What are you talking about…Harvard gives “25% off for the second child in college”. That statement is not particularly helpful. Harvard computers need based aid based on the income and sets of the parents…and many applicants get FAR more than a 25% reduction of costs…due to family finances.
But for,this family…they earn in excess of $250,000 now. I don’t know whether that is before or after taxes…and whether that does or doesn’t include the 401k contributions for the year. And we know nothing about other assets.
It’s very possible that this family will be full pay for most colleges.
$253K gross income. This also includes our 401K contributions. No assets besides what’s in 401K. We also have some emergency cash but it is less than 100K
@thumper1,
You do not have to lecture me on fin aid at these colleges. I do have a first-hand experience that you do not have.
Harvard fin aid calculator shows that they discount parent contribution by 25% for a second child in college for a family with a $250K in total income and minimal assets. Not by 40% like you claimed and not by 50% like I erroneously posted originally.
To a family with $250K AGI and $285K total income and 2 kids in college, Princeton still gives 30K+ of financial aid. This is impressive.
“5. The money IN your 401k won’t be counted as an asset…but the money put INTO that account for the year of your FAFSA and Profile WILL be added back in as income. So…if your income is $250,000 and you each contribute $20,000 that year…your income for financial aid purposes will be $290,000.”
How can the FA profile calculate that your income is higher than it actually is just because of how portion of it is used? As I understand it, 401K annual contributions are counted as part of your income and are added back in to the FAFSA and CSS profile data because they don’t show up on a W2 as taxable income. I think a better way of saying it is that colleges consider the amount of money you contribute to a 401K each year as money that could be available for college costs, so it is counted as part of your income for financial aid purposes.
The acceptance rates at Harvard and Princeton are pretty low. I’d expect to be full pay and hunt for guaranteed merit aid at schools with higher acceptance rates.
@ArdenNJ, you need to plug in exact numbers into the fin aid calculators of all colleges you may be interested in and see what they show. Pay attention to the pre-tax retirement contributions for the year - you will be asked to input them somewhere and they will be added back to your AGI.
The safe answer is that you will get no meaningful if any FA. The whole lovely meander down the lane of big endowment schools is a distraction really. If you are citizens or plan to be citizens and plan to stay, then a good 529 or the best relevant savings vehicle is probably the way to go. If you can find creative ways of tax leveraging/earning on your investments that are better than the 529, then that might be better should you not need it for education in the end. If you have plans to leave the USA then this is something you need to consider.
Try bogleheads or your FA. (You and your wife might consider backdoor Roths for some savings if your 401K is maxed each year).
@Tanbiko - Understood. Will start my research soon based on the advice on this thread. Some terms are so foreign to me. I will have to learn. Thank you for your contribution. Much appreciated.
@austinmshauri - Believe me when I say this, I never uttered words of Harvard or Princeton until it was mentioned. Every parent wants the best for their kid. So Princeton is our dream school as parents but do we think they will get accepted for sure? Not by a far mile. We accept this fact. All we want as parents is to be ready if and when they get accepted by an expensive private school.
@Sybylla - My wife and I are also US citizens and European Union Citizens so are our kids. We will do our homework regarding savings now. Thanks for your advice. Much appreciated.
@blossom - Understood. Here is the best picture I can provide. $253K combined gross income. Mortgage at 2.75% fixed and only 5 years and 11 months to go before we pay off. Current home value $781K according to Zillow. Liquid Cash at bank is $94K. We only own our current single family home. No other assets or business. We expect to be in similar income levels. Both my wife and I are in our current jobs for a long time now. I work for the same company for the past 15 years and I expect to be employed there until they let me go due to age. And when they do, they will pay me a severance based on following formula. Years of Service times Age divided by 12. This is number of weeks multiplied by my weekly gross salary.
@LeastComplicated you explained it right…but so did I. the 401k contributions reduce the income…so for financial aid purposes…those contributions are added back in as income for financial aid calculation purposes.
On your tax forms…your income does not include contributions to your pretax retirement accounts.
@BelknapPoint maybe you can explain this better than I am!
Keep in mind that the EFC everyone is talking about is the LEAST you will pay since most schools gap (do not meet full need). Most of the schools that meet full need will require additional financial information (CSS Profile is the most common form). These schools will look at all your non-retirement assets and calculate an EFC based on their confidential formula. Many of these schools will also count a portion of your house as an asset.
