<p>The home equity interest deduction is limited to $100,000 of debt not used to buy or improve your home. The deduction can be reduced if the total of all loans exceeds the fair market value of your home.</p>
<p>In addition, the home equity interest deduction is an AMT adjustment item, so if you are in AMT territory you may not be able to deduct any of it.</p>
<p>Many people are being snagged by AMT these days.</p>
<p>It isn’t an approach that would work for everyone or every time… but we did a few things that positioned us very well to pay for expensive private schools for my kids.</p>
<ul>
<li>When they were in day care and we were saving $$ in a pre-tax account through work to pay those day care bills, we socked every cent we got out of that account into college savings. The money was gone from our daily paychecks anyway.</li>
<li>Some of our early investments were in the stock market and mutual funds (switched to 529 plan eventually in the age-banded strata, then moved to more fixed asset options as kids got close to college). One of those stocks hit it pretty big – $3,000 investment when D1 was about 2 was about $40,000 when she was 18. Sold that off in chunks starting a couple of years before she graduated.</li>
<li>We both worked pretty much the whole time our kids were growing up. We didn’t spend it on extravagent cars or houses (lived in a 100 year old dinky 1,500 square foot house in the city with 2 kids and a 100 lb dog for a lot of years); eventually we did build a house in the suburbs, but long after most of our friends did, and it was not a megamansion. Vacations were almost all with family, so not expensive. We saved for college diligently all that time.<br></li>
<li>I have never paid more than $20,000 for a car, and most have cost a lot less (typically buy used, although that does not pay off so much right now). And I drive 'em to at least 160,000 miles.</li>
<li>My work is not my favorite way to make a living. But it is lucrative and supports my family well. Well enough that with an unexpected divorce during D1’s senior year, I was still in a position to send the kids to private schools. D1 took a merit scholarship that covered 1/3 at a private college, and I paid the rest (no help from ex-H). D2 will enter college next fall, and I actually think I can probably swing full price with no loans at a private if she gets into her top choice. </li>
<li>We had only two kids. Some days I wished for three, but I knew I could give a better life (things like a better education) to two… so that is what we had.</li>
</ul>
<p>I have some sympathy for people who are caught in this bind, but there are also a lot of life choices people make that they could do differently (both parents could work for more years, working at less interesting but more lucrative jobs, living in cheaper housing, taking some risk with investments in the early years vs. safe but low earning options for college money). I know there are extenuating circumstances for some people (poor health for themselves or family members would be an example). And many of these choices have to be made early with a long view in mind. For us it was a matter of setting priorities early and living our lives with those priorities in mind.</p>
<p>To put this in perspective:</p>
<p>[Average</a> couple spends $26,989 on wedding; many break budget ? USATODAY.com](<a href=“http://www.usatoday.com/money/perfi/basics/story/2012-08-09/wedding-costs/56921020/1]Average”>http://www.usatoday.com/money/perfi/basics/story/2012-08-09/wedding-costs/56921020/1)</p>
<p>Or roughly the Stafford loan limits for four years of undergraduate education.</p>
<p>College costs aren’t ‘artificially inflated’, they’re just plain INFLATED. And when there’s inflation, eventually there will be pushback. No, it won’t be–at least for awhile–at the Northwesterns and Wash U’s & Wisconsins of the world, but at some of the other LAC’s and designer privates that have ramped up the COA to over $50K/year because they could.</p>
<p>I’ve been at scholarship receptions at a couple of schools during my Ds’ college years (very small scholarships but I took em!), and especially since the economy went south in '08, their platitudes and tales of ‘woe is us’ border on the delusional. Classic case of crying poor mouth with a loaf under each arm. </p>
<p>I think the day is coming when they’ll really have something to cry about…</p>
<p>This is, indeed, a bubble that will either burst or deflate in the not too distant future. </p>
<p>I feel that years from now, when costs have stabilized and colleges are marketing themselves based on value and low cost, a lot of us will be smacking our heads at the prices we paid this past decade. (Like our friends who bought homes in 2006 or early 2007, and like our older friends who were caught up in day trading in 1998ish.). </p>
<p>A lot of people are still caught up with the notion that the Ivy wannabees offer some tangible value for the cost. While it is true that there will always be a small number of truly wealthy people who will cough up whatever price for about 5 or 10 particular colleges in the U.S., the rest of us are going come to our senses or be unable to qualify for the needed loans, and the college market will, what is the term? Have a rather large and sustained “correction” .</p>
<p>The top 100+ schools will not have a problem filling their classes ,regardless of costs…it is the secondary and tertiary type state schools that will have problems…state funding is declining year over year, hence tutions are increasing</p>
