<p>ynot, if anything over the next several years financial aid will get tighter, as endowments shrinks. You need to assume that you will pay at least your EFC at private colleges if relying on need-based aid alone. Except for the handful of prestigious schools (Harvard, Stanford) we’ve already noticed, in most cases the private colleges set their level of expected contribution higher than the EFC. What you have read concerning better financial aid at the prestige schools is simply that they are more likely to meet 100% of need (to the EFC level) and more likely to weight their aid toward grants rather than loans.</p>
<p>However, in your EFC bracket your child is likely to do better seeking merit aid than relying on need-based aid. That is, it will be easier to find schools that will give your kid a $10 or $15K scholarship than to find schools that will give the same amount in need-based grant money. (Merit scholarships from colleges at that level are fairly easy for a high achieving, high stat student to come by – though the full tuition and full ride scholarships are a lot more elusive). </p>
<p>Thumper is right, look at it as a cash flow problem. If you have enough on hand to fully fund your 401K and fully fund college… then keep maxing out the 401K contributions. Otherwise, I would suggest that you budget $40K for the first year of college and plan accordingly. (Remember – even if the FAFSA EFC comes out to $35K, there is no guarantee that the college your kid attends will meet that – they have a way of doing the math differently). </p>
<p>Do keep in mind that your retirement contributions can be delayed until April 15th of the following tax year. (I believe this is true – you may need to double check on that). Your kid will know by April 1st what colleges have admitted him, and you should have financial aid offers in hand within a week or so after that. However, your EFC will be determined by in part by the cash on hand that you have in January when you file the FAFSA – so you don’t want an extra $31K sitting in your bank account waiting for your decision. So I’m just saying to hold back on contributions if you think you will need the money. </p>
<p>Do keep in mind, however, that you won’t NEED the bulk of the money until July, and many colleges offer tuition payment options that let you pay in monthly installments (usually with a small extra fee tacked on). So you might be fine to make your full contribution for 2009, prior to the time you fill out the FAFSA – but then hold back on any more contributions in 2010 until you see the lay of the land financially with the college admissions. Your kid may be offered great merit aid at a fairly prestigious school a notch below Ivy caliber – or your kid may end up opting for a public university where COA is well below your EFC.</p>
<p>We made the decision to continue to fully fund our retirement while paying for college. This required us taking some loans for college costs for our two kids. Our reasoning was that we could use our retirement income to pay off the loans if necessary…but if we stopped contributing to our retirement…those retirement accounts would never be the same.</p>
<p>So…we will have some loans to repay while we work and when we retire…after our kids finish college. That worked for us. </p>
<p>We took the stand that college was paid for with past earnings (savings), current earnings (income) and future earnings (loans)…and we used ALL three in our payment plan.</p>
This is not true for 401k’s when you are an employee working for someone else, because your contribution is funded via payroll deductions. If you are self-employed with a SEP 401k then you can delay the contributions.</p>
<p>ultimately its up for my S to decide whats best for him. no debt at public university or around 25k a year for a prestigious private one (im willing to pay around 15k). Mind you he wants to attend med school so add another 4 years to that phewww.</p>
<p>lets hope he can get into HYS… best of both worlds in terms of academics and price.</p>
<p>I’d have an honest chat with DS. $100K in undergrad loans for a would be doctor is crippling. It will compromise his life for many years. It would be bad enough now, but with national health care looming it’s just crazy IMO.</p>
<p>Notrichenough – there can also be an issue with some 401Ks, that if the employee does not contribute at least x% every pay period, he or she does not get the maximum match. My employer has end of year catch up – but one should check.</p>
Nothing in that article changes the fact that Harvard still has $28 billion at least… it’s kind of comical to talk about “collapse” when it only went down 25%. My 401k went down more than that, and I’m not running around crying “the sky is falling!” Cutting jobs, cutting classes, increasing class sizes in a reaction to the falling endowment lowers them to the level of a 2nd rate corporation that is desperate to cook the books so next quarter’s results are a penny better, in hopes their stock doesn’t get crushed.</p>
<p>Harvard has a very, very real cash flow problem. One obvious answer? Collect more tuition dollars. If you were counting on your 401K to live today, you’d be facing very real cuts like Harvard.</p>