@thumper1 yes we won’t qualify for any aid when #2 goes into school I am pretty sure. Yes, well we had lots of options and dream school acceptances with not nearly enough merit aid and then two she wasn’t happy with-- it was in state with no merit (PITT) for just about the same price as OOS honors with aid (UMD). Those were our affordable choices. The others we could not consider.
A lot of people do not understand what they sign on for when they open the 529’s (ours is not structured like Sybella’s) and folks definitely think their returns are guaranteed when they are not. For someone who is going to supplement the 529 with additional contributions during the college years, you’ve got a little wiggle room. For the OP- who it sounds like is counting on every penny in the account- it’s important to know exactly what you’re invested in.
The answer depends on the interest rates of the loans. If the gov’t loans are alot less than the loans you will pay in the future, then it makes sense to take the gov’t loans now ($5,500 first year, etc). The gov’t loans typically have lower interest rates than you can get with a typical unsecured loan. I am not advocating for/against using HELOC, but those loans being secured by your house probably have a lower interest rate than all the the loans. Other than the gov’t loans, the rest I would take from the 529.
I did not read anything about Ds major. Eng and STEM majors may not have time to work much during the school year. I would not count on summer earnings being applied to tuition til the 2nd year and you see how things fall out. That money may be needed for books, and incidentals. Good luck!
There is no such thing as an ‘FDIC account.’ The FDIC is an insurer, not a bank, that insure deposit accounts at many banks, but not at brokerages. The FDIC does not set interest rates on accounts.
OP - I would use the 529 up first.
Will your daughter co-op? That can greatly help with costs. My daughter is contracted to start hers next year and will be earning a significant amount. Depending on her field of engineering, it may be enough or close to it, for her not to need the loans.
You are wise to be focusing closely on the costs with your first college bound child. We made the common mistake of being so ebullient and optimistic about things that it was “money be damned”, it’ll work out. We paid for that attitude for a very long 14 years, and with our many kids, a lot did not work out.
You have a $13k discrepancy between what you will owe for your DD to go to UMD, and what you have in scholarships, 1/4 of current 529 balance and the $5500 your daughter can borrow from Direct loans. That’s what aim surmising from this thread. Assuming you are taking the estimated COA directly from the school and it includes all the extras, fees , etc for her engineering major. Until she gets her exact room assignment, there is likely some Uncertainty there. If she ends up in a triple or quad, for example, as my one son got one year, the cost can be lower. Also some living arrangements even provided by the college costs more. Then, there is some flex with the meal plan. My kids eat a lot so, there wasn’t much cutting corners in that cost. My friends with DDs found savings in that quarter. No sense paying for full breakfasts, for instance, when you know your child just grabs a yogurt and a coffee. You might want to discuss with her the high expense of Latte breakfasts, by the way. They add up quickly and substantially
You can avoid accruing direct loan interest for a while by borrowing the money at the end of the year. Interest starts the instant the money is dispensed. Most schools have a payment plan for a flat fee that could be less than the interest. Find out what that payment schedule is. Also when the school payments are if you do not go on the payment plan and the late fees if you miss that deadline.
You can save some money on state/local income tax by funneling any college payments through the 529. If you aren’t using up the max contribution amounts, contributing to your other kids’ 529s, that’s a strategy. PA state income tax is about 3% and there is local income tax of about a %.
There should be a firm understanding of what your daughter is expected to cover and what is free spending money to her. I’ve seen terrible fights about this Some kids do not understand how tight the family budget is drawn when they are going off to college. It’s so easy to start out being generous with our kids in this, and that’s not doing them any favors when you realize you need to tighten the strings. For example, if she has been gifted the cost of books, do ask that she puts half the amount towards other costs. That’s the mindset you should instill because you have 3 more kids at home that may need college funds too. Also if she pays YOU a portion of the college costs, you can be sure that amount is going directly towards that COA nut, and you can, maybe even run it through the 529 for even more saving.
Term insurance in yourself and on your student is a consideration if you go into one of those co-signed student loans over and beyond the Direct Loans. Because each of you are often responsible for repaying that loan even if the other dies. Not the case if you take a PLUS, which is a parent loan. But the interest rate is up there and starts running the instant you take it out . But the insurance factor is built into it. Because
of the high interest rate, perhaps you should take that out at the end of the college years, rather than at the beginning , since interest is capitalized on-that loan.
