To parents of full-pay private college students

Parents Forum
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I’ll answer. Have 2 sons. One is a HS sophomore that wants to attend UT-Austin. My hope was a lower cost UC for both but my older son was accepted at Stanford so that went out the window. We pay because I think he will get connections there that will last long after graduation and he loves it of course.

  1. What is/was your income? Around 150K/year
  2. What geographic location do you live in? Southern Cali. LA suburb. Not cheap.
  3. What is your retirement funding situation? 401K less than yours. will have to work past retirement. Bummer but that's life.
  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) No. Just felt like this is an opportunity that you can't pass up.
  5. Any specific regrets/advice? Regrets? I wished that we could have saved more for college. Very impressed that others on this post sent their
    kids to college on savings. At the end of the day most parents want their kids to be in a better place than ourselves I think each individual kid is different. I could not picture my younger son at Stanford. Would not work. But if they love the school I think some sacrifices are worth it to help them go.

@woods1234 best of luck whatever you choose.

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One thing I would add to this discussion is that for many parents the support for our kids’ education or other expenses doesn’t stop at college graduation. Our older child chose not to seek an advanced degree; our younger one did choose that.

The older one now earns hugely more money per year than I ever did. The younger one graduated from college only to be hit a couple years later by the massive recession. She chose to seek another degree beyond her BFA, studied for the GMAT and got a very good score, and was admitted to a top 10 business school. Only problem: how to pay for it. Federal loans for graduate programs have usurious interest rates, of which she only came to understand the full implications after she had earned her MBA (as well as an MS in a cognate area). Result? Debt that equaled the cost of her undergraduate degree. It really weighed her down. What happened next? We paid that off – about 5 years after she had finished her BFA.

Our kids remain our kids for a long time. We hope they become economically self-supporting right out of college. That doesn’t usually happen – from my observation – so we have to harbor our resources until they do.

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Even if OP is not whom they said they were, this thread has been very helpful to me.

Thanks especially to @ChoatieMom . The concept that there is a difference between “what you can pay” and “what you can afford” gives me some language for putting thoughts into words as to how to stretch the budget to accommodate having two in college in fall 2018.

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OP here

To answer the concerns a few raised about my “identity”, I am the parent. It looks like my daughter had used my account (I might’ve given her permission, don’t remember frankly) a few years ago. As I said earlier, she is close to graduating (early) from college, and is completely out of the CC world. Either I was aware at that time but forgot about it, or she didn’t tell me. Anyway, I got a “warning” from the moderator for violating the usage terms, and I promise to be more careful going forward :slight_smile:

ALL of the experiences people posted have been very valuable to us. I hope others find it useful as well (and please keep them coming!)

To add further detail to our situation, we have about $300K saved outside of “retirement” accounts (No other debt except a very small remaining mortgage balance). But because our retirement account balance is somewhat “weak” in my opinion (we haven’t always been earning $200K, my wife didn’t work for a while, bad investment, no matching at a startup, etc), we consider the $300K to be more in the “retirement” bucket (at least most of it). Thus, we certainly have the ability to pay the full tuition, but do we want to do it at the expense of possibly “jeopardizing” our retirement fund? That is the question. And I really don’t know how to answer the question “Will you need the extra $300K (plus growth on it) at retirement?” (but I guess that is part of the answer I have to come up with for our situation)

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@woods1234 so, if child number one is almost graduating from college…how did you fund that kid? And since that kiddo will be done with college before the other starts…can’t any college help be diverted to student number two?

The $300,000 in non-retirement savings will add more than $15,000 a year to your family contribution. But you already know that.

46

@thumper1 , As I said somewhere earlier, my D (first child) has been attending a large private university with a full tuition merit scholarship. This was the right college for her in our opinion (we thought so at the time, and we are happy with how it’s turning out for her), and she chose it. For her, full price college was not really an option. We have been paying for her room&board&etc from our income, and a little bit of 529 we had for her.

Yes, the $300,000 wipes out any slight need-based aid we might be eligible for based on our income

47

I think you guys need to run some of the online retirement guides, using your ages, actual numbers, etc. to see what spits out. If based on your non-retirement numbers, you are looking at a very limited income once you retire and are going to be living close to the edge, you do your kids no favors by tapping that 300K for college.

OTOH, if you are looking at a conservative estimate of your lifespan, interest rates, % to tap annually, etc. and it seems close to what you’d need for the kind of life you want- then it looks like some of that 300K could be put towards tuition.

But nobody can tell you if a comfortable retirement means 60K or 90K or whatever. Do you want to downsize? Do you want to travel? Or will one of you keep working (which many people do) even after 65 or 67?

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Do you have 20 yrs more to save for retirement? If so, then you’re in a good posiition. I think you can do full pay, but it sounds like you would feel more comfortable looking for merit. Maybe that’s what you should do.

