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leaderoftheback (76.90)

(?) How not to go broke paying for college??

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January 11, 2014 – Comments (5)

http://www.fool.com/investing/general/2014/01/08/how-non-rich-people-can-graduate-college-without-c.aspx

 I really thought this would be an article about how not-rich people can afford college.   No!

The way for non-rich people to afford college starts with saving as much pre-tax in their retirement accounts as possible, as well as utilizing every pre-tax program that their employer offers.  When financial aid looks at current income and sees no way to pay for college, they can't (and won't) make you pay.  We are so poor that Citibank would not even qualify us to co-sign a small loan for our daughter's college (a 55k per year school).  We do, however save 2,000/month in our pre-tax retirement accounts, utilize our company pre-tax insurance and health savings programs, and when all is said and done, have very little left.

The down-side, for a typical American, is that we can't buy a new car, a big house, or spend money like there is no tomorrow.  In that respect, we really are poor.  But college is four years.  Retirement is hopefully a lot longer than four years.  For middle and lower middle class parents to pay for their children's college expenses is both unwise and un-necessary...and don't expect the college to tell you so.

Our daughter has two jobs in her college town, plus work study and one cheap gov't loan.   She'll finish college with $18,000 debt if she doesn't pay any of her loans back before finishing. She'll have decades to re-pay; or when her parents are dead, she'll be able to re-pay them with her inheritance.

If we pay for college, we have no retirement fund and become government wards in our old age.  Great. Really now, how many people do you know in this boat?  Many, I'll bet.  They've swapped retirement for what?  The accepted narrative is that they are making a better life for their children.  Bull!  All they are doing is supporting the collegiate bank debt complex.  Don't do it!!

Oh, and by the way, do contribute what you can to the Parents Fund of your child's college.  It's not that they don't deserve your support, you simply can't (and shouldn't) afford it.  

5 Comments – Post Your Own

#1) On January 12, 2014 at 1:30 PM, dwot (51.92) wrote:

$55k per year for college?  That's about $4600/month.  Unless you have that kind of disposible income each month, for each of your children, I completely agree, don't do it, and I would go even further and say, don't contribute to the point that your child can finish it themselves by becoming a debt slave.  

But, I think parents should encourage their kids to look local and continue to support them living at home while they are in school.   

The advice to get the first two years in a college is excellent, tuition is low and first year courses everywhere have a lot in common.

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#2) On January 12, 2014 at 3:31 PM, Mary953 (77.96) wrote:

A couple of additional ideas from personal experience - 

We have in-laws with college debt.  They brought it into the marriages.  We set up Roths for each child (including in-laws) with a small amount in each Roth one Christmas.  It is money that they cannot spend but can invest.  Hopefully they have taken advantage of having the framework set up to add to retirement savings.  I don't know.  None of my business.  I just knew that they would be more likely to add to an IRA if the paperwork was done.  This cannot be spent on college debt, but in 30 years, it may be what they need to retire.

One daughter did not know what she wanted to do with her life.  With our blessing, she withdrew from college until she did know.  She is now balancing a fulltime job and school, but she has a plan for her future and is an honor's student...and her college money is still there for her.  Much of this is inheritance from her grandparents (one of whom was a college professor at the end.)  We bought college credits in the 1980's that have appreciated with the tuition hikes, so she is going to school at 1980's prices.  =D  (This program is no longer available. The state could not afford the tuition hikes that they expected the students to handle.)

Our granddaughter has a 529 which is co-owned with her granddad.  He gets to choose when (or whether) to release it to her.  If she wants to prepare for a career in some way, he will release it.  If she wants to travel, buy a car, etc, he will not.  

If it were possible, I would add 1 rec for the post, and 1 rec for Dwot (stay warm, Dear.  What is the temp so close to the Artic Circle?) 

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#3) On January 13, 2014 at 11:51 AM, EnigmaDude (87.69) wrote:

Great post - thanks! I just finished the FAFSA (free application for federal student aid) this weekend.  When it came to the questions on my net worth I have very little to claim, mainly because almost all of my investments are tied up in retirement (and other pre-tax) accounts.  And my kid is fortunate enough to have excellent grades and high test scores so she has already qualified for a $14,000 scholarship at the University of Colorado (because we reside in CO) where she plans to start in the fall.

I also happened across another great article on sending kids to college without the parents paying for it.  And these parents were financially capable but chose not to pay:

http://qz.com/165716/how-i-made-sure-all-12-of-my-kids-could-pay-for-college-themselves/

 

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#4) On January 14, 2014 at 3:53 AM, Mary953 (77.96) wrote:

Enigma, Thanks for a great link and also for the reminder that it is FAFSA time again.

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#5) On April 12, 2014 at 8:26 AM, leaderoftheback (76.90) wrote:

To Enigma; the third leg of the stool is having children that do their part.  This is not always the case; we are one for two in that regard.  But as Mary says, allowing the kids to take a break and figure it out saves money and certainly improves outcomes.

We spent last night with two couples, both of whom have two kids with 3 out of four of those kids through college.  One couple pays $800/month on loans; the other has a net debt of $70k; neither couple has much in the way of retirement capabilty and I don't think the borrowing is done for either of the couples.  It's what our culture has led them to.

They are very, very typical.

 

Thanks for all of the great commentary. 

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