Question: How did you come up with your "number"?

Parents Forum
1

<p>One of the financial "philosophies" that I've come across on CC and ITRW is the procedure of coming up with your "number" - the amount which you as a parent(s)/family can/will be able to contribute towards S/D's college. </p>

<p>Though I haven't had the conversation yet, I imagine it goes something like this:
"As your financial aid offers come in, you will have some financial decisions to make. You willl have to decide how much money you are willing to pay for your education (which will take the form of student loans). I want you to know that I'm happy to contribute $X.00."</p>

<p>Of course, first I need to figure out what out-of-pocket amount I can reasonably/safely (without leveraging the family's future or damaging credit lines or anything financially unsafe) contribute to my child's education. (With no savings accounts, retirement accounts, college accounts, etc., I'll be doing this out of pocket - likely with a 2nd job once she graduates from HS.) </p>

<p>My question is - how to do figure out what that amount is? How much can I afford? Obviously, I don't think strangers can give me "my answer" to that question, I'm just curious about how ya'll went about finding that magic number for yourselves. </p>

<p>Maybe you took the amount in your kid's college account and divided by X years? </p>

<p>Maybe you're covering the student loans after graduation for 5 years so you can say something like "I can afford $200 per month in student loans for 5 years, if you borrow more than that, it's on you." </p>

<p>Maybe you figured that you could handle adding on to your debt load by as much as another car payment would be, so you said, "I'll contribute $20,000 over 6 years."? </p>

<p>I've been impressed with many of the financial planning philosophies I've read here on CC. Just thought I'd ask how you all came to your number. </p>

<p>Thank you!</p>

<p>(Please - no lectures about how I should have had this conversation already or I should have figured out this number three years ago. I'm having it now and that will have to do. Our finances are fairly simple compared to most... mostly because there aren't any. I appreciate the concern, but I can't reverse the clock.)</p>

2

<p>Our plan was much like your paragraph 3 “Of course…” But we also took into account the base price of the cheapest of the schools he was considering. In addition, his mother and I felt it would be a good learning experience for him to have some of his own cost involved. We believed he’d be more attentive and give greater effort if he was paying part of the bill. It’s not as easy for student to blow-off a class or an assignment if the student is paying part of the bill. Our family sees college like any investment. How much do you spend for how much return do you expect? For us, and our S it worked.</p>

<p>He’s out now, and has some (reasonable) loans to pay. If our budget permits, we may now give more than we offered, as we can.</p>

3

<p>Can’t help with your initial question, but another question to ask yourself is whether you want to put a cap on the amount they can borrow. Having read so many stories about kids getting out of college with upwards of 100K in debt and essentially paying it off for decades-- that’s a conversation I would have. Decide how much debt you want your kid to be obligated to pay after graduation and how many years it would take them. I wouldn’t give them that decision because a lot of kids have no idea what those numbers mean in real life, and some idealistically think that no matter what the number is they will earn that much right out of the box. </p>

<p>The answers to your questions should have an effect on what schools he/she might apply to. You want to have some financial safeties because no telling what financial aid might be offered. Have these conversations before he/she applies.</p>

4

<p>We have 4 so we had told ours since they they were in early HS that we had planned for and would contribute, the cost of in-state attendance for 4 years. We figured that even if investments did not pay off, we could manage that level. They were welcome to use that and shop for merit awards, we do not qualify for need based aid. They could go CC and save for some grad school contribution. We would not sign for loans. As for paying for loans later, see first premise. </p>

<p>We are fortunate to live in a state with great schools. It was part of what we considered when living here. So they would get a good education if they went in-state. 2 of them went in-state. 2 used merit awards to out of state or private. The only flex we made to the original plan was to allow for a year of summer school for each.</p>

5

<p>We did a seat of the pants evaluation and concluded that we would pay for room&board, med/car insurance, and cell phone which was already on our bill. DS was responsible for all the rest, knowing that he had a $76,000 college fund to draw from which would have covered any instate university costs. </p>

<p>This was layed out early jr year in hs and he set out to find colleges offering merit scholarships that he would be competetive for. He bagged a biggie later that jr year totalling $16,000 to RPI which he lobbied for with his GC which he knew he was applying to as he had visited the campus a number of times on our way to VT(my wife is an alum).</p>

<p>The one thing we did discuss with him was the significant adverse consequences of large student loan debt. In fact his first choice when acceptances came in was Oberlin which he easily eliminated because of its puny finaid offer, an offer which would have resulted in over $25k in student loans.</p>

6

<p>There are websites that will let you fill out a basic FAFSA form and then generate your expected contribution. (It’s been a couple years since I did this, so I don’t have a specific site for you.)</p>

<p>While this tells you only what a third party thinks you can afford, it still will give you an idea of where you’ll stand in terms of getting need-based aid. My guess is that you’d want to stay away from committing more than FAFSA thinks you can pay.</p>

