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College Funds for the Kids

January 3rd, 2013 at 02:41 pm

The grandparents gave us some money at Christmas to contribute to our kids' college funds. Sadly, the last time we contributed to their funds was last Christmas with money from their grandparents. In 2012 we made our emergency fund a priority. We are hoping to contribute a modest amount to each of our 3 kids' college funds monthly this year. Either $50 or $100 per kid each month, but it will depend on how DH's take-home pay shakes out when we see his first check of 2013 in a few weeks.

I should mention that both my parents and DH's parents helped pay for our college tuition. Both DH and I worked on campus during college, but the majority of our education was paid for by our parents without any student loans. We didn't realize at the time how lucky we were, but now as we see people struggle to repay student loans, we are so thankful for that gift from our parents. (We did each pay for our graduate school tuition years later--I took out a small loan but paid it off in a few years).

I really struggle with the kids' college funds for a few reasons. First, the calculators say that by the time my kids are college-aged, college will cost $150,000-$200,000 for an in-state school. For each kid. So we might be looking at $450,000-$600,000 total. Gulp. We have about $50,000 total saved so far, and over half of that has been from both sets of grandparents.

Second, all the experts say to prioritize saving for retirement. Which I totally agree with. Which is why this month we are back to 15% 401k contribution and extra principle payments on our mortgage, to put us in a good position when we retire.

I also feel like the cost of college is a huge guess at this point. I think at some point, if the costs keep rising at the rate they are, college won't be affordable for anyone. And maybe my kids will get scholarships, or go to community college for the first few years, which would cut the costs dramatically. The costs of college are just so unknown.

I did one of those online FAFSA guestimate calculators to see what our expected family contribution will be for college. It gave me an answer of $25,000 a year for my oldest. Which is basically the full cost of an in-state college with tuition and room and board.

I also struggle with just the balance of it all. Because sure, we could contribute more to their college funds if we didn't go on vacation ever again. But then we'd lose those experiences and memories, and our kids will never be this age again.

So I really hope that by prioritizing our retirement, paying off our mortgage early, but still having some fun memories along the way, we will free up some cash when our kids start college to help pay their tuition with current salary.

What are your thoughts on paying for college? Did your parents help you pay for college? Are you going to help your kids, and if so, how are you planning for it?

15 Responses to “College Funds for the Kids”

  1. creditcardfree Says:

    My parents basically paid for college. I did help manage it, and student loans were taken out, but I had a mutual fund to pull from to pay those. I may have paid some out of my own pocket but it would have been paying back loans.

    We struggle a bit on the college issue too. I do want my children to contribute something to their college costs. I expect there will be some cash flowing of tuition, extra jobs, some from savings (we have about $20K), hopefully a scholarship and we do have some military tuition benefits that can be rolled to our children as well. Our children should overlap only one year while in college, so that helps too.

  2. ThriftoRama Says:

    I think this is something all of us as parents are struggling with. I've read many financial articles that have said you need to save 1000 or more every month PER KID to pay for college, and I think seriously? Who on earth could afford that? I also feel that the college tuition bubble will be next. Price increases are unsustainable, with no name private schools charging 30k a year. Who can say what the future holds.

  3. laura Says:

    We're looking at college for five. Our oldest two are 9th and 8th grades. Both have prepaid college tuition plans for the local community college, two years worth - enough for a Gen Ed classes for BA. These are transferrable to younger siblings should they both get scholarships, which is probably a strong possibility since our oldest is already a scholarship recipient for her Catholic high school. We don't have a comprehensive plan (other than the prepaid plan in place) and we fund their savings mostly from birthday gifts and Christmas gifts and babysitting savings.

  4. laura Says:

    We're looking at college for five. Our oldest two are 9th and 8th grades. Both have prepaid college tuition plans for the local community college, two years worth - enough for a Gen Ed classes for BA. These are transferrable to younger siblings should they both get scholarships, which is probably a strong possibility since our oldest is already a scholarship recipient for her Catholic high school. We don't have a comprehensive plan (other than the prepaid plan in place) and we fund their savings mostly from birthday gifts and Christmas gifts and babysitting savings.

  5. MonkeyMama Says:

    My reply is so long that I think I will do a blog post about this. Big Grin
    But a shorter reply to address a couple of things:

    My response about college costing $200k-ish = Rolleyes I know the point is that financial advisors want to get people worried enough to plan ahead, and that is all well and good. But the idea that everyone is literally paying this much for college is frankly impossible. Would I pay $200k for a college degree? Um, no? I don't think any college degree is worth that much.

    I am mostly not worried about it because college is so inexpensive where we live. The first thing everyone should do is actually look up college costs at potential universities. My college today costs 3 times what it did when I graduated in 1999. This means it costs $3k per semester instead of $1k. I am not worried about it. Wink Look up "common data set" for universities in your area or potential universities of choice. VERY good information and very clear costs. Get some real facts and know what you have to work with. I have also heard good things about the book Debt Free U.

  6. wowitsawonderfullife Says:

    My son's 4 year university degree cost $81,000 all in. That includes tuition (which was $11,480 in the last year), books, accomodation, and living expenses. The cost of living downtown in a very large city is extremely expensive. Of that amount we paid about $65K. It was hard and why I work! One more to go in two years. We're at about $30K in savings so far.