49

I’ve commented more than once before that parents sometimes make mistakes when they compromise their retirement accounts to cover their kids’ college costs. Specifically it’s a bad idea to draw cash from a 401k or IRA for this purpose, since they have a tax advantaged status and can continue to grow until you retire or reach age 70.5 when you are required to start taking minimum distributions.

This doesn’t mean that you shouldn’t make sacrifices to support your kids, whether it’s for college or for personal financial issues (e.g., costs of healthcare). We certainly did. But we never tapped our 401k (403b). However, one “sacrifice” that I made was to keep working past Social Security (SS) retirement age. This allowed the SS pool and the 401k and 457b to grow some more.

To the OP’s issue of the $300K, I agree with the recommendation above that the OP make a careful calculation of expected retirement income – assuming that we don’t head into another recession – and perhaps consult an advisor to do that.

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   Which tactual target colleges for full freight would be up for grabs to the OP? This really IS a factor IMO.
51

We are currently full pay at a top private. We only have the one child.

1. What is/was your income?

AGI about $130K. We live well below our means and are completely debt free.

We had $55K in college savings (half in a 529 plan, the rest in the bank).

2. What geographic location do you live in?

Central New England, not sure what that means in terms of relative cost of living.

3. What is your retirement funding situation?

Mid 50’s, have probably around $500k in qualified retirement plans, and other savings/investments that (in our minds) we always thought of as for retirement, but are not in qualified retirement plans. So far have been continuing to contribute fully, taking full advantage of employer’s match. We do have a second career lined up for our “first” retirement…

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)

Our choice was between this $64K top-ranked private, or another lower-ranked private at half the price (due to merit scholarships). After attending the admitted student programs at the schools and carefully comparing the outcomes for graduates (as best we could determine), the difference between the schools was pretty stark (to us) and the more expensive school was the much better fit for our child.

We do have a relative who is kicking in a substantial amount (about 20%); we probably could cover the full costs without their help but it would involve sacrifices (for example, maybe reducing our own retirement contributions, or asking our child to take on the direct student loan).

5. Any specific regrets/advice?

No regrets yet, we are very happy with the choice we made – the school continues to impress us, more and more.

The child has skin in the game in that they are responsible for books, travel, and all other personal expenses, from money they earn working during the summer (and perhaps during the academic year, too – the college offers jobs to all students who want to work). We are only paying the comprehensive tuition/room&board fee, and only for four years.

52

So OP: do you have 800k in your retirement and $300k savings? Or $500k in retirement plus $300k outside it?

In your late 40s, 800k in a retirement account is pretty great. You still have 15-20 years left to save!!

I am single, and have about $600k in retirement accounts at 50, so you are doing well. I figure i’all work until I have enough not to!

My half of the 2 kids (full pay) tuition is from savings and current income. (I only have 1 in right now). I fit into your parameters 3 years ago, but switched jobs to earn more to be able to pay. It is a lot more time and travel, but it pays for tuition, so…

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Hi all. I’ve been lurking a bit on CC and this thread actually caused me to get off my duff and create a User ID so that I could respond. I’m afraid that college for my children is entirely in front of me so I don’t have experience to share, but I did want to say that this thread has been helpful and therapeutic to read!

We have 3 daughters (please forgive the lack of facility with College Confidential abbreviations), oldest is a HS junior. I have struggled with essentially the same question OP asks here for years. Without getting into specifics, pretty similar financial situation to OP. Unlikely to get need based aid. Fair chance of private colleges, fair chance that some on the radar will be ones that do not give merit aid.

So to build on what OP said, I struggle with: Just because I CAN afford to write these checks, SHOULD I?? What exactly is the intergenerational contract? Obviously that’s rhetorical, and I really do appreciate the comments of those who said this is a personal choice. I also take a lot of solace in those who said, we paid full boat and we have no regrets. So glad to hear that! By the way I also totally agree that using the word ‘afford’ can be a very slippery slope…

In the end in our situation it quite possibly comes down to how long I have to work. I envy those who wake everyday thrilled with what their vocation brings them, but that’s not me. I’ve got many other things I’d like to do with my time. Bottom line, the difference between paying full boat and for instance paying 1/2 or 2/3 of full cost probably means another year or two of work at the end of my career per daughter.

I can share that despite this we are leaning towards ‘if you get in and it’s the best fit for you, we’ll pay for it’ - meaning undergrad, and also with some modest amount of ‘skin in the game’ for them. Our parents did this for us (more or less) and we value all that college meant to us to this day.

Just thought I’d share some thoughts.

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OP here.

@Sybylia, I’m not sure I exactly understand your question. If you’re asking what schools is my S interested in that would be full-pay, a couple are Brown and Tufts. We are still early in the college search (but we do have good general knowledge from our experience with our daughter), so we don’t have more details.

