To parents of full-pay private college students

Parents Forum
1

Our combined income is roughly $200K (with typical assets), late forties, and we have a high-school junior S whose college selection/application process is on the horizon. We are fully informed regarding net price calculators, CSS/FAFSA, merit aid, national merit scholarships, loans, etc etc. Most NPCs indicate we will receive little/no need-based aid at private colleges (price tags now 60K+/year)

Technically, we could “afford” to full-pay, but very hesitant (for many/obvious reasons as discussed throughout CC), and we are fully aware there are lots of other avenues (state schools, merit, etc etc) I can understand that for a family making $600K (this is a random figure that’s significantly higher than our $200K), the decision to go full-pay might not be hard. I realize this is somewhat a personal decision of what one is looking for, comfort zone, etc

I would be interested in hearing from parents whose financial situation is similar to ours (let’s say income $300K or less) who HAVE or ARE actually doing/done full-pay for their child. (I would sort of like to know “would we be only ones??”)

Specifically, I would like to know

  1. What is/was your income?
  2. What geographic location do you live in?
  3. What is your retirement funding situation?
  4. Were there any special circumstances that allowed you to decide to go full-pay at $50K+/year? (you are expecting a large inheritance down the line, a rich uncle partly funded, etc)
  5. Any specific regrets/advice?

Let me put our situation

  1. Combined income $200K (married couple)
  2. Central NJ (high cost-of-livng)
  3. We have about $800K in our 401K/IRAs (we are in late forties). No pension.
  4. No special circumstances
  5. Hoping to get some feedback from others who are full-pay with similar financial situation
2

You will decide how much you are willing to pay and inform your son before he starts making his application list, right?

3

Yes, that is correct.

4

Do you have any 529 or other funds set aside for college currently? Or will this be paid out of current income?

5

It will be paid out from a combination of current savings + current income. We can do it. That is not the question. I am not looking for advice on whether we should do it or not, etc. That is for me to decide. I am looking for specific examples of specific people who actually DID it or are DOING it.

6

I’ve done it. My income (single parent, less than yours, but until this year – senior year of college for 2nd kiddo – lived in a large Midwestern city, not a particularly high cost area).

We had saved for our kid’s educations since they were born. We had over $100K in savings going into college years for each kid. Kid 1 did take merit, but kid 2 did not. We got some limited FA her first 2 years because my income was down for a couple years, but it went back up and we have been full pay the last two years. I may inherit some money from my dad, but not counting on it for retirement.

Worth every penny for kid 2. But she is not a typical kid in a bunch of ways. A high achieving yet supportive environment was important for her. Very pleased with her experience. You really have to assess your own kids, though.

7

@intparent, thank you very much for your input. Exactly the kind of feedback I was looking for!

8

How many children do you have?

I’m in a similar income/age situation, high cost of living area, with 3 kids total. My oldest will be starting at Duke this fall. I worked for an employee-owned company that was sold 10 years ago. Without the lump-sum payment from that event combined with relatives who want to help, we would not be considering private for any of our kids. My oldest would be chasing merit or stay in-state with no regrets. I’ve encountered way too many successful people from “lesser” colleges in my career…I could not see taking on crushing debt for undergrad.

9

Is this an only child?

10

We are headed in a similar direction for our D.

1.) similar income
2.) southwest (COL relatively inexpensive)
3.) retirement funds on track/no pension
4.) special circumstance: grandmother helping pay for college/D her only grandchild
5.) Debt (mortgage/cars/other): none/none/none
6.) D is only child

Our D is applying to nine schools:

–Two large state universities (their Honors’ colleges) --she has already been accepted at both with significant merit aid (she is a NM semi-finalist/hopefully finalist)
–Reed, UCLA, Berkeley, Carleton, Grinnell, Oberlin, Barnard, Yale

We would love it if she went to one of the in-state schools and save money for grad school, but we also know the benefits of small liberal arts colleges—and we think she would do very well in a small school. The two large out-of-state schools (Berkeley, UCLA) we are less excited about paying OOS-tuition—we just don’t see a significant advantage to the two great in-state schools she has already been accepted to.

11

Similar situation as you although we had most of it saved (in a 529) and we’re a bit older. We are paying because we felt like the school DC is attending was a significantly better fit and academically stronger than the less expensive alternatives available to him. Had we not been able to afford it, I suspect the other options would have looked a bit better! At this point, we’re feeling like we made the right decision but realistically, it probably means I will end up working longer than I might have.

To me, an education is the best investment you can make, not necessarily for a financial return, but in making your own head an interesting place to be. We were confident that DC’s choice would afford him that kind of education and peers with similar expectations. But different families look at education differently, so with a different kid and through a different lens, I could see myself making a different choice. You’re smart to think about it and have this discussion before your kid is sitting on a pile of acceptances with a wide price range.

