OT - How Are You Paying for Your (kids') College?
Mates,
We are a year out from having the first one go off to college.
She is busy researching schools and we were talking tuition and room and board last night. Uhm. Yeah. Things have changed in that regard since when I went to school on a magnitude of about 10X. When I stopped playing hockey, painting houses all summer was enough to pay for my last two years of tuition and board. Not so these days!
It is hoped that we would avoid debt of any kind for the kids's school, and so the question is:
How are you/do you plan on paying your kids' college costs?
Thank you, and hopefully many good ideas are shared.
XM
August 11th, 2016 at 2:31 PM ^
That's rich.
In case it's not obvious...I don't choose where my industry sets up shop. You go where the work is. If I didn't, you'd be chastising me for that instead. If there were zero teaching openings in the Ann Arbor area, do you really think MGoBender would be living there?
August 11th, 2016 at 2:41 PM ^
no way his car would make it out of there.
August 11th, 2016 at 2:50 PM ^
Haha. BTW the car was just an example of choosing to not overspend. I actually probably drive my car to work more than I bike to work. I like the security of knowing I could walk to work though. And, I'm planning on buying a new (to me) car next spring, so I'm not a super bike nut.
My original point was that having some debt after college isn't necessarily going to crush lives.
August 11th, 2016 at 3:06 PM ^
I am guilty of substantial financial mis-management during and after college. That is where my major burden was born, not from student debt, but from assuming that the way it was when I was growing up would always be. Two generations ago, two story house, two car garage, two kids and a dog was almost assumed, it was just kind of a given even in one income households. I made the mistake of not having the foresight to see that those times were ending and did not carefully manage myself financially through college even though a portion of it was paid for me. Now wages are stagnant, there are way to many workers competing for fewer jobs in a lot of fields and cost of living including (and primarily) child care has gone through the roof. 20 years ago, the people you see in nice mini-vans with a couple of kids were very comfortable. Now, those same people may look comfortable but they are living pay check to pay check and hoping they don't need to go to the doctor or that god-forbid they should get a flat tire.
August 11th, 2016 at 3:22 PM ^
Unless your industry is very unbelievably specialized, and you're absolutely wedded to a particular niche - you can find work most places.
I have a Computer Engineering degree with an emphasis on VLSI design. I live and work in Michigan, by choice. I left the "Silicon Forest" and "Silicon Valley" both.
You're an aerospace guy. I know plenty of aero grads working in:
Michigan, Texas, Washington, Missouri, Florida, Ohio... all are big aerospace employers, and all (except maybe Washington) are at or below national average cost of living.
August 11th, 2016 at 3:56 PM ^
There are quite a few industries that ARE unbelievably specialized, and quite a few of them happen to be centralized almost exclusively in Los Angeles. There are several career paths that, if you don't live in LA, you might as well not even bother with, mostly related to either video, film or audio production.
August 11th, 2016 at 4:08 PM ^
"There are several career paths that, if you don't live in LA, you might as well not even bother with, mostly related to either video, film or audio production. "
...but you can work most of those jobs in lots of places.
Now - you may not reach the pinnacle of your profession, but you can comfortably support yourself in lots of places.
You might not be making blockbuster $100 million movies, or working on the latest Dre album - but there is plenty of movie production, audio production, etc. work right here in Michigan.
August 12th, 2016 at 1:38 AM ^
August 12th, 2016 at 8:46 AM ^
Yes, that is part of the choice.
...and all those producers working local news stations etc, are making it work - in every reasonably large city across the USA.
I live in Michigan working as an Electrical Engineer. I could make easily 2x as much if I had stayed in Oregon, doing what my specialty is...
...but I CHOSE not to.
August 11th, 2016 at 4:14 PM ^
But I don't work on aircraft and the job I landed is in LA. Like I said before, if instead I had moved back in with my parents and stuck my thumb in my ass waiting for a job in Buttfuck, Texas, you'd be chastising me for that instead.
August 12th, 2016 at 8:47 AM ^
Right.