  7. mjrube94 Says:

    My parents paid my tuition, and I paid room and board using high school savings for freshmen year, then working in the dorms the rest of the years. I didn't realize how lucky I was at the time not to have to take loans. I remember I really wanted to go to Lehigh (why? I have no idea - never visited it, didn't know anyone who went there, it just seemed like a good idea). It was $18k/year at the time. I will never forget the conversation I had with my Dad:

    Me: Dad, I want to apply to Lehigh.
    Dad: No.
    Me: Why not?
    Dad: Because you're going to get in, and I'm not going to send you because it's too expensive for me to pay it and you're not going to start your life off in debt.

    I was disappointed, but ended up going to a different school for $12k/year that I liked very much, and which resulted in meeting my hubby and getting my job. So thankful for my dad standing firm.

  8. FrugalTexan75 Says:

    There are lots of scholarships out there that go unused every year. Once your kids hit freshman/sophomore year, that is a good time to start digging for any and ALL possible scholarships. If they do end up taking student loans, then you can help educate them on the way to do it the most responsibly. From what I've read, many people who end up with high amounts of student loans looked at them as free money and not as money that would have to be paid back. So, in other words, if I had kids I would first make sure that my retirement needs were well funded, then make sure my kids had a strong financial foundation/education, and then fund their college expenses as possible.

  9. LuckyRobin Says:

    My daughter has 3 choices for her freshman year of college, the local community college at approximately $7000 a year including books, the local tech college at approximately $10,000 a year, or the local university at about $15,000 a year. She will live at home. Going out of county will jack the price of education up. Going out of state will jack it higher. If she can find a college that is not above $15,000 a year (like one in a neighboring state where she could live with relatives) then she is allowed to consider that. She is expected to apply for any scholarship she can get and to work during the summers. I refuse to take out loans and I refuse to let her do it either. DS will abide by the same rules unless he gets scholarships (he's brilliant so that is very likely).

  10. snafu Says:

    Dad required each of us to 'have skin in the game,' so each of us had to pay tuition. We all had horrid summer jobs that paid well. Two of us lived at home and went to our city's university, one did two years local, two years out-of-province and doctorate in the USA . Both had summer jobs through H Sch. knowing they would need to pay tuition. Each did two years at Community College having verified credits were fully transferable. Elder son applied for every scholarship he remotely qualified. & misc. DS !! will do his Masters and likely need some level of student loan. He thinks he can work full time and do the program PT reversing priorities.

    If I were planning this in the current economy, I'd be funding with 'Snowflakes' + small cost avoidance in an aggressive Mutual Fund using the magic of long term compounding. If I had high school students, I would be insisting they research every small, scholarship and begin writing the type of application 'thesis' necessary. They need to clearly understand their job in university is to learn adult behavior and fulfill scholastic requirements.

    Some of the DKs in my program would benefit by spending a summer in a third world country in a Peace Corp type project to appreciate their wonderful opportunities.

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  12. snafu Says:

    sorry, my computer lost a paragraph

  13. MonkeyMama Says:

    @mjrube - my experience was similar. My parents rolled their eyes at me because I didn't even know what I wanted to study. I met my husband because I stayed close to home. The only thing to add is that all my friends were pretty snobby about it because they were all going to more prestigious schools (some not that much more expensive - but we all had brains and were accepted everywhere). It all came full circle in my late 20s when I kept running into high school friends. I was well into my career and marriage, and they were all living at home and going to State to get real degrees, since they had gone broke (or their parents had gone broke) getting useless/expensive undergrad degrees. Not only did I think it was funny from the things they said about my college choice, but gives me serious things to talk about with my children. If they don't have a truly clear path when they are 18 (as most youth don't) then they should probably go to community college or State and not waste their pennies, so that they have more opportunities when they actually know what they want to do. The only difference between me and all my friends is that my parents put their foot down, at the least until I figured out a major. They initially thought I should transfer after two years, but by then there was no point - I was already at the best school hands down for a business degree.

  14. Jerry Says:

    I have significant student debt from my studies in the US, and we are seriously considering remaining overseas after graduation. Higher education where we are currently living (Switzerland) leads to $700/semester in tuition, at some of the best and oldest universities in the world. My own current PhD studies charge $150/semester. On the other hand, it's prohibitively expensive to study in the States, and we will probably encourage our daughters to study here and/or apply for scholarships if they want to go to the US for school. We will still save for their school (and grandparents are helping, as well), but I am really turned off my the skyrocketing cost of schools in the US when in most cases there is generally no insurance of better education. (Yeah, the Ivies and places like that... but in general.)

  15. pretty cheap jewelry Says:

    Oh Monkey Mama, make your blog posts about college often and visible so I can learn.

    Our 9th grader had an assignment a couple months ago to pick a college (from a teacher supplied list) and:

    - figure costs, tuition/expenses/
    - what major degrees are offered
    - what that school is known for academically
    - what traditions are associated with that school

    and more. It was simply a good start in the lingo and college world experience.

    My first kid has not figured out what he really wants to study, nor where to go. My second kid is only 2 years behind but has a better grip on what type of career she might go toward. They are both incredibly high scorers so far. But my son is much less active outside of school.

    We have explained the differences in private vs. public vs. out-of-state-public schools so far. We have not pressured them toward a less expensive option (yet).

    I bought my high school freshman this book for a gift Major in Success co-authored by Jack Canfield (Chicken Soup guy) which is loaded with common sense advice for high school age students going to college.

    It's a tad early for us, we need to go through SAT/ACT testing first. The I think the process will be:

    - long list of where they are interested based on major area of study
    - short list these especially with respect to financial aid offered
    - actually apply and see where they are accepted

    We have watched a number of neighbors and relatives put their kids' through college and it is DO'able.

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