I’m confused.
You seem to have the costs covered for kid number one…right? Is that the Princeton kid?
You are floating ideas for kid number 2.
Not sure why you aren’t giving kid two some of the money you are giving kid one. But whatever.
What is kid 2’s family contribution going to be. Do you have that number? Can you pay that bill?
You will be saving money for kid two during the gap year…right. And you will continue tombe able to,put aside $2000 a month to pay for kid 2 college? Do I have that right?
So…what is the balance per year…you will owe kid 2’s school?
@blossom - Nope, I’m trying to figure out what’s the best way to fund for my younger son’s college expenses. Obviously, our cash savings from here on aren’t going to be enough, so we’ll have to tap into either Roth IRA or 401K at some point, and I just don’t know yet which would yield the best outcome. I’m looking at all options, and if selling off our stock holding is the best way to go, even if it’d increase our income and therefore increasing our EFC, then so be it.
@thumper1 - “Not sure why you aren’t giving kid two some of the money you are giving kid one. But whatever.”
As you know by now, our money is tied up in stock holdings, Roth IRA and 401K. Our cash savings during the gap year alone can cover for our older son, so let’s forget about him for now. For our younger son’s continuing Princeton expenses, we can contribute $2,000 a month in savings (most likely in his own 529 account), but that’s not going to be enough to get him to graduate debt free without tapping into 1) stock holdings, 2) Roth IRA or 3) 401K. And that’s what I’m trying to figure out which course of action I should take.
“So…what is the balance per year…you will owe kid 2’s school?”
Just off top of my head, let’s say anywhere from $10K to 20K a year, but whatever the exact figure turn out to be, one thing for sure is that our cash savings aren’t going to be enough, leading the question, again, of tapping into the above three options.
So…your son 2 if he is a second year student…can take a $6500 Federally funded loan…in his name. That would cover something.
Is he working during his gap year…or part of it? That money should also go for college costs.
He needs to have a job during school too…so does older son (to lighten then financial load there…maybe something can go to son 2 if some 1 needs less.
Son 1 can take a loan for $7500 if he is a third or fourth year student. That should help too.
These loan amounts are not onerous. I know you want them to graduate debt free…but another option is for YOU to pay their loans off for them (our kids took the Direct Loans, and our graduation gift to them was paying off those loans…the monthly payments were a drop in the bucket compared to what we were paying each month while they were IN college).
Oh…and son 1…is he working during the gao year and during college? Hope so.
How do you plan to use 401k money for college? There is not the same 10% penalty exception for education withdrawals that IRAs have.
Also, you might want to ask your questions on Bogleheads.
@TiggerDad
I’m a little flummoxed by your situation.
Son 2 will be attending Princeton. Do I have that correct? The school guarantees to meet full need for all students…and is extremely generous, awarding aid to rather high income families. That being the case…if your het cost is higher than what you can reasonably pay…why isn’t the federally funded loan being considered for your kids. It would certainly ease your financial burden.
@Madison85
Currently looking at all options available, including 401K if all else fails. Never heard of Bogleheads before. Exactly what I need, so thanks!
@thumper1
Yes, Son 2 will be attending Princeton and yes, Princeton was quite generous with our 2015 atypical high income year. However, what surprised me a great deal was that, again, in spite of our atypical high income year, Dartmouth offered $10,000 more than Princeton and nearly matched our Son 1’s in-state public university cost. While Princeton has that reputation of generosity, it actually came in 5th out of 9 FA offers, Dartmouth being the best. I hope to see Princeton doing better by our 2016 typical income!
The simplest answer to why we’re so hesitant to go loan route is that both my sons intend to go to a med school, and we simply don’t want to incur any loans prior to what’s expected to be a huge amount of debt in med school years. We’ve explained to them that, while we promise to cover everything up to their undergrad degrees, they’re on their own in financing their med schools. Besides, as I stated earlier, we can tap into Roth IRA and/or some portions of 401K without hurting our overall retirement savings.
Yes, Son 1 is currently working and Son 2 will most likely follow suit when his other projects whittle down.
If you have a lot of equity in your house, you may find that a HELOC is the easiest way to finance the gap. If you don’t want to sell stock, and are leery about tapping the 401k and IRA, and are disciplined about sticking to a budget (which it sounds like you are) then down the road (since you don’t have a cash flow problem right now) the house may be the easiest solution.
When you compared the FA offers, and Dartmouth came in much better than Princeton. did you look at what will happen in a couple of years once your older son graduates, and your family size changes. It would not surprise me to see Princeton’s net cost over 4 years to end up more affordable than Dartmouth - I recall running the NPC under various scenarios, like what happens if DH’s income falls by $20K, or how does a family of 3 compare to a family of 4. Even though our family situation is different than yours, Princeton has earned its reputation for being very generous with financial aid.
I like @blossom 's suggestion of a HELOC - as that gives you access to the funds you need without triggering any taxable issues or raising your income.
@blossom
Great reminder re: HELOC which completely escaped me, most likely because we just paid off our mortgage this past year, FINALLY!, and so enjoying the excitement of being debt free for the first time in our lives, LOL.
@3puppies
Good point you’re making. It’s all moot now since my son’s committed to Princeton, but since I’m going to open NPC to estimate what our 2018 EFC for Princeton would be based on 2016 financial data (son’s taking a gap year), I’m going to run it also with Dartmouth and see just for curiosity sake. After all, $10,000 difference between the two schools was quite surprising. I doubt that Dartmouth gave the most generous offer just to suck you in and then change the EFC down the road in comparison to Princeton?
@TiggerDad
“The simplest answer to why we’re so hesitant to go loan route is that both my sons intend to go to a med school, and we simply don’t want to incur any loans prior to what’s expected to be a huge amount of debt in med school years.”
But if you’re committed to paying for their undergrad, you can just pay their undergrad federal loans off for them while they are still in med school. Its not like having a little undergrad debt is going to prevent them from getting their grad loans. If you take the loans for both sons then that leaves your cash flow available to fund the gap on son2 (with supplement from a HELOC or whatever). Then you can just pay the fed loans off once son2 graduates. The loans wont even have payments due yet if they are both still in school.
And seconding Bogleheads. They are fantastic.