So you could live somewhere with a significantly lower cost of living - you just CHOOSE to live in LA because you feel the benefits outweigh the costs.
August 12th, 2016 at 3:58 PM ^
How is that a response to what I wrote? I get a strong whiff of 'bootstraps' from your posts, which is why I'm calling you out on this. Stop acting as if everybody has infinite opportunities.
August 12th, 2016 at 4:09 PM ^
Everyone does not have infinite opportunities.
Someone with an Aero Engineering degree can get a job that will pay a comfortable living in lots and lots of places across the USA though.
Like I said above - my area of specialization is VLSI (particularly microprocessor design)... I work as an Electrical Engineer in Michigan - where there is no VLSI work at all.
I chose to take a 50+% paycut and to leave my area of specialization when I moved from Oregon back to Michigan. It was a choice, and it's a choice almost anyone with a good engineering degree can make.
August 11th, 2016 at 1:22 PM ^
Seems I'm in double post mode...
August 11th, 2016 at 1:30 PM ^
Shut up baby, I know it!
August 11th, 2016 at 2:22 PM ^
About 5x as many people pay off their loans as default on them.
August 11th, 2016 at 3:17 PM ^
I have no idea if your stat is correct or not, but even if it is, a 17% default rate is awful and is actually making the case that far too many people are not able to pay their loans.
August 11th, 2016 at 3:26 PM ^
It's pretty close to accurate.
Actual default rates are soemwhere between 10-20%.
When you consider the willy-nilly way in which student loans are handed out - less than 1 in 5 defaulting isn't too awful.
If you throw out the crappy for profit college, I suspect the number is much closer to 10%.
August 11th, 2016 at 4:18 PM ^
Bingo. 1.3 trillion is the amount of outstanding student loan debt in the United States. 5% would be crippling. 17% is a catastrophe.
August 11th, 2016 at 1:19 PM ^
The issue isn't necessarily that you'll go into default, its that paying off your loans means you are putting off other things. People aren't saving money for retirment, they aren't able to save up to buy a house which means throwing money away on renting even as rental prices continue to increase at absurd rates, etc.
There are long term consequences to having a generation that is barely scraping by without any ability to save up for emergency funds, retirments or investments until they are 35.
August 11th, 2016 at 1:32 PM ^
I totally agree.
One of the reasons I stopped paying anything more than I had to on my student loans was because the rent for my one bedroom Ann Arbor apartment eclipsed $1000 a month. And it wasn't even that nice or new.
I think it is insane that my federal student loans carry a 6.5% interest rate.
However, if you do college "right" (take it seriously, don't borrow more than you can handle, work hard, get good references and take seriously the notion that you must get a job after that 4-year ride), you should be able to swing a federal student loan payment.
In fact, the Income-based repayment plan is essentially calculated to be 15% of your spendable income, based on where you live. If you aren't making much money, that number is tiny or even 0. And yet, those tiny payments still will all count towards the 20-year forgiveness mark.
So, you do the math. You figure out how much you'll pay in interest and prioritize your student loans, your emergency fund, etc.
Another thing: I dont' really have an emergency fund, per se. I have a Roth IRA that I treat as an emergency fund. I'm saving for retirement with it, but if absolutely needed, you can always pull out contributions to a Roth without penalty.
August 11th, 2016 at 2:34 PM ^
So in other words... things are exactly as they've always been historically.
August 11th, 2016 at 1:23 PM ^
Obviously, you've never heard of law school...
August 11th, 2016 at 1:25 PM ^
First they begin to accrue interest as soon as you take them out. So if you start your Freshman year you already have 4 years of interest tacked onto that loan by the time you graduate. Also 10 years of paying a student loan is a very long time. Most people who graduate college, usually don't start with a high paying job, so even a few hundred dollars a month can become an albatrose around their neck, if they are saddled for 10+ years.
August 11th, 2016 at 1:50 PM ^
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August 11th, 2016 at 3:54 PM ^
How are you paying only 1.85 % for med school loans?
August 11th, 2016 at 3:53 PM ^
Seriously?