OP’s family did not even reach top earning years yet. By the time the kids apply to college family income will be well over $275K and chances for need based aid will be slim.
OP has to decide if it is necessary to provide their kids with this American private college “experience” that will cost at least 8 x 80K =640K and which colleges and majors may justify this price tag. As OP lives in an NJ town with $871K houses the pressure in high-school to attend such a college will be high.
As OP is from the Eastern Europe there is a chance that he commuted to his college on a city bus and the world did not end. There is also a chance that Rutgers New Brunswick (much maligned in the OP’s town) is a much better University with much more resources than what OP has attended. Nevertheless the OP did quite well in life. Go figure.
OP, I commend you for your financial planning 6 years out and asking good questions about what you theoretically can expect to pay since you didn’t attend college in the US. I’ve been on CC for a while now and every spring there are posts from kids and parents who have sticker shock at what they will actually be paying for. So, welcome to CC.
That being said, you will likely be in a better position financially than 90+% of the parents of college applicants, and in the US parents are first in line to finance their children’s education. I don’t think you’re asking for sympathy about being likely to have to pay full price, but there have been parent posters in the past who have substantial income and assets yet still feel that elite schools should give them financial aid. I think that’s informing some of the comments here.
Thanks @Tanbiko . You are reading the situation perfectly. We live in a town in Morris County, NJ. It is an affluent town. My mother didn’t go to school. She didn’t know how to read and write. My father same situation. Us 5 siblings all went to college. I graduated from Harvard of my country. My wife same situation. She is my college sweetheart. She also comes from poor background. I wish I am half the parent my own parents are. Future planning is my profession at work.
@GnocchiB - We are doing our best to give a good education to our kids. For my wife and I, dream scenario is for them to go to college in Europe and come back to US for masters. College is practically free in Europe for our family. But due to the town we live in, I am sure they will want to go to college in USA and they will target top colleges. It is the nature of the town we live in.
@ArdenNJ Congratulations on your family doing so well and very smart to plan early. If you’re wealthy, it often seems like you are expected to gut your assets. Of course, not every wealthy family does this. Your twins could get merit aid. There are top public schools that start at a lower price point. And your idea of them attending university in Europe could clearly be the best value. Is it important to you that they attend a private university?
Seconding that Rutgers is a well regarded university.
@Thumper I understand. When someone says “my income is X”, I always assume that is their gross income. All the OP needs to know concerning 401K accounts is that money already held in a 401K account is not counted as a parental asset. But, contributions made to 401K accounts during the tax year(s) used for FA purposes ARE considered as income that is available for the parents to use for college costs (even though they chose not to) so in the FAFSA and CSS it will have a field asking for the amount contributed to 401K accounts and that amount will be included as part of the Expected Family Contribution (EFC) calculation.
When you contribute to a 401k, it reduces your income for tax purposes. BUT that reduction is NOT there for financial aid purposes. The 401k contributions are added back in as income…to the reduced amount.
@ArdenNJ especially in these very fractious political times, your family story warms my heart - it’s so very American in the best sense of the word. Your parents must be very proud of your successes and your kids are extremely lucky to have such hard-working and forward-thinking parents.
I’m glad you found CC - it’s a wealth of information (and a great way to procrastinate)!
Start seriously saving for college. You won’t have the frequently heard excuse that “oh, we just recently began earning this high income,” so we couldn’t save for college. And, in a few years, your income will likely be significantly higher. With that income, there’s really no reason why you can’t start putting aside at least $1k per month in a 529 account…perhaps per child.
You mention that you can’t pay full freight for both kids. The calculations assume that you’d be drawing from savings, current income, and loans (if necessary). The calculations do not assume that you’d be paying for all out of current income.
^Yes. That is the expectation that you meet your EFC through income, savings and loans (if needed). Not just drawing it straight from salary.
Are your twins going to be attending a top private high school? That will likely solidify their expectations. We live in a wealthy town and there certainly is a social pressure. You could consider public ivys like UVM. Wealthier OOS students happily go there for a cost with merit aid in the high 20s. It will depend on the twins interests and performance in school.
