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College savings

October 30th, 2015 at 10:11 am

So we're on track for retirement and being financially independent. However I know my DH and I have taken care of ourselves at the expense of our children. We aren't going to be eating cat food and we are going to provide them with a good life and education k-12. We are going to give them a nice place to live, healthy food, and an education.

But what about college? That's the elephant in the room. I love reading CreditCardFree's posts about college. It is costing $17k/semester for her daughter to go to a state school. That means it is $136k without scholarships to go to the state school. OMG. And I understand it's out of state tuition but she explained the scholarship brings it in line with in state tuition which still isn't cheap!

But they are paying $7100 this semester because of a $10k scholarship and with the scholarship it works out to $75k for 4 years. Another reader Joe said he paid out of pocket after scholarships $9k for the semester which works out to $72k for 4 years. Jolie says they are paying $13k for the year or semester I can't tell. Either way it works out to $52k for 4 years or $104k for 4 years. Ms Frugalista said it cost $40k and probably $47k in total for each of her two kids now.

So I'm going to estimate right now in 2015 $70k is not an outrageous amount to be paying for college for 4 years. That works out to be around $17k/year. Assuming a very conservative 3% inflation rate I'll need $100k in 12 years. Granted I have an extra 4 years to pay this over and I have 15 years for my younger kid.

$100k for each kid as a ballpark number seems like a reasonable amount. I have 16 years for one and 19 years for the other because I will likely borrow and pay back based on grades. I want my kids to have skin in the game.

But we've only save $14k for DK1 and $9k for DK2 at a rate of $2k/year. According to a calculator if we save $2k/year for 16 years and get a rate of 6% return we will have $88k for DK1. So we may make it depending on the market. However if we save $300/month for 16 years at 6% we can have $130k. For our younger DK2 we have $9k and if we save $2k/year we'll have after 19 more years $96k @ 6% rate of return. However if we save $300/month for 19 years @ 5% we'll have $152k.

Can we find $300/month more for college? I think we can. After we buy a house and determine our living expense I'll show DH our potential college savings deficit and determine if we think $100k is enough for each child.

I've always said I'd like to provide 4 years at the state school and anything above we can't guarantee. Of course if they go somewhere really cheap I'd also love to give them the balance for graduate school!

8 Responses to “College savings”

  1. creditcardfree Says:

    I'm glad you have been saving some for college. When you posted on my blog it made me think you weren't saving.

    I have a friend sending her daughter to a state school in MN. Her daughter will graduate from a high school in Texas. The non resident tuition for the entire year at that school is $6400. Without scholarships. The room and board for the semester is $4050. One year, non resident is $16500.

    I think the tuition isn't terrible...it's the housing costs that are the worst!

  2. jokeabee Says:

    Maybe your kids can consider a community college for 1-2 years? Yes, they may miss out on the dorm living experience, but if finances are a concern then a community college is a great way to go. I got my associates at one before I transferred to a 4 year university. I feel like I got an even better education than some of my peers who went straight to 4 year schools because every professor I had knew my name-there were no 150 student lectures, and none were taught by a TA.

    I agree with CCF-it's housing costs that are the worst. If your kids could live at home (if you can stand it!) that also takes a significant portion of the cost down.

  3. rob62521 Says:

    College is outrageous and here in Illinois, I look for it to go up since our state isn't giving the universities much money.

    jokeabee's suggestion about a community college was what I was going to recommend as well. Most colleges and universities will work with you if you explain you want a four year degree, but need to do the first two at a community college -- they tell you what will transfer so no credits are lost.

  4. FrugalTexan75 Says:

    Yep, I agree. Have the kids start off at community college. Also dig deeply for any and all scholarships that they even can remotely qualify for. So many scholarships go unclaimed either because people don't know about them, or think they're "too small to count."

  5. Livingalmostlarge Says:

    No we've put it lower on the priority list for now. Now that we've moved and are about to buy our final home and settle in we'll move it up the priority list. Plus the kids are getting older. My biggest issues has been I've never felt like I have a goal of savings in mind other than "save for college." There hasn't been a concrete plan or number.

    jokeabee I know about community colleges but I feel like dorming is part of the college experience and one that helps a lot. I'll post about that later.

    Rob how much is illinois?

    FrugalTexan definitely we'll have them apply to everything.

  6. snafu Says:

    We've 2 DSs who completed graduate degrees about 2.5 yrs ago, We DCA'd Mutual Fund programs whose somewhat aggressive compounding over 18 years accumulated substantial sums. As others have said, there are thousands and thousands of awards, bursaries, grants, prizes and scholarship s available for the effort of applying. If you expect DKs to have 'skin in the game,' they will work part time in high school, summers and during semester breaks in college. There is no rule that they must move directly from H Sch, to college.

    For boys, it's often helpful to have them in the workforce for a short term to allow maturity to catch up to age. Finally, while there are benefits to the dorm experience, it needn't be 4 -5 years if there is a state school in your city. Our younger son did 2 years of fully transferable college before moving on to a 4 year program. He nearly stopped my heart by deciding to take a 'gap' year and fund travels by working in third world countries. [best thing ever to appreciate being Canadian]

    Finally, we cannot imagine what post secondary education will be in the next two decades. There will likely be such an incredible backlash from millenniums who find student loans of $ 130K @ 7% for 20 years to be unacceptable that there will be change. There is too much advantage in Nordic countries for example.

  7. My English Castle Says:

    This is an ongoing anxiety issue for me. My parents left my daughter some money for college, and we have money set aside, but it's so expensive. I also worry about stickability for kids. The classes I teach are probably less than typical as I have 25 in each section. But of those 100 total, I've lost five or six who have been dropped for missing too many classes. I have access to student records, and even good students have horrible semesters, drop classes past the refund date, and end up taking five+ years. With the budget cutbacks at my university, we'll be offering fewer classes which means it will be difficult for even decent planners to graduate on time. I think snafu is so right; boys have the hardest time. Of my late dropping students, only one is a girl.

  8. Livingalmostlarge Says:

    Snafu did your boys use all the college funding? Based on college costs in Canada, I know it's substantially cheaper even being from the states. We got the kids their birth certificates and will use Canada as an option in the future.

    MyEnglishCastle, Do most kids pay the majority of tuition at your school? Is it public or private? What do you think it costs for four years?

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