<p>Personally, i think this is going to affect almost every college.</p>
<p>Paying $75,000 over the asking price and then knocking out the back wall of a perfectly fine five year old house to put in a 2000 square foot gourmet kitchen and two story family room with a wall of windows was the thing to do in 2004 in my neighborhood. Hummers, luxury SUV’s and top of the line sports cars once were common in the parking lot of a neighborhood public high school. </p>
<p>While there is a continued smallish percentage of people in my county building and buying 7000 square foot mansions, the excessive remodeling and conspicuous consumption that existed at one time is now seen as a little gauche. When the time comes to trade in, people are coming home with smaller, more effecient, less flashy cars, and are more careful with their housing/remodeling money. I’m seeing kitchen tweaking, as opposed to massive construction projects.</p>
<p>I see colleges in much the same light. For a few decades, colleges have been viewed as another form of conspicuous consumption among the families that live in my area. I sense a change in perception here about value and cost.</p>
<p>“For a few decades, colleges have been viewed as another form of conspicuous consumption among the families that live in my area. I sense a change in perception here about value and cost.”</p>
<p>Here too.</p>
<p>When Happykid was in 9th grade, the moms were all about “best fit”, and “academic challenge”, and “You wouldn’t believe how much harder it is to get into X, why my stepsons just walked in ten years ago and you can’t do that any more there even from our school district”. When Happykid was all set to graduate, and headed to our local community college because it was all we could afford, the 9th grade moms were saying “You go girl! Save that money for the last two years.” and the 12th grade moms were asking if Happykid would be driving or taking the bus so that their kids could help set up a car or bus-pool. If it had only been the 12th grade moms, I might have thought it was merely reality setting in about their precious little ones, but since the 9th grade moms were on the same page, I can’t help thinking that it was the economy.</p>
<p>Every year Happykid was at her HS, I did my own analysis of the self-reported post-HS plans that appeared in the last edition of the student paper. Every year more students were headed to our community college than to all of our other state schools combined. And every year the difference between those two figures increased. Clearly parents are voting with their tuition dollars in Montgomery County, MD.</p>
<p>I think a big reason people didn’t save is that they didn’t have to:</p>
<p>On both my husband’s side and my side, we have grandparents who literally got on a bus with 50 dollars in their pocket and went to college. They worked their way through. It was very possible to do that. Even for me, Baylor cost 7,000 a year.( Tuition, room and board. It was roughly the same as going to aTm.) My merit paid for 3,500 of it. So my parents only had to pay 1700 a semester. They could do that with his decent middle class salary. Now when he lost his job halfway through, it was much harder. But still doable. I worked, my grandparents helped and it wasn’t a big deal. Now Baylor is around 42,000 dollars a year. Right now he would qualify for 15,000 with merit aid. He might get a little bit more, but probably not. Even if he gets 20,000 then that still leave 22,000 to pay for. If you make 90,000 a year and have 2 other children then that could be rough to pay for out of pocket if you haven’t saved. And as I said, the previous 2 generations didn’t save and didn’t need to, so it is coming as a shock to this generation. Add to the problem that right now people buy the biggest house they can possibly afford rather than building a small house and paying it off and then adding on paying cash if you needed to like previous generations did and thinking things like cable and cell phones are necessities not luxuries or eating out instead of cooking at home. Then yes, the college costs are inflated. So that is where we are. I think there are faults on the college side and the parents side.</p>
<p>Shame on parents who live in well-to-do areas, who spent frivously on homes and cars and NOW have become concerned about college costs…too late…And while CC 's have their role, nobody can ever compare them to a solid state school, let alone a private school…People who make such comparisons are just trying to justify their decisions</p>
<p>
THe problem with this approach is that many schools, particularly at the dream school level, don’t offer any assistance to transfers and the total cost could actually be more doing it this way than if a student started at a mid-level school as a freshman with merit/need-based assistance. This would have to be planned out carefully.</p>
<p>
This is absolutely true. I have personally known people in connection with my volunteer work who have been motivated, skilled and ready to move on but ultimately didn’t do it because they felt (rightly, I think) that the cut-off was so severe and so immediate that it would be like jumping across a deep gorge and hoping to land on both feet. Getting an apartment outside of public housing or even taking a promotion at work can require having a little money set aside in case things don’t work out perfectly at first or there are unexpected issues, and people coming off public assistance don’t get to save and prepare for being out there on their own. That can be a hard thing to do.</p>
