College Savings

[LivingAlmostLarge]

Okay question people, I am saving $2k/year into a coverdell account and i have a 529 opened for my daughter for any extra we can save, have $2k in there. Sorry but we just can't fund more college at the expense of our retirement and other stuff.

Today i was talking with another mom who is a CFP professionally, and she pushed the 529 because you can fund it front loaded up to $250k. Yes there are fees, and she wasn't hitting people to invest but said that the $2k limit on coverdells was to limiting and there were income limitations.

Okay I have to ask this stupid question, but are people really able to save that much for college? Where is all this money coming from? Are people on here getting estate planning gifts from their parents to the tune of $11k/year?

I am not, but is it more common than I anticipate? I have a lot of friends now who are getting down payments from parents and gifts of cash, but my DH and I haven't gotten anything like that. We had help with college, but that was it.

Am I really that out of the norm to be struggling to save more then $2k/year for college? I know it will cost more but retirement and other expenses take priority now. Seriously we make a very good living probably around $160k a year on one income but we save at least 30-35% of it a year between retirement and long term savings like cars, home repair, etc.

Are people here saving a ton for college? Am I that far behind the 8 ball?

[jpg7n16]

Are people here saving a ton for college? Am I that far behind the 8 ball?

I really don't think you should be comparing yourself to the clients of a local CFP. You should be comparing to your family's plan, and what is possible for you.

Do you have any more money to contribute?
Do you expect to be receiving gifts of $13k/year from multiple people sometime soon?
Would you sacrifice your retirement to save for your kids college?
Is your income going to magically increase in the near future?

This is just my encouragement to compare yourself to yourself, not others

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Seriously we make a very good living probably around $160k a year on one income but we save at least 30-35% of it a year between retirement and long term savings like cars, home repair, etc.

A lot depends on your lifestyle. With your salary, a very frugal person should be able to pay most or all college expenses. But it is your money, and you have to decide your priorities in life.

[Redraidernurse]

Everyone's lifestyle is different. We make much less than you and manage to save over 2k per year for our child's college ( and plan to do the same for #2 who is on the way). We prioritize college savings, but not before retirement.

[disneysteve]

I agree with the others. It is all about priorities and it is exceedingly difficult to compare yourselves to others or say what is the norm. We also earn less than you but have $300/month going into DD's 529, so $3,600/year. Our overall savings rate is about 25% of gross. So we earn less than you but we also spend less than you and choose to direct a little more toward college savings.

If you really want to adjust your priorities, sit down and look at your spending plan now and see if there are any places where you'd be willing to trim spending to redirect where the money is going.

[MonkeyMama]

I am personally saving $0 for college. (Don't worry - we got it covered. College is simply inexpensive here - and I have got several plans like pay off the home first, or just work more while the kids are in college - my husband has been unemployed for a decade. I don't mind a second job to help, anyway. Plus, our parents have money, and on and on - so I See options if our kids' passion is med school).

I am kind of annoyed at all the articles I read about how expensive college is. Sure, I appreciate that financial professionals want people to plan and prepared. But, scaring parents with CRAZY numbers? It's way over the top.

& of course, investment professionals have a stake in scaring you into saving a ton.

Grandma actually has $3000 in a 529 plan for the kids (with her insane expensive broker). Anyway, I just got this note in the mail that we have to start saving $12,876 a year to afford college for one of our children. Last I checked, our alma mater cost about $15,000 for a 4-year degree, and there are several excellent public schools around here. (Private schools are more rare here). Basically, what are the odds we are going to choose a $200k degree? Slim to none!

Anyway, I find college planning to be VERY individual, accordingly. College is inexpensive and financial aid is extremely unlikely for us, so we aren't going to be saving anything into 529 plans or anything like that. Saving in the kids' name is fine (or ours). Others may be more concerned with financial aid ramifications and bigger college costs. I don't think 529 plans are a great choice for the average person. (They are great if you have maxed out your retirement plans, HSAs, etc., and need another tax shelter. Or if a grandparents wants to pass on some money, etc.).

Now, if you don't believe in loans, and you only believe in private schools, well, you better start saving TONS.

[disneysteve]

pay off the home first

I just got this note in the mail that we have to start saving $12,876 a year to afford college for one of our children. Last I checked, our alma mater cost about $15,000 for a 4-year degree

Paying off the home first is part of our plan too. Right now, we're on track to have the mortgage paid off in just over 3 years and our daughter just entered 10th grade so probably during her 1st year of college is when it'll get paid off if all goes well.

As for college costs, they vary dramatically. My alma mater is about $45,000 per year right now so in that $200,000 range for a 4-year degree. Obviously, I'm hoping our DD won't head in that direction because she'll be largely on her own if she does.

Another totally unique piece to our situation is that when she turns 18, our DD will start getting annuity payments from a legal case resulting from an accident when she was 6. It isn't a ton of money (about $7,200/year) but it will certainly help out a lot. We don't want her to have to spend all of it for college but even if it just covers her car and some living expenses, it will ease the burden.

