I do think it is crazy to risk retirement security to pay for any experience whether that be college tuition, extravagant vacations, or funding a lifestyle out of line with your income and savings needs. Nevertheless, I think the analysis of paying $70K annually out of current income fails to garner much sympathy with me. It is no surprise these expenses will come up and should be saved for over 10+ years if someone is earning the “donut hole” income of $270K which is neither low enough to garner financial aid or high enough to comfortably pay tuition strictly out of current income. Too many of these “donut hole” families are unprepared for college expenses by choice.
@YaleGradandDad, I just find the assumptions fascinating.
Saying that a family should prepare to save to fund a college education is one thing.
Saying that a family should prepare to save to fund a private college education at list price wherelistpriceisincreasingatdoubletherateofinflationormoreeveryyear is something else.
At current rates of increase, by the time my kids attend college, list price at privates will total half a million over 4 years. I’m socking away a little in the 529s every year, but even if market returns match the historical average (and we all know that 50% drops in the market are possible), it seems unlikely that the 529s will grow to $1M by the time my kids go to college.
And even if it does hit that number, there are only a handful of institutions (with and they’d have to choose certain majors) where I would deem it more worthwhile than a cheaper undergrad+more useful/elite grad degree.
I don’t have to borrow (yet). My retirement fund will take a hit, but my son’s merit aid got all his colleges down to in-state prices, so I can’t complain. I am also hoping that my straight A student daughter will get the same merit aid + some need based financial aid two years from now. Maybe I have rose colored glasses. It’s sad when 30k a year is considered a bargain!
Someone rational please tell me if this makes sense?
D1 accepted to Tulane as well as numerous other schools with better FA. Her heart is set on Tulane and they offer her desired Double Major of Neuroscience & Public Health w/ a Pre-med track. Her ultimate goal is to become a Neurosurgeon specializing in research & auto-immune diseases.
The problem is the EFC Tulane expects me to pay. I do not want to take out loans and I do not want her to have to take out loans. My thought was…if she doesn’t find/like another school with a lower EFC, would it make sense for “Me” to do the following after getting her to sign legal documents that she is expected to pay me back. (Gosh, that sounded really harsh after I actually typed it). Lol
Pay off my current mortgage,Pay off my vacation/Rental Property mortgage, leaving me with no bills other than a car note and regular monthly living expenses, freeing up our monthly income to support the expected EFC. Our take home, after taxes is about 72,000 - 30,000 of which would have to go to the EFC. Please…Someone who has more experience with this…Does this even sound practical to anyone else. I don’t owe that much on either mortgage so the there is no tax deductions on the interest paid. I am actually brain dead and so confused with all this college search stuff, sometimes I have to question my sanity.
Someone rational please tell me if this makes sense?
D1 accepted to Tulane as well as numerous other schools with better FA. Her heart is set on Tulane and they offer her desired Double Major of Neuroscience & Public Health w/ a Pre-med track. Her ultimate goal is to become a Neurosurgeon specializing in research & auto-immune diseases.
The problem is the EFC Tulane expects me to pay. I do not want to take out loans and I do not want her to have to take out loans. My thought was…if she doesn’t find/like another school with a lower EFC, would it make sense for “Me” to do the following after getting her to sign legal documents that she is expected to pay me back. (Gosh, that sounded really harsh after I actually typed it). Lol
Pay off my current mortgage,Pay off my vacation/Rental Property mortgage, leaving me with no bills other than a car note and regular monthly living expenses, freeing up our monthly income to support the expected EFC. Our take home, after taxes is about 72,000 - 30,000 of which would have to go to the EFC. Please…Someone who has more experience with this…Does this even sound practical to anyone else. I don’t owe that much on either mortgage so the there is no tax deductions on the interest paid. I am actually brain dead and so confused with all this college search stuff, sometimes I have to question my sanity.
Just Say No. Pre med kids should be smart enough to understand you get undergrad to as close to free as possible. What are her stats, what is your home state, where is her cheapest 4 yr option? Why Tulane? How much merit did she get? It couldn’t; possibly be at the top of the pile for a kid who gets max merit from Tulane. She surely got merit elsewhere if they gave her enough to get your EFC to 30K.
I also think it doesn’t matters if you are 45 or 55 or 65 - no one should be borrowing a lot of money to finance college.
At 18, kids don’t understand the family finances. It would be easier if they knew before start the college application process what to expect from parents. We told our kids that we would only pay at state tuition level and if there is anything extra (ivy league) they have to find merit scholarships. So, they ended-up going to state-schools and graduated loans free.
Also, kids change majors or even drop out- but the debt never goes away. My daughter changed majors several time, so did my son. They both ended up getting jobs that they really like but not highly paid. Now they thank us for not letting them borrow to go to private schools.
Even if she signs an IOU, are you really going to sue her to enforce that contract? Does your state allow a personal loan where there are no payments made during the first 10-12 years? (some won’t enforce a debt that is more than 7 years old, or 10 years old).
What if plans for this career don’t work out? She decides being a pre-school teacher is really her dream, or she becomes ill and can’t graduate at all. Are you going to enforce the contract to repay you $200k?
There is nothing wrong with making a contract, but just realize it is unlikely you’ll take action to enforce that contract. I’d just say no to Tulane if I (me, the parent) didn’t want to pay for it. There is a reason schools/govt will only lend about $30k to kids because repaying more than that is really hard.
Doctors get paid a lot -once they graduate and finish all internships and residencies. Until then, which is 10-12 years from now, they are just poor students.
My husband and I make large incomes now, but when the kids were born, it was a different story. In 2001, we were both laid off, and were out of work for at least 6 months each just after our first son was born. That was a rough time for IT people, as many, many people were out of work at that time. Maintaining Cobra, paying our mortgage, and staying afloat depleted most of our savings and the majority lot of our 401Ks. Thankfully, we both found jobs, but at substantially lower salaries than where we were previously. We ended up with three kids, with both of us working. Paying for daycare was very expensive, - we saved pretty much nothing for college while the kids were in daycare, and did as much as we could towards our 401Ks to at least get our company match. In 2005 and 2006 we were paying $37K per year for daycare. It was 3/4s of one of our take home pay, but we couldn’t survive without that remaining 1/4. It was a really rough several years for us. The last one is turns 12 this year, and this summer will be the last one that we need to pay for full time care.
This is a pretty typical example of how some high income families may not have a lot saved for college. Dual income families pay a LOT for daycare in some parts of the country. We were making a lot less money then than we are now. Fast forward 16 years - we have both been promoted at work, and we are doing well financially - but that is only within the last 4-5 years. We have not been making this level of income for a long while, and it has taken us all this time just to get close to being almost on track to 401K wise.
We will be able to give each of the three children money to attend college, but we can’t afford to send them to an Ivy, or any other private school, we would not co-sign huge loans for them.