I don’t have the statistic in front of me…but the vast majority of parents actually do NOT have savings for college. They don’t. And a good percentage of students attend local community or four year colleges that parents do pay for out of current earnings…plus the student Direct Loan.
So…let me word my response differently. When my son attended college…his COA was between $38,000 a year and $48,000 a year (costs went up every year). His college costs matched my net income.
By the time my daughter went to college…the costs were $50,000-$60,000…luckily I got raises…and my net income still equaled her costs to attend.
@thumper1 You are referring to your own income but was there another earner in the family? In our case, just one earner. So what we saved or spent came out of my as well as our net income. Our COA’s were considerably less than yours, I suspect because ours were incurred in the 1996-2003 period. Those costs (not counting transportation) were about $30,000-$35,000 per year for each kid. (A far cry from my own costs of $2,000 at a private college in my day.)
I’ve said it several times. MY whole net income paid for college. My husband’s paid for everything else. Basically I was working to pay college costs. So HALF of our family income went to college costs…for seven years…what fun.
No complaining here…it was how we chose to fund college. And it worked just fine!
@mackinaw yes…I think the cost difference was because of the year’s our kids were in college. Mine were in undergrad from 2003-2010.
@HRSMom yes…felt great to pay that last college payment. But I think that is the case for everyone!!
For the duel income families net income would be take home pay less other obligations. In our case we would have to stop our 401k contributions and pay about 50% of our net income.
My net income was half of our annual income…and it was our NET income. This was after taxes…and after my required retirement contribution. Required.
In my case, I also continued to contribute to my 403b account…so my net incime dos not include that either.
My net income was my gross minus my retirement account contributions, minus mandatory health insurance contribution, minus taxes state and local…minus FICA.
It was just enough left to pay for the college bills!
But like I said…we were a two parent incime family…and the other parent net pay paid our other bills.
I gladly worked to pay for our kids to go to college.
To @annana need based financial aid is NOT based on your net income. It is based on your family adjusted gross income.
Who was it, Augustine? Lord, make me pure - but not yet! Contemplating our near future, DH and I have certainly had our moments of wondering whether our longtime habit of living within our means and putting our efforts into accumulating assets vs. fabulous vacations, nice cars, and ephemeral luxuries over the years won’t wind up biting us in the butt when it comes time to finance our two Ds college educations.
Ultimately, I guess it is what it is - we struggled in the past but are doing better now, and now is what counts. At least we’re in a position to be able to offer our kids a future that doesn’t include crippling student debt. Even if we feel the squeeze in order to be able to do so, I’m ok with that tradeoff. And if I wind up subsidizing some other kids along the way, I figure most of them are deserving even if a few are gaming the system. In the balance, I guess I’m ok with that too.
My entire net income goes to D’s college and S’s private school costs. Luckily, my net income is only about 1/3 of my husband’s net income. I work part-time. If we are truly squeezed for money or we want goodies, I can work full-time quite easily but right now, I’d rather have time over money. Essentially, I’m working for retirement and education costs.
After all deductions from paycheck approx 22%. We were pay as you go but S got way more in FA then we expected. The 22% was the amount we knew we could pay OOP for an instate public. The private college turned out to be the same after grant, We never saved for college and chose to fund our retirement. We also sent S to private high school instead of saving for college.
I’m hoping that our 529s, coupled with investments, will cover the expected parent contribution for the first child, who is a rising senior. A small remaining portion of the 529s will cover part of second child, a rising junior. I’m hoping with two in college at the same time, the expected parent contribution comes down. I am going back to work expressly to pay second child’s college costs and will probably chip in up to 10% to supplement funds from the 529. We’re aiming or schools in the $25-35K range. I do not anticipate any need-based aid, and although I’m hopeful for merit aid, I am not planning for it either. So grateful the 529’s are fat.
"at. Those of us who live frugally and saved for kids’ education are massively subsidizing those who replaced cars, went on vacations, and redid kitchens and baths. With the reduced use of loans in financial aid, those of us who spent 20 years saving up have in essence " - Although I understand your concerns, that’s only partially true. The EFC formulas are heavily weighted by Income, with only partial dependence on savings (with 401K savings excluded).
Exactly. Unless you have really huge assets stowed in non-retirement accounts or real estate, your EFC is going to be based primarily on current income. So if you haven’t saved, and your combined salaries don’t put you into a position to provide up to 60K per year without feeling it, when your kids go to college, you’re looking at a significant reduction in lifestyle if you are accustomed to spending to the top of your take-home pay. Colleges don’t care about your home equity loans for kitchen and bath renovations, or your credit card debt, or your car payments.
The bulk of my take-home pay has gone for college costs over the last 4 years. We sent the last college payment in Jan. We are looking forward to feeling so rich next year!
for us, about 25% of take home pay will go to college costs for 2 kids. we havent quite figured out how we will do this yet. we can cash out some investments (not retirement); we can do a home equity loan, or we can tighten the belt and have younger kids quit all select sports and lessons. WE DID NOT SAVE ENOUGH. (at some point there will be a little inheritance $ for the next 2, so we’re not super worried. but that’s not fun to think about.)
My question to you then is, what of people who are not maximizing their earning potential/income:
Families who have a stay at home parent, one income, and therefore receive need based aid whereas if both parents worked, they would not; and what if a parent has a high powered law degree but chooses to work as a public defender instead of being a partner at XYZ firm and now qualifies for need based aid. Are they being ‘subsidized?’
I remember being happy that my kids were 5 years apart thinking that we would only have one in college at a time. If I’d only known!
The system is what it is, and in reality, this all only applies to the relatively few schools that meet full need, and even fewer that have a no-loan policy. These schools are generally difficult to get into. The vast majority of colleges do not meet full need, and there, those who have not saved up will feel the sting.
To answer OPs question, we will be spending about 40% of our after tax income for college expenses for our last child. DH and I are low maintenance and can live quite comfortably on the remainder. However, my income can potentially fluctuate quite a bit, and if it goes down considerably, we may ask for a subsidy (meets full need school :D). Or we’ll take out a loan and pay it back as it works for us. Last one, yes.
About 30% of current net income, but in reality about 10% of current income due to saving for college over the years.
ETA: And as for the idea of our saving over the years “subsidizing” others who didn’t… that’s a load of BS. We would be paying about 30% of our current income had we not been saving. No thanks; we appreciate the options afforded to our Ds by planning ahead financially.
I have a question about those referring to required contribution for retirement. I understand recomended (to get employer match, 10% wise minimum, etc.). Is this required to pair with a defined contribution benefit? Just curious.
Break, break: Net income is gross minus taxes including FICA. Subtracting anything else starts to become discretionary income. I can’t conceive of many cases where discretionary matches net income but net income is a better standard.
Still pre college here so costs aren’t defined yet. I could see around 20-25% as a realistic number.
