I agree that with 2 kids it may be advisable to stash at least $100K into 529 plan.
Obviously, OP can bankroll Rutgers or TCNJ at full price from the current income but If he wants/needs private or out-of-state college(s) for his kid(s) then dedicated savings make sense. Even with BS degrees in Europe plan, this money can be used for graduate degrees.
Rutgers gives big merit scholarships to good in-state students. Instead of going abroad it may be worthwhile to attend Rutgers for free. This is what children of immigrants do.
The discussion about 401k contributions being counted as income are the FAFSA rules for current filing, and only the rule for federal aid. These folks are so far from receiving federal need based aid that it isn’t worth discussing. If things stay are they are now, it doesn’t matter if OP + spouse make $253 gross or $233 or $273 - there will be no federal need based aid.
Any college can consider any assets, 401k contributions, equity in a home that it wants to through the CSS. OP can get a rough (very rough) estimate of what his kids would get at Harvard or Rutgers or the community college if the kids were to enter college next year. It might be similar in 6 years, it might not be.
OP asked if his kids would receive aid. If he meant need based aid, it’s not very likely except at the most generous of schools, so at this point he should plan on receiving none. In 6 years he can make all kinds of decisions like he’ll only pay an instate rate, that his kids should go hunting for merit aid, that they should go to Europe for free, that he’ll be happy to liquidate some savings (401k or other), that he’ll fund college out of current income. If he starts two 529 plans right now, he’ll have yet another choice.
OP can only make decisions based on what he knows now, that at this income/asset level, there will be no need based aid. Happiness will be if, in 6 years, his kids get full financial aid somewhere or a big scholarship or tuition is lower than he planned for (hahaha). He can then spend the money saved for college or keep his retirement funds or head to Vegas.
Only in NJ is Rutgers not valued. It’s just the nature of familiarity. The kids from NYC want to go to Boston. Kids from Boston want NYC. Kids in California want to leave and and OOS students want to go to California. In my state Brown is no big deal because it is just so familiar.
There is no one answer. Even for wealthy kids. Plenty of wealthy families are making practical choices. Especially if the students are interested in advanced degrees/ doctoral programs.
“The discussion about 401k contributions being counted as income are the FAFSA rules for current filing, and only the rule for federal aid.”
They all add non-taxed income to taxed income for institutional aid calculations. You can see that if you play with fin aid calculators.
^^But you can’t say that no CSS school will disregard the corpus of the 401k account like FAFSA formulas do. If you have $500k in a 401k but have no income and qualify for a Pell grant, that $500k asset is not considered for FAFSA. At a CSS school, that same student would get the Pell grant but the school might find there is no other need to be met.
and which school is that? Any first-hand experience with $500K in retirement accounts affecting financial aid?
“Rutgers gives big merit scholarships to good in-state students.”
Can you clarify this with examples and known numbers for me please?
My kids are both at NJ public schools and applied only to NJ public schools as that was what we could afford. They are excellent students, honors program, 3.9 GPA juniors at Rowan University.
Only Rowan offered significant merit aid.
Daughter was given 11,500 a year for 4 years on a COA of 28,000.
TCNJ offered 3K or so,
Montclair 0,
Rampao $10,000,
Rutgers was maybe 4K.
All COA for these schools was similar.
*I believe Rutgers had a larger amount offered to proportionally a very small number of incoming freshman for 1450+ SAT scores. My kids decided on a smaller classroom size, so we stopped looking at Rutgers, but I like to know more, which is why I’m asking!
Will your kids qualify for need based financial aid? Perhaps not.
Will there be a number of affordable college options for them when the time comes? Absolutely.
@NJRoadie,
“Rutgers gives big merit scholarships to good in-state students.”
Can you clarify this with examples and known numbers for me please?
My first-hand Rutgers experience is dated but I can share it.
My son was offered a full ride (Tuition/fees/room/board) in 2009 and he took it. That year there were 90 students attending on full-ride (do not know how many were offered and what the yield was). He had almost perfect SATs in one sitting and lousy GPA in the full IB program at the top NJ public magnet school.
With much weaker credentials but higher GPA from an average NJ public school, my daughter was offered 5.5K in 2014.
These full scholarships are competitive but I doubt they completely disappeared. “Good student” was obviously a stretch. You need to be somewhat special. Admission rate to my son’s HS from our town was lower than the admission rate to most US colleges.
In our state (PA) you can get a tax deduction for 529 contributions up to $14,000 per parent per year. Since you have a few years, contributing starting now might be a good idea.
@gearmom - Thanks for your kind words. Since yesterday my wife and I learned a lot about need based scholarship and merit aid scholarships. We aren’t obsessed about top privates. If our kids are OK with Rutgers, we will be OK. It will be their choice and we will be there to support them whatever they decide.
@GnocchiB - I am glad if our story brought a smile to your face. There is one piece I like you to read about my mom. Here is the link. I hope you like that one too 
http://talk.qa.collegeconfidential.com/discussion/comment/20400257#Comment_20400257
It is now clear to my wife and I, our kids have little chance to qualify for need based financial aid. We will do two things. Start a 529 for each kid seperately and put down $1.5K per month per kid to their 529 accounts. We will also move half of our liquid cash($25K each per kid-total $50K) to their 529 accounts.
This is a great community. I can’t really thank enough to everyone who posted and who reached out to me thru Private Message.
Only move your liquid assets if you know you will not need that money for anything but education expenses. You also might check any state income tax benefits as there might be a deduction available to you, and it might have a maximum so moving the money over several years might benefit you more.
Buy life insurance and disability insurance, if you don’t already have them. Even if it seems highly unlikely you would be fired or laid off, something could happen to you or your spouse that would make you unable to work.
@NJRoadie I know the valedictorian of my son’s class (2017) was offered a free ride to Rutgers in the Honors college. I know she scored in the 1400’s on the SAT, GPA was 103 (our school reports out of 100).
@twoinanddone - Thanks for the suggestion. NJ doesn’t provide any tax benefits for 529 plans. That’s why we will move everything all at once.
@rosered55 - Both my wife and I have life insurance but not disability insurance. We will look into disability insurance for sure. Thanks for the advice.
Double post. Deleted.
This has been a nice discussion but honestly in your situation you should see a professional money manager to get the best possible advice for your situation. Clearly you should be saving robustly now to be prepared in 6 years. Even if your kids end up going to Europe for college there are incentives to paying for the full year in advance plus having the money on hand to be able to pay in full when the exchange rate is advantageous could save you a lot of money. Typically the best investment vehicle would be a 529 but NJ offers no state tax advantage so it may be a different story for you. It also might be better in terms of taxes not to pay off your mortgage but again you need to find a real professional to give you solid advice for your exact situation. We saw one when my kids were little and saved the amount they told us to save monthly and it worked out pretty much perfectly even though at times it was painful to cut back on spending.
For sure do not default to a 529 if there is no tax benefit. Make sure you leverage any other tax saving options you have and compare running costs and earnings. You might be as well off or better in your own investing portfolio. Go to bogleheads.com and get a breakdown of your financial picture that might be more useful than on CC. They will have a big picture opinion.
@ArdenNJ
Random memory that if you have a 529 Plan in NJ your kid(s) become eligible for a scholarship, but you have to have a 529 in place for 4 years or so. This is vague and unhelpful :0 but maybe sends you looking for verification.