<p>
</p>
<p>Until the general population wakes up and realizes that there is nothing “top” about these schools except for prestige and price. But even then, I suppose, a certain segment of the population will agree with Pizzagirl that college should be a luxury good, for those with the means, and will be willing to pay top dollar for prestige (while no doubt defending to the death the myth that they’re getting something more than prestige for their money).</p>
<p>Yes, there is no difference between a top school and a community college 
In an era where just about everyone with a pulse attends college, the quality of students can only decline, and where do you think many if them attend? Lousy secondary and tertiary state schools and community colleges…few graduate, and most take on some debt, only not to receive a degree…can some students succeed in this environment, absolutley, but they are the minority</p>
<p>I think the ‘lousier’ the school is/will be from a perception standpoint, the harder a hit it will take. BUT…schools designated by whatever publicized list as ‘great value’ could actually get an uptick of apps. Just in the Midwest in the last 3-4 years (oddly, since the economic downturn) we’ve seen in-state and OOS applications at state flagships Illinois, Iowa, Mizzou & Wisconsin go absolutely through the roof. My guess is that this is the direct result of the filtering down of wealthy parents deciding that some of LAC’s/privates aren’t worth the money.</p>
<p>Actually as long as they take the classes as a high school student they will be considered FRESHMAN not a transfer. This is EXACTLY what my middle one will be doing. At the end of this school year, he will have 30 credits at the end of his 10th grade year. We homeschool and his junior and senior year he will take 3 or 4 classes each semester. So he will have close to 60 hours in credit by the time he graduates from high school.</p>
<p>Quote:</p>
<p>Just curious, has anyone considered having their kids go to a community college during their high school years and try to get their 2 year degree by the time the graduate so it saves money and their kid can go to their dream school? </p>
<p>THe problem with this approach is that many schools, particularly at the dream school level, don’t offer any assistance to transfers and the total cost could actually be more doing it this way than if a student started at a mid-level school as a freshman with merit/need-based assistance. This would have to be planned out carefully.</p>
<p>
And not every school will accept those credits. In fact, most won’t do so. You have to check carefully with each potential college and each potential major. Also, some colleges don’t care when the courses were taken and will treat your kid as a transfer.</p>
<p>Been there, done that, learned some hard lessons . . .</p>
<p>It’s not that it can’t work, it’s a matter of doing really good, specific research and making sure that you know what your student’s exact situation will be.</p>
<p>^^
Just be careful with the college credits during HS. Some schools limit the number of credits that transfer if you enroll as a freshman. You can get placement, but still have to meet residency requirements. You have to balance the benefit if aid as a “first time student” who qualifies to enter as a freshman, against more transfer credits allowed as a transfer student with an Associates degree. And if you get the degree, some schools will consider his a transfer student, not a freshman.</p>
<p>The same applies for AP credits as well. If you are earning their degree, they want to be responsible for what you learned.</p>
<p>As far as the value of “prestige” schools, I liked one story told by a professor. He said he taught a class in a top 15 university as a grad student. He really didn’t know how to teach. Now, 20 years later, he considers himself a much better teacher, and he is teaching at a no-name school. The students who had him 20 years ago paid much more in tuition than the students who are in his class today.</p>
<p>To build upon Zoosermon’s comments, the big breakpoint for many limited income families is when they earn just enough money to no longer to be eligible for Medicaid, but not enough to be able to buy health insurance.</p>
<p>To build upon the comments above, colleges greatly vary upon their acceptance of AP credits. Some only accept 5s, some accept 4s, some give credit for 3s. Some make it very hard to receive AP credit, with a strict maximum, while others make it easy. Some give 8 credits for a certain test, while others give 3 credits. It can make a big difference in college affordability, if you can skip a semeter or not.</p>
<p>In my state, the selective colleges will not give credit for dual enrollment college classes taken inside a high school building. The in-state public colleges and some less selective private colleges will.</p>
<p>In response to a comment above, it is extremely hard (if not impossible) to borrow from your traditional IRA account for college, without major penalties. (One exception is for health insurance if you are laid off). </p>
<p>Roth IRAs provide much more flexibility to withdraw your principal (not earnings) for college without penalities.</p>