Saving for college

[kjell1979]

I have a couple of questions about saving for college. I posted this here because my questions are business related.

Here is some background to my situation. My wife and I are expecting our first child in mid December and I just signed up for an account at upromise.com. For those of you who aren't familiar with this site, whenever you buy or use (as in a creditcard) a participating company's product, it dontates a percentage of the amount which you paid to a college savings account.

On upromise has 4 different savings plans to deposit this money.

I'm not sure which is the best one. I know some general rules of thumb as far finding accounts. Tax free is the best because you can gain a lot of money that way. Conservative accounts are the best (although it doesn't mention how the money is invested in all 4 plan descriptions) because gradual earning is much better than an account that wildly fluxuates. I should probably look for keywords like S&P index fund and stuff like that. I follow this with my 401k.

Upromise deliberately wants to convey to me that the 529 College Investing Plan is the best one, however they way they present it makes me wonder whether they're objective. However, one point which makes me wonder is that their 529 account will not effect financial aid elegibility. Now I'm a programmer and will probably have quite a bit of savings by the time my kid goes to college. Will just the fact that I'll probably be earning a lot later on ruin my kid's financial aid elegibility no matter whether I have this account or not? If so, would it be better to go with the Coverdell Education Savings Account which has tax free withdrawls.

There's no need to rush this because in order to open this account I need to know the name and birthday of my child. Since I don't know whether it will be a boy or girl yet (although we're a few weeks from knowing), much less the day when he or she will be born, I have quite a bit of time.

Also, are there any other college saving tips I should know about for those of you experienced with long term saving? Also, are there any epinions about this I should look at? I poked around for a while, but I didn't see anything long term. Thanks!

[kurt_messick]

Check several things.

(1) Is the money yours, or your child's? This can be important if you want to control the money and your child ends up being less than responsible at money management. It can also be important for some tax considerations down the road.

(2) What happens if your child doesn't go to college?

(3) Financial aid eligibility will take into consideration your income, your assets (not including retirement accounts), and your child's savings. However, this calculation changes periodically, and will likely change again in the next 18 years.

Also, it is also varied depending upon the cost of the college, and each college does its own calculation.

(4) Can you change the investment later? Can you go for growth in the first ten years, and then move it to more conservative investments at a later point?

[mnehr]

I would see what your state offers.
Here in Texas, we have a system that is a state sponsered college savings account that will lock in today's tuition prices. 18 years from now, that could save you tens of thousands of dollars versus saving and paying the tuition rate going at that time.

The disadvantage is that it only applies to 'State Schools'.

[Joubert[$]]

Kiplinger's has a great section of their site dedicated to college savings.

Head for this link:

http://www.kiplinger.com/managing/college/

[frazzledspice]

I wrote a review on 529 plans in April, 2001 or so.

A 529 plan can be transferred to another child in the same family.

You retain ownership of the asset, whereas in UTMA accounts the funds belong to the child, and can be used to purchase a sports car or a Harley when the child turns 18, if that's what he wants to do.

Financial aid will look at a much higher percentage of savings in a child's name as being available for tuition.

A smaller percentage of savings in parents' names are considered as being available.

I have put 1 1/2 children through college already (the older one hasn't finished...but I haven't given up hope. I think he'll be going back in the fall.)

It's nowhere near as unaffordable as people make it out to be, even if you don't get financial aid.

My second son (the one who finished) had 3 scholarships. He also worked at Toys R Us as little as 8 hours a week, demonstrating video games. Do you know that Toys R Us had a tuition reimbursement plan for him? It kicked in when he'd been there 6 months.

Of course he loved working at Toys R Us because at the end of the month they raffled off all returned merchandise for free or very, very low prices.

Put your child in the school band, even if (s)he thinks it's not "cool." Music scholarships are abundant, especially if kids play unpopular instruments (I have two friends who had full tuba scholarships.)

There's always ROTC.

If finances are really a problem, kids can go to community college for two years at $40 a credit, transfer as a junior, and get their degrees from the schools they REALLY want to attend.

Kids can usually START college with as many as 30 credits if they take AP courses or "extension" courses while in high school. These courses are great bargains--3 college credits only cost $100 or so.

My youngest child was born when I was 39 and her Dad was 41. When she starts college we will be near retirement. How much we can help her depends on variables such as how our 401K's fare over the next 5 years, whether we are involuntarily retired and are able to get medical insurance, etc.

When our sons went to college, we hadn't yet spent 4 long years in the school of hard knocks, courtesy of downsizings and forced moves to undesirable parts of the country. We were more optimistic and were easily able to afford their college expenses.

Yes, she's in the school band, and she will stay there.

Yes, she will take AP courses in high school.

Yes, she will try to get academic scholarships.

We may even suggest she work at Toys R Us when she's a senior.

[kurt_messick]

Maybe I should go work at Toys R Us

[kjell1979]

> (1) Is the money yours, or your child's? This can be important if
> you want to control the money and your child ends up being
> less than responsible at money management. It can also be
> important for some tax considerations down the road.
>
> (2) What happens if your child doesn't go to college?

My wife and I agree that the money is there for their college tuition if they decide to go. If they don't then the money is going to be for them to get a start in whatever their endevour is going to be. At that point they can blow it on a car or whatever, but once it's gone, it's gone.

