<p>We have 2 high school children, d1 (junior) and d2 (freshman). We are trying to develop the best split of college funding between our individual ds and us. We want the approach to be fair and able to be used consistently for both d's. We recognize that every familys philosophy and financial position is unique. We would like to be sure that our daughters have some skin in the game when choosing their college (from a financial standpoint). We are also fortunate enough to be able to pay a large amount of the cost for schools but also need to keep funding our retirement plan and some ongoing health costs.</p>
<p>Our current approach is to establish a certain amount that we will fund each d (adjusting for tuition inflation as well every year). Then, any actual cost above that will be paid in a ratio between our d and us. D can earn merit scholarships to offset her share. And if she receives additional scholarships beyond that amount which reduces our parent contribution we would hold that money for after she gets her bachelors degree for her use (eg. grad school, car, house etc.). </p>
<p>We would like your feedback on this plan as well as the specific amounts below:
30K is the base amount that we will pay per year. We will adjust upward for inflation in the future for d1 or d2. Any college cost exceeding 30K would be split 60/40we pay 60% and d covers 40%.</p>
<p>Currently, our d1 is most interested in private schools with a 55K tuition who award varying levels of merit scholarships. </p>
<p>We appreciate any insight or perspective you are willing to share on our plan </p>
<p>I give you a lot of credit. Wish we had done the same. We blew our financial gaskets with our first one. </p>
<p>Now we have a limit of $35K a year for each of our other kids which has worked out well. It means that with their savings (and they all worked and saved their money for years), working during the school year and summers and their Staffords, they could consider private schools that give about $10K in merit money, most OOS schools, any private school within commuting distance, all state schools. I wish I could bring it up another $10K, but it has not limited the 3 on their choices. Though they did get acceptances from full cost privates that were out of budget, they had so many equal and better choices for less, that they threw them out without a thought.</p>
<p>It seems like as long as they include in-state public options in case merit does not work out for them, they would be covered by your contribution, money earned fom their own work, and a stafford loan in each of their names. </p>
<p>In terms of loans each child will be able to take out $5500 in stafford loans for freshman year, $6500 for sophomore year, and $7500 out per year for junior and senior. </p>
<p>In terms of the 60/40 split over $30,000-ish will you take out PLUS loans in their names that they will pay back to you, or will they be expected to earn the merit/ supply the remainder through work, or attend a more affordable option?</p>
<p>It will be important for them to understand the perimeters when building a list of schools. Institutions with guaranteed merit for their stats will be key to include on the list.</p>
<p>Your plan seems like a fair one… just need to make sure that your Ds understand the ins and outs of what it all means. :-)</p>
<p>I agree, the amount they are able to take out on their own is limited so the difference between what is needed to be paid minus your cash contribution minus their federal loans minus any merit/scholarship (be careful of those that don’t extend for 4 years in your calculations) is what you would need to negotiate with your kids as it would need to come from your pocket directly or as a co-signer on the loan or as a parent PLUS loan. We found it easier to simply tell the kids how much we could afford and let them add the federal direct loan as their “budget” to work with than to get into a “you’ll pay us back” type situation. With some good research you can find many good colleges and universities that would be covered with a $35,000 budget.</p>
<p>If I understand correctly, this is not a matter of what you can afford, but what ground rules you’d like to set for your kids in order to engage them in the cost/benefit analysis and to help them appreciate the magnitude of the cost.</p>
<p>In fairness to your younger daughter, perhaps you might index your “base” amount to some indicator of overall cost, like your local public university.</p>
<p>We told D2012 she had $30k/yr for college. Anything over she needed to get merit money to cover since our income is too high for FA. We would not allow her to take loans. If she didn’t get merit, she could go to our state schools. Anything left after undergrad was hers for grad school. D2016 will have a little more per year based on inflation. D12 got quite knowledgeable about affordable schools, figuring out which ones would never make it on the list. S2005 had the same deal, with less money; used his leftover $$ to cover 1/2 of a master’s, rest in loans.</p>
<p>We figure their “investment” is in maintaining the GPA needed to keep the merit award for 4 years.</p>