12

@woods1234 ,

My D is starting college this fall. For most of our career, our incomes were similar to yours. We started saving in 529s from birth, with the specific intent that both of our children would be able to attend any four year college in the country. We are doing considerably better financially now, but that hasn’t changed anything–we were on track for $250K+ per child well before then.

That said, when my D said she was considering medical school, we strongly encouraged her to look at places where she could get a significant merit scholarship so she could graduate from medical school without any loans. She received nearly a full ride from Alabama, and full tuition from Pitt. In the end she decided that medical school was lower priority and will be attending UChicago this fall.

Looking at your financial situation, you really need to think about your retirement first. I recommend you use a retirement calculator to how you are on track to fund your retirement with and without paying for your son’s college. Here is a simple one:

https://retirementplans.vanguard.com/VGApp/pe/pubeducation/calculators/RetirementIncomeCalc.jsf

13

We had an income between $200K and $300K, and we paid the full cost of a private college for one kid and an in-state state university for the other. The kid who went to the state university did so by choice; he could have chosen a private college if he wanted to.

We’re in the Middle Atlantic, with no debt except for a small mortgage that we could pay off tomorrow if we wanted to.

We paid for our kids’ college almost entirely from savings, not from current income. And we have plenty for retirement. (We inherited some money, but we would have had enough anyway.)

What worked for us is that we are really, really cheap. My husband and I both came from families that went through financial hardships during our childhoods. We share a feeling that we need to have a big nest egg – probably bigger than what most other people want. So we just don’t spend very much money on most things. And since we hadn’t spent it on other things, we had it available to spend on our kids’ education.

I have absolutely no regrets. My parents paid for college for my sister and me, and I was glad that my husband and I could do it for our son and daughter. I can’t think of anything we could have done with the money that would have been more worthwhile.

14

OP here. Thanks for all of the input/experiences/advice shared so far. All of them are valuable to us.

To answer the specific question for me, this S is actually a second (and final) child. First child got a full tuition scholarship at a large private university, and she will graduate soon. My son (the high school junior in question) is a high achiever, but we feel he might thrive more at a small/medium-sized school surrounded by high achievers. Merit aid at such schools is much, much harder to come by. (We have looked and are looking)

15

@woods1234 Take a look at Davidson. It might fit your criteria. They have a small number of full rides available.

16

I’ll answer. We were full pay for two kids between 2003 and 2010…at two expensive private colleges. Kids did get merit awards…one pretty good, the other a smaller award.

like to know

At the time, our income was under $150,000 a year.

CT…and it’s expensive here if that is why you want to know.

We started contributing the maximum to our TSA/IRA accounts when we were in our 30’s. I have a public pension which was not a voluntary contribution.

We NEVER expected anyone else to pay for college for our kids. That was our thing to do.

Sure. Here is what we did. We had NO college savings…not one cent. But both parents worked full time jobs. DH’s income paid our regular living expenses. My income…all of it…went to college costs from 2003-2010. We called it the mystery money. It went into our account director deposit…and out via auto withdrawal every month for those seven years. EVERY month!

We had decided that me working was how we would fund college. And for us, that worked very well.

So my advice…you should either have a healthy college fund OR a second parent income dedicated to funding college.

17

We are on child #2 (of 2) as full pays at private U’s. 6 years between them so only one at a time.

  1. Income was lower than yours when I finally started paying attention when C1 was a junior in HS and said holy ####! Started moonlighting my brains out (lucky to have that option) and ended up high end of your range. Had minimal savings for the kids due to the fact that I had >200K in (professional school) student loans when I finally started paying down at age 35--after C1 was born.
  2. COL lower but not super cheap, flyover country.
  3. Retirement prob similar. Have real estate assets though which outpaces the stock market (ROI) and is very stable here.
  4. No windfall expectations or family help. In fact, we partially support both sides of the grandparents
  5. No regrets. My parents paid for my private college ($3500/yr tuition when I started) and I always expected to do same for my kids. DH had no parental support from his family with poor results and also was always adamant that paying for college was a no brainer. Kids chose their schools without considering finances. Our state schools are not great but both kids turned down large merits from other private Us.

–largely funded out of cash flow. Approached C1’s costs as a 6 year proposition.
–C2 has 3 more years to go. If my income goes down (possibility as I ‘freelance’), we will pay off her school costs over the next few years. $35K/yr for 8 years sounds so much better than $70K/yr for 4. No more kids coming up.
–they’re expected to be on their own beyond college. C1 is in a fully funded grad school. Don’t think C2 is headed for professional schools but if she does, we may help if we can.