My main concern is that my child will turn 18 while still in High School and get access to the money and blow it before he or she gets to college. Is the money automatically turned over at age 18? Can my wife and I have the option to manage it until they turn 21? I'm just afraid that my child's friends might get some bright ideas with it their senior year in high school and convice our child to do something stupid with it.

What are some of the tax considerations I should know about?

> (4) Can you change the investment later? Can you go for
> growth in the first ten years, and then move it to more
> conservative investments at a later point?

That's one thing I was wondering. I was hoping I'd be able to treat it like a 401k account and roll it over into another account or something.


> It's nowhere near as unaffordable as people make it out to be,
> even if you don't get financial aid.

I have to disagree with you there. It matters where you go to school. I went to WPI where tuition was $35,000 a year not including room and board, books and other expenses. When all is said and done, you could be facing $200,000 per child for a college like that. This is not even including how much they may cost in 18 years. On the whole, yeah you're probably right, but it all matters which college they want to go to.

> My second son (the one who finished) had 3 scholarships. He
> also worked at Toys R Us as little as 8 hours a week,
> demonstrating video games. Do you know that Toys R Us had a > tuition reimbursement plan for him? It kicked in when he'd been
> there 6 months.

Scholarships are nice, but unfortunetly my wife and I never recieved any so we think of them as a plesant surprise rather than something we should count on. Also, most companies do not currently offer tuition reimbursement. It is a good thing to look for in the future and a good thing to keep in mind. My only concern is that extracirricular activities can interfere with this. The reason why I didn't work an afterschool job is because I had sports or piano practice or something like that. It was one of the reasons I got into the college I did.

> Put your child in the school band, even if (s)he thinks it's
> not "cool." Music scholarships are abundant, especially if kids
> play unpopular instruments (I have two friends who had full
> tuba scholarships.)

This is true. There is one thing you need to keep in mind as a parent with regards to this. Don't push this too much. I played 2 different instuments throughout my childhood and by the time I got to High School I hated it. I just didn't want to play because everyone sucked the fun out of it. It was a chore rather than something fun. My parents forced me to play just to get into a good college. However, others who played loved it. It's like worldwide club with a common language.

> Kids can usually START college with as many as 30 credits if
> they take AP courses or "extension" courses while in high
> school. These courses are great bargains--3 college credits only
> cost $100 or so.

Some colleges do not accept these, or they don't count for as much. Another good idea though.


Thanks for the advice. We'll have to see how much of it applies down the road, but it certainly is something to think about and keep my eyes on as our adventure with this progresses.

[frazzledspice]

USA Today had an excellent comprehensive feature on 529's, including grades and details for each state plan.

The link (for Monday's article) is at:

http://www.usatoday.com/money/covers...lege-plans.htm

If it isn't active on Tuesday, send me a PM and I can fax you a copy of it if you want.

I'm not sure what WPI stands for.

I guess it stands for W_________ Polytechnic Institute.

I have lived in four states--NY, Missouri, South Dakota, back to Missouri, and Arkansas. I lived in New York until I was 40 years old, and yet I never heard of WPI.

I'm sure it's a wonderful university, but I never heard of it. I never heard anyone west of the Mississippi ever mention it.

My friends are sending their second son to college. Besides being brilliant and a National Merit Scholar, he was on the national-winning Quiz Bowl Team. He and his other team members traveled to Vanderbilt, Catholic University, Notre Dame.....They were pretty much told: "You're brilliant. SO WHAT! So is everyone else who comes here. So cough up for 35 grand or stop wasting our time."

Except for one Quiz Bowl member (the one whose dad is a neurosurgeon) they are all going to the University of Arkansas Fayetteville. There they will be in the Honors College with Presidential fellowships. They will have all tuition, room and board covered and receive $2,500 stipends each year for other expenses.

They will receive an excellent education and graduate from the Honors College, without having spent a dime, instead of graduating with their parents $150,000 in debt (or owing $150,000 on their own.)

My son's girlfriend went to one of the Seven Sister schools. She is a wonderful girl, and her parents were able to cover the tuition. But although her educational experience was very different from my own son's (who went to University of Missouri, Columbia, ran the campus radio station for three years, sang and played in a band, and enjoyed a wonderful four years) I don't know if it was any better.

But as a rule of thumb, I don't think I'd spend $35,000 on any school that didn't enjoy a top notch national reputation. Maybe I am alone in not knowing what WPI is.

When I lived in St. Louis, people there thought Wash U (Washington University) was the best college going, and it was very, very expensive. But on the coasts no one really thought about Wash U or thought it was anything special (although it's high up on the "best" lists.)

And, because professors were so involved with research, they didn't spend much time with those students who were supporting their research with gargantuan tuitions.

Before I committed to a really expensive school, I'd call up someone in Wyoming. Then I'd say, "What do you think about _____ U?" If the person said, "What?" I wouldn't send my child there.

[quasar]

Just make sure as much money as possible is in your name not your childs'. Any money in their name will negatively affect financial aid. My parents saved for my college education from the day I was born and the result was that I lost financial aid. My younger sisters used that money to buy cars and computers and more than made up for it in financial aid.

Janice

[soxfan[$]]

Originally posted by frazzledspice
I'm not sure what WPI stands for.

I guess it stands for W_________ Polytechnic Institute.

The W stands for Worcester (Mass.). WPI's the third-oldest independent science and engineering school in the nation.

Ailsa