Let's say you are OOS and send your kid to Michigan for an undergrad degree and then med school. That's a half million or more right there. Mom and dad contribute 100K and kid starts his residency owing 400K. Residency doesn't pay jack, so you aren't paying off loans for, say, three or four years you study to be a primary care doc. Now, you owe north of 450K due to interest accrual when you start your first job.
You are paying 3.8 percent on your undergard loans and 5.3 percent on graduate debt. Splitting the 480K evenly between undergrad and med school, that comes to about 22K per year just to service the freaking debt. Throw in some principal and you have, in essence, a large mortgage for decades to come as well as your other mortgage. Law school is almost as bad but with worse prospects for high level reimbursement. Ditto for B-school.
And you think student loans are not the end of the world.
August 11th, 2016 at 5:23 PM ^
Yeah, where did I say taking out 450k of loans was a good idea?
I said it was an option to be considered and it's not the end of the world if you take out a small amount.
August 11th, 2016 at 4:20 PM ^
"Student loans aren't a problem because, if you go into public service, you can get them forgiven after 10 years! Also, I assume "forgiven" means that the debt just disappears into thin air!"
Congratulations for living frugally. I mean that - it's very admirable. Now enjoy paying off everyone else's "forgiven" debt in decade or so.
August 11th, 2016 at 4:52 PM ^
What's ten years when you go into medicine. Four years of college, four of med school, some surgery areas go as long as nine years, and maybe you got an MD/PhD like our former mod. You are in your mid to late 30's when you finish training and now you go to some out of the way place and spend 10 years in public service. While I respect people willing to make the sacrifice as well as get their loans paid off, that route is not practical for a vast number of students.
August 11th, 2016 at 5:27 PM ^
I was just pointing out one program; I didn't say that student loans weren't a problem. I did say it's not the end of the world if you need to use SOME loans to finance.
Actually, the PSFP does forgive loan balance after 120 payments if you're working at a non-profit. There are many career paths where you are very likely to be working at a non-profit. It doesn't have to be the same non-profit, either. It's just one program I pointed out because I think it's important for people to know.
As for "paying off everyone else's forgiven debt..." 120 payments isn't nothing. My 120 payments will result in me ultimately paying my loan principle plus another 10k. So, yeah, I end up getting a chunk of interest forgiven. Does the federal gov't need to be making 6.8% interest on student loans anyway?
August 11th, 2016 at 1:09 PM ^
Blah, double post.
I'd also throw in that getting a college job is my number one piece of advice to soon-to-be college freshmen. Having a little side money is important. It can cover those things that pop up - like textbooks - that some people will pay full price for. I don't know; having a job made me think of things more frugally, even though I had a huge chunk of money (loans) sitting in the bank account. For the most part, I was able to finish college with a good chunk of student loan money left over; that held me through to my first paycheck and I was then immediately able to throw the money back at the loans before the interest started rolling.
August 11th, 2016 at 1:06 PM ^
Done & done.
August 11th, 2016 at 1:13 PM ^
mr. scott mr. scott, whatcha gonna do? whatcha gonna do, make our dreams come true!
August 11th, 2016 at 1:35 PM ^
College costs are brutal. Our oldest daughter is in the Navy, as an Aegis computer network technician on a Destroyer (currently in the Persian Gulf area). The GI bill is giving her more than $150k towards college costs, plus living costs while enrolled. She is considering reenlisting: she'll get a $50k + reenlistment bonus, and is able to knock out as many gen ed classes as she can on the Navy's dime while she's enlisted. That's above and beyond the GI Bill. Her goal is to get an environmental engineering degree, finish college debt free, and have enough for a down payment on a house with her reenlistment bonus. (Unfortunately, Michigan doesn't have an environmental engineering degree program, at least now).
We also have twin adopted children in high school. Because their mother was on crack, and they came through the foster care system, there are special scholarships available to them. With good grades, they will qualify for a full ride (tuition, dorm, books, fees, medical costs) at any Illinois public college or university where they're admitted. Our daughter is planning to go to the University of Illinois for pre-law. Our son needs to get his act together.
