For soph year (2015-16) , his aid is also $50k of grants and merit, right?
Was he offered a sub loan for soph year? If so, take that. Even if you declined it, go back and ask for it back. Only you and your son can decide whether taking the unsub loan for soph year is a good idea.
Is his major something that could lead to a good-paying internship next summer? does he work part-time during the school year?
Banking the loan for this year is a good idea. I’ll have to get him to pull up the package and see if we can do that. No, he doesn’t have a major likely to get him a good paying internship and he’s unlikely to pull in much money. Mom, sent you a message; will send another with a bit more info.
Since he has unmet need for 2015 school year, he should be able to get that sub loan for this school year, even if it was declined. All you have to do is contact the FA office and ask. This isn’t something where they could run out of funds.
Were you able to file head of household on your tax return in recent years?
Also can you contribute to a Roth IRA? That money might be easier to access.
I would definitely spend down the college savings account first.
When you deposit the direct loan proceeds, keep them in a separate account.
Yes, I filed HOH.
My job only mentioned a 401K. Don’t know about a Roth. Is that something I could do myself and then ask the company how to roll it over? Is it possible to take a loan from a 401K for college? Or would it be better to tap home equity?
he may not qualify form a subsidized loan…but he definitely can get an unsubsidized one if that will help you bridge the gap.
Welcome back and congrats on the salary increase.
I agree with the others that you should definitely max out your 401k to fund your retirement.
Even if you are making 100K if you are saving 20k, you will only be taxed on 80k.
If you are saving 20k a year with a 50% match, you will be getting a free 10K a year (better interest rates than the bank).
Keep living like you are making 60k until your son finishes school (don’t do anything that you could not do before you got this increase)
Check your 401k as some plans will allow you to borrow from yourself and pay yourself back at 1% above the prime interest rate.
You will see the change in your FA package next year, junior year.
For junior year consider
Perhaps find ways that your son could cut expenses; living off campus vs,. on campus.
Renting vs. purchasing books
Although not guaranteed and competitive jobs, becoming an RA. If he can get this, he may get free room
If he can get a job with the college’s food services contractor, he may even be able to get free meals
If he is not FWS eligible any more,he can get a work study job to help defray some of his costs.
If you have this year already covered, and if your son can and has not already done so, he should borrow is sophomore loan allocation of $6500
Junior year he will be able to borrow 7500 (that will be 14k)
If you can use 7k from the college fund, that will be 21k.
If you can borrow $5k from your 401k and pay it back over 48 months, you will be repaying at a rate of ~ $50 week/100 per paycheck if you get paid every 2 weeks.
If son can earn $2/3k in summer earnings, then you may only need to pay $2/3k out of pocket.
Senior year
Have son borrow $7500 student loan
IF you have $ left over from the college fund $5000 (12.5k)
3k from summer earnings (work 2 summer jobs if he must (15.5 k)
Borrow the 10 from your 401k repay over 48 months at a rate of $100 per paycheck (this may mean living on the cheap another year).
with some planning, you can do this!!
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he may not qualify form a subsidized loan…but he definitely can get an unsubsidized one if that will help you bridge the gap.
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This year’s aid isn’t affected by the salary increase and they were gapped. So he should qualify for a sub loan for this year. If so, he should take it. Even if they don’t need it, they can bank it.
The problem really isn’t the 2015-16 school year (his soph year), the problem will be his jr and sr years.
I’m hoping that with him away at school, and only 2CWG at home, she can find ways to cut back home expenses (utilities, food) and set that money aside for next year.
Depends on the school. My kids’ full need was not met at two different schools they attended…plus a total of 8 others to which they got accepted. Neither received subsidized Direct Loans.
OP- congrats.
Take an evening to go through the benefit book before you decide to take the vision and dental. At my company, most people take them (just check off the box) even though they are very costly forms of insurance. You know your own medical needs, and you may be better off waiving them (if there’s an upcharge, which there usually is) and self-insuring. Get your annual eye exam at Costco, buy the glasses at Costco, unless you have some very complicated optical issues you will absolutely be ahead of the game vs. paying for vision care. Check what you are getting for your life insurance from your job- as a single mom you may also be carrying an individual term policy which you might be able to drop now that you are down to one dependent and IF your job comes with a cheaper term policy.
Ditto dentist- I pay cash for my annual cleanings and my dentist offers a heavily discounted rate to spare him from the administrative hassle of filing the paperwork.
You can absolutely do this-- just make sure you are not paying out of pocket for benefits which you really, really don’t need to help you through two more lean years.
Do you own a home? When’s the last time you reviewed your homeowner’s policy? If you are insured for $1000 losses, now is the time to up your limit and reduce your premiums. You can likely afford to replace your TV and laptop if they were stolen. Make sure you are not double-insured (many people are)… if your credit card offers you loss protection, identify theft, etc. for free, you may also be paying extra on your home-owner’s for the identical protection.
If you can squeeze some extra take-home out of your monthly check, you are very, very close!!! Good luck.