I would not expect much more from UMD when your secind child enters college. Maybe subsidization of the Direct loans while she’s in school.
Good luck on this journey. We finally arecat the end of it.
@twoinanddone Here are the billable costs the OP posted.
It’s about $48,000…but I don’t believe UMD has actually set their costs for the 2019-2020 school year…so the actual costs could be higher once set. Maybe that’s why the OP is using $50,000 a year as their cost.
https://oafa.pitt.edu/financialaid/costs/
It’s too late for this…but tuition/fees/room and board for Pitt would be $32,000 or so at full pay for engineering. UMD net cost for this family is $38,000.
I hope they can craft a plan to pay the difference in costs.
In other threads, the OP indicated that this student would be doing co-op terms…and if that is the case…then yes…use the 529 money to cover the shortfall now. But that’s sort of counting one’s chickens before they hatch…
It’s likely to be more than $50k. And there is some hefty engineering tuition differential, maybe junior and senior years
It comes down to the fact that the OP and her DD need to come up with an extra $1000 each month. By being extremely disciplined, could shave off a few thousand a year but $12k is a lot. Especially since costs go up each year and MD hasnt released its figures for the upcoming years. Gotta hope they don’t spike the OOS rates. Hope she gets one of the less expensive rooms
How much is gifted for books? I know my son (finishing freshman year) needed more book money than we first allotted. Going into sophomore year, we have a better handle on what things cost. S did work on campus for his own spending money, but we pay for travel and the extra book costs. He’s in OH and the family lives in Georgia.
Our kids were responsible for spending money and books. Spending money meaning for supplies including necessities , trips other than home , We figured 3 round trip tickets home for him. But we visited him too and frankly paid for a lot of things as parents do. In retrospect, we should have been stricter about their money because they made quite a bit and mainly blew it except for one. They could have made a nice dent in expenses. Our backs were not up against the walls enough to have been stringent but I’m not sure that was any favor to them.
The 50k figure is the 2019-2020 Estimated COA per the UMD website. Assumption I want to go on is that we have what we have now the 529$ and the merit$. I do have expectations of course but I am not going to calculate them into a financial plan. So what I am reading here is that it would make most sense to pay out as follows:
Fresh:
1st Semester:
Merit/529/Kid Contrib
2nd Semester:
Unsub Loan/Merit/529
And so on until we run out of 529 and then we have to pick up with either our own outlay, loan, internship money etc. UnSub Loan always in the 2nd semester and pay the interest? Do they split the Merit $ by semester usually?
@cptofthehouse I am not sure what you mean by the payment plans for the schools? If we have a 529 do you use a payment plan to pay with those fund? I thought you just paid a lump sum? Thx for your details!
With a payment plan, the college doesn’t care about the source of the funds- they just split whatever you owe into 10 equal lumps and bill you monthly. It’s then on you to get the bill paid for each month. If you are kicking in with your own outlay, some people find it easier to pay monthly then assemble the entire payment in August…
Payment plans have some extra charges usually. UMD has a 2% fee for CC payment, if you have double rewards CC that 2% is negated, payment can sit in the CC grace period (60 days potentially) and earn at least 2.2% in an online interest earning savings account (or CD ladder). If you are using a payment plan, you swallow that enrollment fee but still can play the same game with the interest earning money with your CC. This is not for risk takers though, it is just a fun way to let your tuition money earn a bit more interest. One of my kids schools has no fee for CC so it is even better LOL.
Not all payment plans are 10 months. One of my kids had one that was 3 payments per semester.
You can take the loan in the second semester, but it won’t be split that way on the FA page. You’d have to turn it down 1st semester and then ask the FA office to add it to the second semester. I’d take it each semester just like it is awarded. I found the fewer ‘special requests’ to the FA offer, the better. The amount of interest that would accrue between Sept and Jan on the loan wouldn’t be that much, and you’d lose that amount from taking more of the 529 money for the fall semester anyway.
Yes, school awards like merit are split per semester. You can’t move it all to the fall or spring.
I’d split it all equally. If your daughter is contributing $2000, do $1000 each semester. She can learn to hold that amount in her account or pay you in September.
Direct unsub loans are >5% APR plus>1% origination. As you have very little mortgage left, is HELOC a much cheaper option? Also are you ATOC eligible? I think <180k joint income?