@HRSMom, the $300K is in addition to the $800K we have in our 401K/IRA. Interestingly, some seem to suggest that $800K is somewhat weak, while someone suggested it is a very “good” amount. Remember, we have no pension whatsoever. Considering we are in our late forties, there is some more time for us. However, one of us works in high-tech field, where it’s dicey one could work into mid-late 60’s even if one wants to.

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You are in your 40’s…right? And you have $800,000 in retirement now. You have 20 more years to add to,that.

It sounds healthy to me.

56

Understand. But you are in a good place. Don’t let ppl scare you! Sounds like you’ve been frugal and saved!

PS: most of us sadly have no pension:(

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@Saint68. In answer to your central question (What do I owe to my children?), I recall what my father told me when I was about to set off to college: “We can’t promise you an inheritance, but we can guarantee that you an excellent education.” That’s also what my wife and I believed we owed to our children. We saved money to assure that our kids had good choices in where to attend college. If we hadn’t saved as much as we did, as well as received some help from my parents, we’d have restricted the college search to places that had lower costs. But because it was possible (with help from their grandparents), we let the kids dream and pick their schools without concern about costs. They graduated without any debt. And we graduated them without any debt of our own.

But then there’s the provocative but fair question: should you prolong your work career to allow your kids to have full-pay options for colleges. Oddly enough, I did that in part b/c our kids were born when we were in our 30’s, and they started college when we were in our 50’s. By the time my younger one finished her masters degree in 2011, I was in my late 60’s. I enjoyed my career, and it paid well and offered me many opportunities for international travel. I never thought I missed anything by working that long. But if someone is less satisfied with their work, or has other things they’d really want to do, then more power to them if they’ve met the core obligation to assure the kids have good educational opportunities.

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  1. What is/was your income?

Just shy of $250k now. However there were 2 layoffs in the last decade that decreased college savings considerably for the younger 2 (of 4).

  1. What geographic location do you live in?

Pacific NW. Very high cost of living area.

  1. What is your retirement funding situation?

1.2M in retirement funds, plus one pension, early 50’s. Decent home equity.

  1. 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)

We have deliberately chosen not to go full pay at 50k+ per year but instead have focused on the right school, for the right kid. It is different funding for the 4 kids and that has a bit of an impact. 2 of the kids have 2 parent savings to apply, the younger two have only one and that was the parent (me) that experienced layoffs.

Older 2 went private and OOS and were full pay. However, the sticker prices were not north of 40k. We have given the younger 2 a budget of 28k. Anything over that and they need to have skin in the game through scholarships, summer earnings, school year earnings, and loans not to exceed the federal limits. This means that there is a cap, which is about 38K all in. Our strategy has been to find schools that either 1) come in at that price tag or 2) offer enough merit to come in at that price tag. It does mean looking at safeties and matches and skipping reaches. We are all ok with that.

If we are able to lighten that load a little after the older 2 are launched, we will. My H should be able to contribute towards the youngest once we stop having kids overlap. If we are able to pay off their loans for them (if they go that route) we will.

If they go over 8 semesters it is on their dime (enforced that with the oldest).

  1. Any specific regrets/advice?

No. I personally cannot see any undergrad degree being worth a quarter of a million dollars. I also am comfortable in the fact that if we do need to take small loans for any gap, our retirement is secure, we have never skimped on that. Nor will we tap into our home equity. To me a small loan (capped up to the students federal limits) is the car I didn’t buy them and a payment I am comfortable with given the lack of savings. I also think some skin in the game is very important. Oldest is taking longer to launch than ideal and I firmly believe that a sense of urgency is missing. Reasonable loan payments mandate a sense of urgency. Putting your own work funds towards your education mandates graduating on time.

I will admit, the current top choice is about 3K over budget and we are busy looking for scholarships to meet the gap. Could we swing it? Yeah, probably. But I want to see how badly he wants it to be honest as there is money out there. He has options under budget so we will see!

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I would look for medium sized state schools or larger state schools that will give merit, and focus on honors colleges. 2 out of our 3 wanted the smaller environment and will do best in that scenario. Honors college (which is the strategy for the youngest) will get them surrounded by peers.

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We were about 1/2 pay and 1/2 merit for S 8/2006-5/2010 and full pay for D 1/2009-5/2013. Most of that time, H’s salary was under $100k and I earned anywhere from $20,000 to $40,000 gross/year. We live in a very high COL (Honolulu). Unexpectedly, SisIL helped us a bit, when she was able to. She also unexpectedly died and left us an inheritance.

H has a pension and retired (just after both kids graduated) after working 45 years. The pension is enough for most of our expenses. It was very tight financially, especially when both kids were at the private U at the same time.

We have no regrets. It was scary, but it was what we wanted to do and our kids got great educations and graduated debt-free. S has an excellent job and we hope D will soon get one too.

I’d see a fee only consultant or CPA and figure out what you can afford AND retire in a reasobable time frame (so you’re not resentful) so that you and your spouse are comfortable with whatever you decide.