<p>We told DS that we would contribute the COA for our state flagship each year. If he chose to go to a cheaper school or had scholarships, we would bank the extra for him. If he wanted a private school, he had to get scholarships. As it turned out, he choose his #1 school, and he received enough scholarships to cover the expense while taking just the subsidized loans each year and earning his own books/spending money over the summer. He is finishing freshman year, is very happy, and has ownership in his education. FYI- the amount we pay ended up being almost exactly our EFC so we are each doing our part! And we are all happy with the decision he made.</p>
<p>I told my son that I will not be contributing more than a cost of IS public minus max Stafford loan he will be required to take. He will also be required to work to cover the cost of books and personal expenses. I have full intention to pay off my son’s loans if he succeeds at school, but like you I need him to have a skin in the game.</p>
<p>*We would like your feedback on this plan as well as the specific amounts below:
30K is the base amount that we will pay per year. We will adjust upward for inflation in the future for d1 or d2. Any college cost exceeding 30K would be split 60/40—we pay 60% and d covers 40%.</p>
<p>Currently, our d1 is most interested in private schools with a 55K tuition who award varying levels of merit scholarships. *</p>
<p>A school may award varying levels of merit, but keep in mind that often these schools only award to the top 25% or less (some only award to a few students or the top 5% of applicants)…usually most students do not get merit. </p>
<p>Have your D look at where her test scores fall within a school’s range. If they are well within the top 25% and the school awards to most in the top 25%, then she may get an award.</p>
<p>Also, have her apply to some that will give her assured merit for stats.</p>
<p>And, if you won’t co-sign any loans, let them know that.</p>
<p>Are you willing to co-sign loans? If not, you may essentially be limiting your Ds to state schools or privates that will give merit - which would rule out some of the top schools that give only need based aid as well as schools that are “reachy” for them. If that’s the case, I’d just make sure the kids understood that up front. Will $30,000 cover the entire COA of your state flagship? I know it would not at ours for my D’s major, although given $30,000 she could cover the COA with just a Stafford loan. One other consideration - do your daughters have relatively similar abilities? I have one daughter who has earned a full tuition scholarship to an OOS public, and another daughter who, even if she worked as hard as D1, could not hope to earn a merit based scholarship. That being the case, I would set different parameters for my D2 than for my D1. Fair is not always equal. Overall, though, I think you’re being quite generous and also quite fair in letting the girls know the situation up front.</p>
<p>Merit also limits the universities to which your child applies as not all of them offer this. Second, merit, depending on the institution, can be given to VERY few at the outset in very parsimonious amounts and for a variety of in-house determined reasons. It is pure voodoo as to how each university decides this and not altogether transparent in how it’s doled out. My only suggestion is you carefully evaluate your assumptions on which your FA offer is based for your children. As anyone will tell you who is in the throes of this mess, what I knew and believed in September about financial aid bears little resemblance to what I know now following some serious knock downs and drag outs from The School of Hard Knocks.</p>
<p>I don’t believe cosigning loans is a good idea most of the time. I’ve stated this a number of times on this board. The lenders are doing this for profit, so the terms are not as flexible as PLUS though the interest rates may be less, but are often adjustable. The big drawback of this sort of loan is that both parent and student are equally on the hook in terms of credit report and legal responsibility for the life of the loan and for either borrower. Dad becomes disabled, too bad. Kid dies; dad is on the hook. There is an insurance component to PLUS that does not exist under these loans. T</p>
<p>If considering them look at the terms v-e-r-y carefully as there are no real guidelines or generalities with these loans and compare them with the terms of everything else that may be available to you and your child.</p>
<p>We asked that our kids take out the Stafford loans, and work to earn all of their own money for all discretionary spending and books. This is how we “split” the costs with our kids. We were fortunate that one got a nice merit award and the other got a little one. Every penny helps. </p>
<p>We were able to fund about the same as the OP…$35,000 per year. With the Staffords and their merit awards, our kids were really able to apply to most schools without issue. Of course, our last one graduated two years ago…so that does not count for inflation.</p>