I had a long post going, but then I read that the OP’s son is getting merit aid and using his own money.
If that is the case, why does it matter if the OP has a new job? I don’t see any loans noted.
If you have substantial home equity, you should compare that rate to any loans offered. But again, I’m confused as to whether he is getting loans or need-based grants now.
I will reduce a small grant amount in the third year because you have your new income only during half 2015. It will reduce more during the senior year, however your kid still has some grant with your new income bracket. FAFSA uses AGI number, so 401K contribution will reduce that number.
Just a quick “to be honest” based on my family’s situation.
For the first year you are making over 100K, I would make sure you have 20K extra available. If your salary increase was on the order of 40K, saving up 20K should be doable.
And if you try to live the same as before, you should have extra money. If you have a HELOC, you can pay it off as you get paid from your job, and then use it to pay for college.
Does your son’s school have a tuition payment plan? That will help a lot.
I’m hoping that since the son is home now for summer, the mom will notice that once he’s returned to school and she’s the ONLY one at home, she will realize some new savings. She may be able to close the vents in the empty rooms and just heat/cool the rooms that she’s in. Boys tend to take long showers, so maybe some utilities savings there. When she’s just feeding herself, she should also realize some food/beverage savings.
Good, if you can file HOH then that should save some on federal taxes. Run a withholding calculator to see if you can up your allowances while still paying enough in.
The Roth IRA doesn’t have to be through your employer, you can open your own account and the contribution would be after-tax. I’m not an expert but I thougt that the contributions can be withdrawn again if needed.
But if you already put maximum in 401k that might be too much. Also I think there are income limits and since your income is increasing that might not be an option.
Ok so this year’s aid won’t change. Your son can take out direct loans and save them. Then next year if grant goes down he can also take loans and I would spend most if the 529. Like others said the asset protection allowance is being reduced a lot, for us it’s going down from $30k to $6k. So why should you be penalized for college savings and borrow from home equity? Then last year you can make up the shortfall from a loan if needed.
year one (income $60k) $25 k merit, $25 k grant
year two (income $60k) $25 k merit, $25 k grant
year three (income $100 k) $25 k merit, $6,500 loan from soph year, $7,500 k junior loan, $11 k 529 acct
year four ($100 k) $25 k merit, $7,500 senior loan, $9 k 529 acct, $8,500 from home equity loan?
So you see you really shouldn’t have to pay anything out of pocket until 4th year, with your son taking $21.5 k in loans, the $20 k in 529 acct, and you paying $8.5 k
I don’t have more time now, but I can look up some links for W4 calculator and Roth IRA for you later.
Don’t worry, a raise is always good! And you do have the merit aid that shouldn’t change!
Your son might even be able to raise that $8k or some of it over the next two summers and maybe get an on campus job as well.
Pat yourself on the back for putting three (?) kids through college as a single parent!
http://www.irs.gov/Individuals/IRS-Withholding-Calculator
http://www.rothira.com/roth-ira-withdrawal-rules
http://www.rothira.com/roth-ira-rules
You should not stop contributing to your 401k. These are pretax contributions and the company match is even better. I just thought it might make sense to maybe contribute less to 401k for a few years and put money in a retirement account where it seems that contributions can be withdrawn easier if I understand that correctly. Also by using the 529 acct up that counts against APA, and save in the Roth IRA which is not an asset for FAFSA.
Thanks guys. To clarify, I would have to make up $25k a year from now for two years in addition to the college savings account. I was already spending about $8K-$10k/ year from the college savings account to close the gap. We were not offered loans but I can go back to the school and ask for them and we will bank this year’s loan. I will look into whether the insurances are worth it. The vision was pretty cheap. The dental was more but it’s been so many years since we’ve been to the dentist that I don’t know what we need done. And no, living off campus isn’t cheaper in this case and my living expenses are already extremely low for this area. His biggest expense is food and I have to pay that for him no matter where he is.
Mommdc, I will definitely look through those links. You’re right: I am surpassing the match so maybe it would make more sense to spend down the college savings in year three and put save on a Roth past the match. I am contributing almost $750 pretax every two weeks and company is matching the first $250.
If you are saving 401k pretax of 13500 a year, then your income for tax will be $86500.
Let’s say your insurance is $500 a month, all pretax, so $6000 a year, now your taxable income is $80500.
You should only take the free disability. The other you can upgrade in 2 years. They offer one years salary life insurance free? That is all you need right this minute.
Dental is very limited, so look at it closely. Generally will only cover a % up to $1000 a year.
Vision and legal services…decline.
I agree it adds up. But you still should have a significantly higher take home pay, bc these deductions from your check are not subject to tax, so the Impact seems less.
I would think you would end up taking home about 600-700 more per 2 week cycle.
Thank you everyone! I will continue with the contributions then and look into additional loans to finance his last two years. Will see if it is cheaper to do that as home equity or a retirement loan. I will also look into a monthly payment plan. It might help a lot because, by 2016, I should bring home more and, at that point, there actually should be extra take home income, beyond taxes, insurance and retirement contributions.