18

Full payers, no regrets, ended up helping one child with professional school (which was not our original plan- we figured undergrad on us, grad school on the kids, but since as it turned out we could, we were happy to do it).

1- Always had two incomes and almost always lived on one, banked/invested the other.
2- Good health. We have siblings who have not been as lucky so their calculations are very different (what if one parent needs to go part time, give up working, high medical costs one year, etc.)
3- Very high cost of living area, but we lived below our means and we ended up an intact family anyway so I’m happy to report that my kids grew up without HBO, big screen TV, or Disneyworld/skiing over school breaks and they lived to tell the tale.
4- Got every penny in matching dollars for retirement from employers, every penny in matching charitable contributions, but didn’t overpay for insurance (high deductibles wherever we could, did not do dental/vision/extra frills to keep cash flow high).
5-Told the kids 8 semesters tops. If that meant no triple majors, no “do-overs” due to flunking a course, etc. that was that. One kid wanted to study abroad but it would have added time-- we were not interested in subsidizing semester number 9, and to our astonishment the kid got an actual summer job and a travel fellowship from the college in that country which didn’t cost us a penny and seemed to scratch the itch (living in an apartment overseas, traveling every weekend, working with smart people in an actual job, but no need to worry about transferable credits and pre-req’s in the major). So it can be done.
6- and probably the most important- we never looked at our house as an investment. Never. It wasn’t a cash register to draw money from, it wasn’t something we banked on as being able to fund our retirement, we didn’t refinance every time somebody on the street paid more than we did so we could justify “skimming” off the top of an ever increasing asset. As a result- we had a period of unemployment while one kid was still in college and we managed fine. Our house isn’t a palace, which now that we are empty nesters is a good thing, since who wants to heat and insure and clean a palace when you don’t have kids at home? I think a lot of young couples underestimate how much it costs to maintain a house…

No regrets bottom line. Kids were all self-supporting by August after graduation so anything we’ve done since then (including grad school) was done cheerfully and received with gratitude. I have friends who are still supporting kids in their early 30’s, and so the idea of subsidizing grad school is extremely painful to them- on the one hand, it might be the only shot at getting the kid off the payroll. On the other hand- MORE? when the parents are completely tapped out? I get that.

OP- best of luck to you.

19

I’d target some of the many private colleges that offer 50% off of tuition merit scholarships. That would still cost you 28K to 38K a year, but that is much better than $50K to 60K a year. That also means pushing your son or daughter to take standardized tests a few times, and to do serious prep for them.

20

There is a distinction between what you can “afford” and what you can “pay for;” they are not the same. It sounds to me like you can make the payments but might not be able to afford being full-pay if the loss of those funds to education is going to interfere with your retirement picture, standard of living, debt ratio, solvency, peace of mind, digestive health, etc.

We went through this angst for high school instead of college, spending $50K+/year for boarding school when we were in our mid-fifties. We could “pay” for it, but weren’t sure we could really “afford” it as it meant temporarily stopping all forms of saving (401k, 529, emergency funds, etc.) at a time in our life when those things mattered very much. We had to sacrifice every single penny of one income and try to live on the other with no inheritances in sight. It was a VERY tight four years. If there were “special” circumstances, it was considering the sanity and morality of potentially spending close to a million dollars to educate one kid from ninth grade through college graduation if his chosen college also cost somewhere in the $50K range. That just sounded nuts to us. At the time, I shared my unease among my friends on the boarding school forum:

http://talk.collegeconfidential.com/discussion/comment/14478203#Comment_14478203

Of course, when I posted that, I had no idea where our son would land for college. In a twist of irony, after all that education saving, spending, and TUMS, he chose the military and is attending a service academy for “free” (not counting the potential for the ultimate sacrifice), so we ended up about even financially, having paid college rates for high school and not having to pay anything for college but of course, we couldn’t have known that at the time, so we struggled with “affordability” as we prayed for good health and good luck. It’s all hindsight now, but I certainly understand your hesitation and am happy to share the TUMS.

One thing I would say to you as you weigh your options and decide what to do is to consider that you are only in your late forties and, unless you plan to help with grad school (we never did), this is only a four-year “hole” in your savings which, as one of my BS friends kindly pointed out to me, is a first-world problem indeed. Though you can’t get back what you’ll spend over those (hopefully only) four years, most likely you will have the option to work long enough to right your retirement picture and stabilize all those other buckets that may go temporarily under-funded. Good luck as you decide what makes sense for your family.

Oh, any regrets? This doesn’t apply to you but, had I known my only child would end up in the military, I’m not sure I would have allowed him to go to boarding school at 14. He is really, really “gone” now. We only see him a few weeks a year. Civilian college might have given me more time. No regrets about the stellar high school education though.