7

<p>^beware those calculators. They were WAAY, WAAY off for me.</p>

<p>Strategy: find a financial safety that has the program your kid wants and hope they fall in love with it. When that happened with us, my relief was unbelievable.</p>

<p>We paid for the small tuition (after scholarship) and room and board and travel. Everything else was on my kid. Luckily, with Summer and Christmas work and with getting income at school (he set up a film company with others and they did concert and promotional films as well as commercials), he was able to take on those expenses.</p>

<p>I wanted to have two full years of college expenses in his 529 account, but I ended up with only one year. But bonus income and tax returns went into the account, and that, combined with out-of-pocket expenses got us through the four years. He just graduated with no student debt (our graduation gift to him).</p>

<p>At first we thought that we would be able to afford more, but just before he started his freshman year, I was laid off from my job. :eek: You never know what will happen, and having his choice also be a financial safety is a lifeline.</p>

<p>I’m in the extreme position here, but I think that student debt (or a least a large one - anything over say $10,000 total after four years) is bad, bad, bad and should be avoided period.</p>

<p>There are other options.</p>

<p>My parents gave me ZERO money for college (they were not well-off) and I did have to borrow a little just to get started, but then I worked as a co-op student for 5 years and that, combined with scholarships, finally got me through my undergrad at Georgia Tech. Not only do I not regret it, I think that - in the long run - it was the best gift my parents could have given me.</p>

8

<p>our goal is to give our kids a debt free college. grad school on them. we were fortunate that my D got anice merit offer and small local scholarship and that helps. plus she loves and is excited about her choice</p>

9

<p>Unfortunately, there’s no such thing as a financial safety for us–even UMass costs a bit more than we can probably handle without aid or some small increase in debt. We will be heavily dependent on need-based aid for even the cheapest of the privates we’re considering.</p>

<p>We’re using the EFC calculators, but adding a couple of thousand on the assumption that they’re telling us an overoptimistic story. The resulting figure, when parsed out on a weekly or monthly basis, seems pretty daunting. It’s going to be an interesting exercise in belt-tightening, for certain–especially since there aren’t that many luxuries or extras in our lifestyle as it is. I’m going to have to be more aggressive about getting gigs in my 2nd career as a musician, and I will be thanking my lucky stars that my day job is relatively secure. But we’ll manage.</p>

10

<p>When Mommy started pushing DS in his spring of HS junior year (2001), I showed DS his UGMA balance, which was sufficient for his choosing the college of his choice. Then 9/11 and a political change happened. </p>

<p>The Number was then a pretty good estimate. Besides 9/11, two things politically happened that worked in our favor but does not apply today, but may in the future:</p>

<ol>
<li><p>Clinton’s administration and Congress, in a fiscally conservative move for the budget and favoring lenders ('98}, took the student loans from a fixed rate to a variable rate, thus eliminating big budget hits when interest rates increased but increased subsidy to banks when interest rates decreased, which was deemed unlikely. </p></li>
<li><p>W and the Republican Congress eliminated the “Pay as you go” law inorder to allow two tax cuts. Then the Twin Towers collapsed which forced the Federal Reserve to drop interest rates and allowed the W and the R Congress to spend $$ to encourage the growth in the economy. Stafford loans got as low as 1.75%, and PLUS as low as 3%. Oddly, when the D’s took control in '06, they eliminated the variable to the fixed interest rate system which then controlled some of the bleeding in '07-08 but increased deficit '09. </p></li>
</ol>

<p>So even as DS’s UGMA had collapsed, we were able to makeup the difference in loans. What was planned, didn’t happened. What has unplanned, happened. The Number that I had in mind stayed fixed but how I got there as wildly unexpected.</p>

<p>IOW: Make an educated guess. It is all you can do.</p>

11

<p>I looked at how much $$ I had in CASH in the bank that I was willing to devote to college when he was applying (fall 2006) and divided by 4.</p>

<p>I knew I did NOT want to take out ANY loans to pay my portion of college expenses. I will end up (he’s half way thru school) paying almost exactly what I had planned on paying.</p>

12

<p>Started saving early on. Told both kids that we would have enough for any instate public. If they wanted anything different, it would be up to them to earn scholarships. Both chose instate publics.</p>

13

<p>I’m an entering freshman to my local community college & technical institute. I’m waiting to see what I qualify for in the financial aid arena. My parents can’t afford for me to go to a four-year, and I don’t want to take out loans for the first two or three years. </p>

<p>My family is in a very unique financial situation, and it is possible I won’t get aid on time. So my plan B is money I’ve been saving since I was a sophomore in high school. It can cover at least a semester and a half of school at the CC. </p>

