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Old 01-25-11, 10:20 AM   #1
HardyWeinberg
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saving for kids' college

WA has a 529 plan that offers guaranteed tuition, here's how it works: $117 plus 7.5% finance charge gets you what is today $86 worth of tuition. We have a 4th grader and a kindergartener.

My wife thinks we're in a college tuition bubble, like real estate or dotcoms had or gold is having. I also have a hard time wrapping my brain around front-loading the payment that much. But tuition has never gone down and it was level for a while so may have some run in it yet.

What do you all think, is it a good deal? (all my other concerns are addressed, it's fully transferrable if the kid(s) don't go to the schools the tuition is pegged to, it can be swapped between kids, other stuff like that...)

(actually I have another issue, there is a caveat that if I withdraw it there is a 10% IRS penalty on the total and I don't understand that because the only deferred taxable activity is reinvesting of dividends in the underlying wherever they park the contributions until you spend them) (there is no state tax benefit to this program at all)
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Old 01-25-11, 11:03 AM   #2
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Pre college investment programs are a joke.See that your kids have decent grades,apply for all grants/loans before freshman year.When they graduate you can assist in their low interest student loans.
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Old 01-25-11, 11:10 AM   #3
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My plan is to kick him out that door and wish for the best.
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Old 01-25-11, 11:37 AM   #4
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It can be OK, but only after you've fully saved for retirement first. 401(k) maxed out? IRA or Roth IRA maxed out? Only then. Everything you put into Roth IRA you can have back at any time since its after tax. Make junior find his or her own funding. Perhaps co-sign. Perhaps provide a weekly stipend or other periodic payment during college to offset some of the cost (maybe like $50-$100 per week) and then offer to continue post college provided student can prove at least that amount is going toward paying off college loan debt. That way, you pay some based on performance, and the record shows junior paid for/off college on their own since your $100 per week doesn't pass the tax disclosure threshold and isn't necessarily fully targeted at loan payoff. Take care of yourself first. Leave your options open by maintaining control of the funds.
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Old 01-25-11, 12:17 PM   #5
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OK thanks, I think you're all talking me back down from make rash $$ committments.
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Old 01-25-11, 12:20 PM   #6
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All you have to do is look at the trend in state support for higher ed to see what the possibilities are for tuition cost when your kids are ready....yeah, not good.

I think 529 accounts are an excellent way to save for education, but choose a program wisely. I started out with the Maine program, but after a few years it was apparent that the ones benefiting the most was Merrill - Lynch, so that one got replaced. We looked at lots of state programs and found that Oregon's 529 program was as good as they get, and we are doing well there.

Prepaid tuition is a good thing if you are sure you'll be using a state university. The important thing is that money is saved for education, it will be more important over time.
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Old 01-25-11, 06:22 PM   #7
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Two kids Graduated College within the last 36 months, and one graduating this coming may. Two were in private Engineering Colleges and one was in the New York State University system. For price checks the schools are: Rochester Institute of Technology, Milwaukee School of Engineering and SUNY Albany.

The trick is not how much the school costs, it is how many and what assets the family has and how much the family earns. My three daughters had 10K apiece (in their names) as entering Freshmen. They all graduated, each owing less than 20K on Stafford Loans. All I paid for were their books. They worked through college, earned scholarships, and are currently doing quite well financialy.

Every student needs to fill out a FAFSA form which calculates the families financial capabilities and provides an annual Expected Family Contribution based on your assets and earnings. Some assets are counted and some, such as 401K's, are not. Some schools tailor financial aid packages very closely to the FAFSA results and some don't.

With a taxable household income of less than 45K, we managed to provide a college education to all three of our children.

By all means, do put money away towards your children's educations. In addition you absolutely must learn the economics of financing that education. It's much more involved than socking away huge piles of cash, unless your stinking rich. Talk with college financial aid departments, banks, friends with kids in college. Learn your way around that FAFSA form. Learn the ropes and be educated enough to eliminate the mystery and gain some piece of mind around the actual tuition costs

Best of luck to you and your family. Remember to enjoy them now as they're growing up and try not to stress over the college thing too much. If a poor, old factory slug like me can pull it off...anybody can.