The reality is that they will not have the opportunities I had. I was able to make enough between grants, scholarships, and summer work to pay for room, board, tuition, books, fees, at Michigan. Those days ended a long, long time ago. The other reality is that it appears all 3 of our kids will have college paid for without my contributing any money to the cost. I'm not complaining. I sure can't afford to pay for college on my salary.
I just finished reading a very good book entitled Hillbilly Elegy. The author, J.D. Vance, makes a fascinating point. If you are a good student, it actually is more affordable to go to a top of the line school than a State school. Places like Yale, Harvard, Princeton, Stanford, Northwestern, and the University of Chicago have huge endowments and scholarships for low income families. If your income is low enough (under $50k?), and you are admitted to a prestige school, chances are, most of your costs might be paid for, much more than the scholarships offered by a state school.
August 11th, 2016 at 1:44 PM ^
Just went out and bought that book today during lunch. Ha.
August 11th, 2016 at 1:50 PM ^
Wow, impressive. That's like top 1% in terms of responsability, I'd say.
Been wanting to read that book, too! I've heard it is a good take on the multi-generational cultural pathology--and I am no foreigner to it--that affects so many people who struggle to do better than their parents. Would love your take on it.
August 11th, 2016 at 4:08 PM ^
The GI BIll is no joke for people who know how to get the most from it. I have a coworker with a masters in English and a JD from Georgetown without spending a penny.
August 11th, 2016 at 6:03 PM ^
My daughter will be a freshman this fall. She got into Michigan (in-state), but despite being awesome, received basically no support. Cost of attendance would be about 27K. Again, that's in-state.
She was also accepted to Stanford. Cost of attendance there would have been 19K. Stanford and most other top private schools carve deep discounts. I make just over 6 figures and don't consider myself low-income at all, but by the standards of Stanford and the Ivies I guess I am.
That said, my kid did exceptionally well in HS, and I was very fortunate financially as a result. With two more coming along, though, we may have to move to plan B or C.
August 11th, 2016 at 1:07 PM ^
This is actually one reason, though small, that my wife and I decided to not have kids. We'd rather spend money on ourselves to take vacations and buy what we want.
August 11th, 2016 at 1:14 PM ^
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August 11th, 2016 at 1:22 PM ^
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August 11th, 2016 at 1:34 PM ^
What? What's wrong with not having kids?
August 11th, 2016 at 1:41 PM ^
Why? Not everyone wants kids. Certainly not everyone should have kids. Unfortunately most who shouldn't have kids, do.
August 11th, 2016 at 2:16 PM ^
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August 11th, 2016 at 3:56 PM ^
I'm not sure why people like you always have to adopt a holier-than-thou attitude towards people who don't want to have kids. "Selfish"? Give me a break.
August 11th, 2016 at 4:19 PM ^
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August 11th, 2016 at 5:14 PM ^
Agreed, if he said that he was going to give it away to the poor, homeless, and needy, then that would not be selfish.
August 11th, 2016 at 1:40 PM ^
"We'd rather spend money on ourselves to take vacations and buy what we want."
This is one statement where a sarcasm meter completely fails me. You could be completely seriously. And you could be over the top sarcastic. Without knowing you, or hearing your tone, it is impossible to tell.
If you are being sarcastic, well, ok.
If you are being serious, I support you. That is to say, I'll agree that some people shouldn't have kids. They are a serious investment. I personally wouldn't trade them for anything. I have loved experiencing so many things with kids. There's nothing like the awe of taking your kids to do something that blows their mind. They are happy you're spending money on them. And you secretly are delighted to have them with you enjoying themselves, and would find it much more boring to only have the two of you or one of you.
August 11th, 2016 at 2:06 PM ^
would find that statement ridiculous. I was the most selfish individual ever until I had a child. Now the thought of having things or vacations instead of a child seems like a life without purpose.
There is no object in the world worth as much as a hug from your own child who loves you.