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Anyway, I just got this note in the mail that we have to start saving $12,876 a year to afford college for one of our children. Last I checked, our alma mater cost about $15,000 for a 4-year degree,

I'd check again. Ivies are generally $50,000+ a year. One of our kids is attending a state university, which is about $16,000 a year for everything, and one is in a private university that costs about $38,000.

Fortunately, both kids have merit-based scholarships, so we only pay a little over $20,000 a year for the two of them together, but without those scholarships and without any "hooks" (being an under-represented minority or a star athlete, etc), it could be quite expensive.

Books costs alone for my two kids were nearly $800 for this semester (some of the books had to be ordered new, with few options of ordering them elsewhere).

[feh]

Depending on where you live, given your income, I don't see why you couldn't save more than $2K per year. But how you prioritize these things is obviously a personal matter.

My son is almost 12. We've set aside $40K for him, which has grown to somewhere around $50K. We didn't budget for it - we simply deposited (into a 529) when we had some extra money (we don't make near what your family does). There was a $30K deposit when he was about 3, and another 10K just this year.

Our goal was to fund about 3 years worth of expenses at a good public university.

[MonkeyMama]

I'd check again. Ivies are generally $50,000+ a year. One of our kids is attending a state university, which is about $16,000 a year for everything, and one is in a private university that costs about $38,000.

Believe me, I am well aware of our options, and the cost of our options. As I said, college is VERY inexpensive where I live. I am well aware of the costs it would take to send my kid to several colleges, if he were starting this year. With the economy and everything, we keep an eye on the actual costs so that we are prepared. Likewise, I Wouldn't see the point to pay 20 times as much to send my kids to the Ivy League. I just simply am not going to make that financial decision unless I received a huge windfall, personally.

You are talking to an *over planner.*

& no matter where you live, I don't think the only option for a decent college education is to spend $200,000.

Anyway, cost of living is high here, but this is one of the trade-offs. Public colleges are the primary option, and very affordable. Everyone in my family has been well educated with no debt.

[disneysteve]

no matter where you live, I don't think the only option for a decent college education is to spend $200,000.

Certainly, but public schools aren't equally cheap everywhere. Here in NJ, I believe they run over 20K/year currently and we've still got 3 more years to go so will probably be pushing 25K/year by the time our daughter would be attending. So that's 100K or more for 4 years at a public school with in-state tuition and that doesn't include books or supplies or living expenses.

[Scanner]

LL,

I think I get the "jist" of the topic here - how in teh world is the average family going to able to

A. Save for retirement

and

B. Save for college

Honestly, I just don't see it happening.

You are going to see enrollment and graduation rates decline and dropout rates go up. It's just unsustainable.

You are asking the exact same question I asked during hte Housing Bubble (now the College Bubble exists):

"Where is all of this money coming from?"

My father wanted to go up and knock on the door of some of these McMansions and just ask, "What do you DO for a living? Deal drugs?"

I have heard all of the counterarguments. . ."Well 1 year of college costs the same as a SUV." Yeahhhh. . .okay. . .but I don't think even the most spendthrift of persons gets a new SUV every year without a credit on trade-in either.

[MonkeyMama]

I'd be curious to see a poll about what people are actually paying for college AND how thoroughly they have considered their options. Because I don't see reality matching with the hype. (& yes, could be some regional bias). But, even the people I know going more private school routes have scholarships, etc. So, where I am coming from.

Of course, we all see all the people calling into Suze, etc., who didn't think twice about borrowing six figures for college for a useless degree and a job at Wal Mart. But, I think most people around this website are a little more careful and thoughtful in their college plans.

[Scanner]

I agree we around here are usually more informed and usually more prepared.

Even that being said, I still think something is really off about saddlign parents with an expectation to pay for college.

I think it's reasonable for a kid to earn 10-15K/year through part-time work through college though.

Add in savings and current contributions and you can probably get the sucker financed.

I imagine I will maybe have 75K for all of the kids college through savings (I have 3) by the time I am done.

They are kids of divorced parents though and they may qualify for more aid. I haven't honestly looked into it though.

[disneysteve]

You are going to see enrollment and graduation rates decline and dropout rates go up. It's just unsustainable.

I agree that it is unsustainable. I don't agree that the result will be lower enrollment and grad rates.

I think a couple of things will happen.

1. Students will take on more and more debt, which is already happening. Graduates will be paying off loans for 25 years after college.

2. Schools will finally be forced to face reality and stop raising their fees by 2-3 times the inflation rate year after year. They will have to stop building up their campuses just for the sake of doing it. I graduated college 25 years ago. I think I got an excellent education and greatly enjoyed campus life. Since I graduated, however, the school has gotten a natatorium (swimming center), a new stadium, a new fitness center (a brand new one opened while I was a student there), a couple of new dorms, an expanded campus center, a new theater and various other upgrades that were all nice to have but non-necessities. I realize that over 25 years, some changes and upgrades would be inevitable, but not to the level they've taken things. When I graduated in 1986, tuition was $10,300/year. It is now $43,200. Adjusted for actual inflation, it should only be $20,200 so the price has risen more than twice as fast as inflation would dictate. That is what is unsustainable.