<p>Any plan you(pl) commit to follow and can live with, is a good one - bravo!</p>
<p>We allowed the oldest two kiddos to choose their schools based on fit - with lttle consideration for budget. They are responsible for working during summers to fund personal spending and books - and each will graduate with $10K or less in loans. We are able to cover what their contributions and institutional aid does not.</p>
<p>We itend to fund the younger two kiddos similarly in another 7+ years, but will also steer them toward school choices which will recognize and reward their academic achievements. Not sure what the variables will be at that juncture…</p>
<p>One of the things we did was to create a spreadsheet to compare the full costs of each school on D1’s list. We then sat down as a family and added in the line items for what we parents would pay to determine what would be expected from her. We would not be taking out any parent loans and she would be limited to Stafford loans (our EFC precludes financial aid from all but HPY). Personal expenses and books would be her responsibility in every scenario - this was her minimum buy in. A rundown of the major merit scholarship information ($, eligibility, requirements for maintaining scholarship, etc.) was added as well. The bottom line was a realistic financial picture of her next 4 years at each of the schools on her list. </p>
<p>This exercise really helped her understand what would be expected from her. Fortunately, she received generous athletic and academic scholarships at several of the schools, so she had multiple options that fit well within the family budget. Now, as a college student, she maintains focus on academics as a result of her merit scholarship requirements. She maintains a budget to control her spending during the school year because of expected buy in. She works and earns more each summer than she spends the next academic year.</p>
<p>As a rising junior, she has made the decision to live off campus at a much higher cost than the dorms. She knows that she is responsible for the increased costs and is ready, willing and able to pay.</p>
<p>When DD2 and DH went on a multi-state campus tour this past spring break, one of the things they carried with them was a spreadsheet of the COA at each school, potential merit scholarships she would be eligible for, and the $ amount of our parent contribution. DD2 became very interested in crtieria for merit $ at each school and asked a lot of great questions of admissions officials and Honors College directors. She knows exactly what she is responsible for with each school visited.</p>
<p>Our goal is to have each girl graduate in 4 years and debt free. If they choose wisely for undergrad, there will be parent $ available for grad school/setting up household for 1st job. Knowing this helped ease a bit of the pain when some schools came off the list due to costs.</p>
<p>None of this precludes the girls from looking at T20/top calibre schools. They just know what those options will mean for them financially.</p>
<p>I am considering something similiar. You mentioned you are willing to fund “30K per year” but didnt mention how long. One of the major factors for the cost of college isnt the per year cost, its the number of years. Kids that switch schools, switch majors, etc can spend 5, 6, even 7 years getting a degree so give them some incentives to graduate on time.</p>
<p>We wanted to report back that we spoke with D1 about our plan this week. It went well and she asked questions and challenged it smartly, but came away understanding the plan with an accepting attitude. We believe she internalized that the plan is relatively generous and not overly onerous on her. We basically kept to the plan we posted originally. That is we pay 100% of first $30K then split 60/40 us/her the rest of the COA. We also indicated that any merit aid she receives we will split 50/50. This means that she could actually ‘earn’ credit for the future. For example if she attended a 55K school and received $25K merit (which may be a dream) she will not only not pay her obligation of $10K (40% of $55K less $30K), but that we would hold her remaining $2.5K share of the merit award for after graduation. That future credit could be for grad school (which we cannot commit to pay for), help her with IRA funding or maybe a car down payment. </p>
<p>We incorporated your comments as well. For example the $30K will be indexed for rising avg costs, the $30K will fully cover our flagship state school, etc. The one thing we added to the plan after the initial post but before our talk with D1 was that if our EFC dropped and we actually received financial need aid that the financial need aid would all go 100% to the parents. She immediately understood the reason that if our EFC dropped then Mom & Dad clearly had an unexpected financial downturn. </p>
<p>We don’t know what college she will choose, but she was thinking on the spot without prompt by recalling that Rice, one of 10+ schools in her top preference tier, has about $7K less expensive COA. </p>
<p>We are fortunate that we can afford to do what we can. Thank you to you all. Best of luck.</p>