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Old 01-25-11, 06:30 PM   #8
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My wife thinks we're in a college tuition bubble, like real estate or dotcoms had or gold is having.
Yes private college is overpriced. Stupid overpriced. But I don't see a whole lot of factors that's going to curtail this phenomena. And banking on that may well leave you rather high and dry when your kids graduate high school.

Had college tuition kept pace with inflation since I graduated (from NYU, 1980) sending a kid to NYU would probably cost about $30K annually today, not closer to $55K. The private school premium is so off the hinges that for it to be worth it you either have to be rich (it's not a problem) poor (you get tons of aid) or oblivious. There are plenty of top tier state universities that cost far less. My kid has been accepted to two of them for the Fall 2011 semester (SUNY Binghamton, UMass). We can afford those.
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Old 01-25-11, 06:37 PM   #9
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I have to give the ^ this advice because he has enough expensive bling to circle his yard.
If you rent those outrageous priced college books from chegg.com you'll save 1/2 the cost of books.
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Old 01-26-11, 08:22 AM   #10
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Two kids Graduated College within the last 36 months, and one graduating this coming may. Two were in private Engineering Colleges and one was in the New York State University system. For price checks the schools are: Rochester Institute of Technology, Milwaukee School of Engineering and SUNY Albany...

...With a taxable household income of less than 45K, we managed to provide a college education to all three of our children....


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Yes private college is overpriced. Stupid overpriced.... you either have to be rich (it's not a problem) poor (you get tons of aid) or oblivious....
It's all part of the war in the middle class. If you're poor or rich, college is easy, earn over $100K/year and you're on your own ($100K isn't much in Chicago). My daughter is at a state school for Engineering, we forced her to go there, the other choice was to saddle her with huge loans. We're paying cash for her education, ~$1800/month. Even more ironic, it's out-of-state. Another big state school gave her in-state tuition as a scholarship, 1/2 the price of the local in-state university....
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Old 01-26-11, 09:46 AM   #11
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The BEST way to fund a 529 is to have YOUR parents do it - that way, when it comes time to file the FAFSA and apply for financial aid, the 529 asset (yes, it must be declared as an asset on the FAFSA) will not be reported on your applications... this goes for any type of college saving account. You can require dual signatures - either yours or your child's - but as long as the grandparent is the 1st listed account holder you would not have to report it.

For instance, if you are strict about putting away money in your child's name, your child will either have to SPEND the money BEFORE filing the FAFSA, or report it as savings, which, if it amounts to anything worth talking about, will work against thier need-based aid eligibility. The same savings account, listed under Grandfather Joe AND your child, with BOTH signatures required, is Joe's asset, not your child's.

(I am a student financial aid professional)
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Old 01-26-11, 04:53 PM   #12
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It's all part of the war on the middle class. If you're poor or rich, college is easy, earn over $100K/year and you're on your own ($100K isn't much in Chicago). My daughter is at a state school for Engineering, we forced her to go there, the other choice was to saddle her with huge loans. We're paying cash for her education, ~$1800/month. Even more ironic, it's out-of-state. Another big state school gave her in-state tuition as a scholarship, 1/2 the price of the local in-state university....
Fixed, Correct.

Your avatar rocks, I am a huge Plankton fan.
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Old 01-26-11, 06:21 PM   #13
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Your avatar rocks, I am a huge Plankton fan.
Take it over to the Taco Bell discussion
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Old 01-26-11, 06:29 PM   #14
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Pre college investment programs are a joke.See that your kids have decent grades,apply for all grants/loans before freshman year.When they graduate you can assist in their low interest student loans.
I don't know about all that. My parents did a program through the state of Texas and I will be graduating debt free with only book money from them.
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Old 01-26-11, 06:46 PM   #15
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I don't know about all that. My parents did a program through the state of Texas and I will be graduating debt free with only book money from them.
Is Texican a free tuition state like Cal. or Florida?
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Old 01-26-11, 06:48 PM   #16
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No it is not, and I go to school in Pennsylvania.
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