<p>I’m also hoping to sign up for pharmacy tech certification, so I can land a job hopefully next year and save up for the school I will eventually transfer to.</p>

<p>My parents have very little ability to help. So I need to take on responsibility for my life, work hard, and hope for the best outcome. </p>

<p>The kid has a BIG part in the college years, and that isn’t just studying, its paying.</p>

14

<p>I worked it out to pay off our sizable mortgage in ten years, and it would have been paid off the year D started college. A home equity loan for a small portion of the equity plus the money plus out of pocket payments would have allowed us to finance privates for both kids. That’s what each was heading for.</p>

<p>9/11 hit, and between a slowing down of my husband’ business plus bad choices on his part, all the money went to bailing out a failing business. So now we had a new sizable mortgage, twice as much as the original, plus no money for school.</p>

<p>However, I encouraged D to go ahead and apply ED to the school of her choice having been assured in writing that if we could not afford it, we could back out, no hard feelings. The guidance counselor wanted this assurance too.</p>

<p>She was deferred from ED school, but eventually accepted. Since we now had a heavy debt-load the FA covered exactly what the home equity loan would have. Half came from out of pocket as you go with belt-tightening.</p>

<p>D came out with $17K debt; S will have no debt – his school is loan free. We will pay D’s loan, a pre-arranged situation.</p>

<p>Things worked out, not at all as we planned. I took more risks than most would, but D has graduated, and S has two years to go. I haven’t received this year’s FA, but it should be doable. If not, I do have some other resources.</p>

15

<p>^^ Keep them coming. I’m really impressed at the strategies that people have worked out when “things didn’t go as expected.”</p>

16

<p>If I were in the OP’s position:</p>

<p>“With no savings accounts, retirement accounts, college accounts, etc., I’ll be doing this out of pocket - likely with a 2nd job once she graduates from HS.”</p>

<p>I would use that 2nd job salary to start working to create healthy retirement accounts, or I’d be worried about being dependent on my kids later. I would be showing my kids how to find the highest paying part-time jobs for their skills. Just my opinion, but I think a motivated kid can still pay their way through college, and feel proud about doing it on their own.</p>

17

<p>geomom: You make an excellent point.</p>

<p>However, for me, paying for my kids’ college was part of my own life plan. I would have felt like a failure if I didn’t.</p>

<p>I have worked two jobs the entire four years so far, and will for the next two as well. I will also probably have to work until I’m 70. I have a tenured position teaching English at a college, and I adjunct two extra courses each semester and one over the summer.</p>

<p>The kids earn their spending money. Since D went to school in NYC that was quite a bit of change. She worked in the Provost’s office for four years and summers and got free housing on campus. S works in the college library.</p>

<p>We all have different strategies. I’m sure they all work.</p>

18

<p>Another vote here for a flexible plan. As each child reached freshman year we had the money talk … you know “Your parents will pay for your state flagship; if you want better than that you’ll need to get scholarships.” Behind the scenes we had a four-level plan … each level independent of the others. That worked out great because one of our two jobs went away (bye-bye Plan A), followed by the tech stock crash (and there went Plan B).</p>

19

<p>Our number - the best education and best fit for each kid while avoiding significant debt for the student or the parent.</p>

<p>We are solidly middle class, qualifiying for some financial aid. However, by June 2010 we will have put 2 through private college paying tuition, room, and board while at the same time avoiding significant debt. Kids were aware they had 4 years to finish (no parent help after 4 years) and kids paid for books, incidentals, etc out of work study and summer jobs. Younger son’s school costs 49k this year and does not give merit aid but meets 100% of need - no loans.
The college savings lasted a little better than a year. Since then we have done the “pay as you go.” We live off one salary and use the other for school expenses. The monthly tuition payment plans have helped spread the expense over the year. One son graduated with 3k in subsidized stafford loans and the other will graduate with $7,500 unsubsidized stafford loans.
We are fortunate to have stable jobs, but we really limit expenses. For example, we rarely eat out - just a few times a year, and for vacations we hike, bike, kayak within a same day drive from home. Our cars are >5 years old, boring but reliable. When S. studied abroad for a semester (less expensive then being on campus), friends were stunned that we did not travel abroad to see him. We could not afford it. Our choice has been to pay for school and minimize kids debt.
We are so fortunate to be able to provide for our basic needs and still afford this overwhelming expense. Luck and good health has been on our side. Our plan could have easily been derailed.</p>

20

<p>Digmedia -</p>

<p>When you say that the calculators were way off, did you mean that the online calculators gave you a different result versus the “real” FAFSA when application time came? Or did you mean that you didn’t think the online FAFSA expected contribution was realistic for your family? Those are two very different things.</p>

<p>The online FAFSA confirmed what I expected – that we weren’t going to be eligible for need-based aid – so I thought it was credible tool.</p>