt. Both children were on their own for master’s degrees. I agree that fair doesn’t mean the same when both get what they need. I also don’t think a reasonable amount of debt is egregious if a student chooses a more expensive option, although I would never allow more debt than the federal government does. But I will say that we considered the money we paid/saved to be ours, not the children’s. So I wouldn’t see it as two separate 529s. I would see it as a pot of money to be divided. I would have the student going out of state take some federal loans to make up the difference. Different choices have different consequences.
They will each get the education they need, that is fair. I would, however, encourage the OOS kid to get the best deal possible with lower cost universities or merit so it isn’t as lopsided as it could be.
My DD’17 is at community college and will complete her program there, no transfer to a 4 year. She pays her rent and buys her food, I cover any tuition after scholarships (which there is very little to pay). She’s very cheap for us and she’ll also finish with her savings account intact.
DD’19 will very likely go to a 4 year. She will definitely be kicking in at least as much as her sister pays per year, working, using savings, and maybe small loans, but will need some help from us. We’re trying to keep the COA low with a small public but we will be contributing more for her.
They will each end up with the degree they wanted and will each have had to work and contribute to it. Sometimes I feel a little bad, though, and try to be generous with DD’17 in other small ways. She is my low maintenance child though.
If the in state doesn’t have the major one of the twins wants, it is possible to get in state tuition at the out of state where the major IS offered. At least in my state. I would look into that.
Otherwise, I think it is reasonable to just pay whatever is needed for each kid, without comparing. Your only problem is that the 529’s designate funds for each kid. What would you do if it was all in one bank account instead?
I completely agree with @eastcoast11 . My goal for our three kids is to support them so they can become independent. For our oldest, it was a two year technical program - he didn’t spent what we had saved for him in his college account so we transferred it to S2 and helped S1 with a down payment on his first home.
529s do not need to be used on the child who is on the account. The money can be freely used on educational expenses for anyone.
The money can ONLY be used on educational expenses–so there is no value to “saving” it for the child on the account if it exceeds the cost of their education.
Here’s another way to look at it. You have 2 children, one is healthy, the other has a chronic disease. Would you ever withhold care from the sick one because their medical expenses were greater than the healthy one? Of course not. Same here. If one child’s needs can be met at in-state state U, great, but if another child requires a small, private LAC to be successful, I’d support that too, to the best of my ability.
I would call all of the money family money for college. Then I would pay based on the school each child wants to attend. It sounds as though they are doing that. To create a balance/fairness plan would in my opinion only create issues down the road. It can be Mom and Dad paid for college or you went to a more expensive school than I did and … No way I’d do that to my kids. Also, once the money is spent, one of your kids down the road might want to go back to school at age 35. They are going to be looking for “their” money.
If there is any money left after all three have graduated I would keep it in the 529s to be distributed evenly for grandkids/or grad school.
We have two kids…they both went to state schools so that cost was similar…however for the oldest we paid for a masters…but that is because she got her BS and MA in 4 years total because of HS credits.
We have three kids and 529’s in our names for each of them although there is some saving none have enough to fully fund all four years and room and board. We have strongly encouraged our kids to go after merit to help not only themsleves but younger siblings because money not spent on one can be passed along to others as needed. Being a scouting family they have been told to look at it as “troop funds” money that is not theirs individually but to be shared as needed.
Our oldest is starting her 3rd year of college this fall and middle kid his first year of college so far we haven’t needed to touch the 529 funds. It’s too soon to tell if we’ll need those funds for the youngest or not but if not those funds will be used for grad school or grandkids.
When considering how to handle the situation, be sure to think of the possibility that the one who is likely to attend the lower cost college decides to want a higher cost college, or is forced to go to a higher cost college due to not being admitted to the lower cost college (or the desired major there).
Whatever you decide, be sure that they know the financial limitations before they apply, so that they can have realistic application lists. There are too many sad stories around these forums of students who find out in April that all of their admission offers are too expensive, when it is too late to change their application lists.
We have 3 kids who are all getting their degrees at different types of schools and costs. No one has complained and we have simply agreed to provide them that education. I don’t think any of them have thought to compare equal costs and we are not going to “even it out”. They are each getting a degree and that’s the main goal.
Keep in mind that amounts above the federal subsidized student loan limits (which total 27k over 4 yrs) would require you, the parent, to cosign the loans.
Seems like it is easier if the parents can pay enough for each kid to attend his/her first choice college. But if the parental budget is not sufficient for that, then rationing decisions must be made and managed carefully to avoid conflict and resentment.
We are managing in this way but the process is not yet complete so exactly how it will work out is unknown. We have put exactly the same amount in each 529 plan. The plans are invested similarly but differently due to their difference in age (4 school years apart). When DS16 was choosing his college we used the then balance in “his” account as the base budget. Federal loans, his summer employment and an additional annual contribution from us set the total budget. He is on track now to not need the loans and may not spend all of “his” 529 + our annual contribution. His summer employment covers all transportation, off campus dining and entertainment. We will use a similar process to set DD20’s total budget. Investment g/l and increases in the cost of college will mean some judgement will be made about what a comparable budget is as well. We will consider what the spend would have been if she attended exactly the same college as DS (4 years later) as a data point but will not limit the budget to exactly the same amount. If the amounts need to be grossly different to get each of them the degree they hope for, some adjustment will be made ( wedding, grad school, down payment for first house, inheritance, etc) but that has not been explicitly promised. We feel very fortunate to be in the position to make this financial contribution to their future at all. Past employment bumps made it unclear at the time DS was choosing how much that contribution could really be without sacrificing retirement. We are very pleased with how it is going so far but will not feel completely confident about the numbers until each has a diploma in hand. Too much can change over the years that multiple kids attend college.
I have to wonder how Solomon would have handled funding for colleges if he had multiple kids and lived in the US today. This is a common dilemma and I doubt that there is an easy answer.
I would try quite hard to avoid borrowing more than the federal subsidized student loan limits. This is already a very significant debt for a new graduate to have to deal with.
Also, for the student who needs to go out of state it would be worth looking hard to try to find a reasonably priced option. We had one daughter for whom the in-state options just weren’t an acceptable fit in several dimensions, but she was able to find a very reasonably priced out of state option (actually less expensive than the in-state option, but for specific reasons that apply to her including a merit scholarship).
We are perhaps unusual, but we were always open with our twins that we had enough saved to cover the cost of our in-state flagship and we specified how much money was available to them (and showed them the 529 statements, to demonstrate quite how long it takes to save up that money). If they went above that budget then we said we would share the incremental costs 50/50 and if they came in below budget then they could use the difference for further study or (eventually if it wasn’t spent) for a deposit on a house. So that made private options with merit aid (around $50K pa) a reasonable possibility (staying within the federal loan limits), but ruled out a lot of need-only top colleges (Georgetown, Brown, etc.) that would have been $70K+ per year. In the end S18 chose to stay in-state and D18 received a full merit scholarship OOS.
So S18 will spend most of his 529 (depending on how much he earns from summer jobs) and D18 will spend almost none of it, but both feel the situation is fair. We wouldn’t have wanted to take the money from D18’s 529 to allow S18 to attend a full pay private college, especially as he is interested in high paying jobs afterwards and she isn’t, so having money left over is more important for her (though that wasn’t the primary rationale for her choice of school). And they really understand how much money is at stake and that it would take them 10+ years to save up $100K. I think its a big problem when kids have grown up without thinking about finances and don’t have a conception of what they could do with $100K instead of paying for college.