contributing to 529k

[aim-high]

I am a software engineer with 2 kids. My first son is 6 years old and second one is 1 year old. I would like for them to do undergraduation in computer science when they grow up. Just a wishful thinking. In the year 2029, my first son will join college and in 2034 my second one. So I am looking at spending college fees from 2029 - 2032 for first one and 2034 - 2037 for the second one. I researched on college education fees at various top universities in the US and the average amount is around $35K per year. given this, can anyone advise me how much money should i contribute to 529 ? I am looking at worst case scenarios where both of my kids dont get any funding during their 4 year period in college.

[Captain Save]

It's hard to plan on such a short period of time. The goal is to save as much as you can and hoping that you'd have a good amount of money during their college days.. a 12 year period can be way up .. or could be way down.. The most important thing is that you're saving. Once they get to college, keep in mind that the money that you have in there can have wild swings.. so you don't want to make plans thinking that the money will definitely be there.

For example, if they could go to a state school but have an opportunity to go to a more expensive private school, I wouldn't make the decision based on the amount I have in the 529 plan, unless you plan to be extra conservative while they're in college. The worst thing is to plan for something and have a 2008 happen WHILE the kid is in college.

[MooseBucks]

No way would I fully fund a 529 for my kids. For us we put away a half of semesters tuition each year since they were born at the local state school. The amount we go off of is just tuition + fees no room and board. By the time they are 16 they will have enough for 4 yrs full paid at a local school. The thing is if your kids get into a great Ivy League school you will most likely not have to take out loans. If they go to a great private school you're going to be paying insane amounts for their college.

[MooseBucks]

Also it is imperative to remember that 529s are for education expenses. If you over fund it or if they decide they don't like computer science and want to forego school, you're going to have to save the money for someone else's school or pay the tax penalties.

[sblatner]

No way would I fully fund a 529 for my kids. For us we put away a half of semesters tuition each year since they were born at the local state school. The amount we go off of is just tuition + fees no room and board. By the time they are 16 they will have enough for 4 yrs full paid at a local school. The thing is if your kids get into a great Ivy League school you will most likely not have to take out loans. If they go to a great private school you're going to be paying insane amounts for their college.

Why would they not have to take out a loan if they go to an Ivy League?

[MooseBucks]

Why would they not have to take out a loan if they go to an Ivy League?

I know off the top of my head Princeton, penn & Harvard all have no loan policies. They will meet 100% of your financial need with grants. Now if they say the parents should be able to afford 10k and they parents say we aren't paying that is a different story.

[MooseBucks]

Per US news 66 schools that meet the full financial need. The list I'll be giving my girls to apply from and praying they get into one.

http://http://www.usnews.com/education/best-colleges/paying-for-college/articles/2016-09-19/colleges-that-claim-to-meet-full-financial-need

[disneysteve]

I know off the top of my head Princeton, penn & Harvard all have no loan policies. They will meet 100% of your financial need with grants. Now if they say the parents should be able to afford 10k and they parents say we aren't paying that is a different story.

I wonder how that works. Do they use the FAFSA parental contribution amount because that number is always insanely high? If they only cover any amount beyond that figure, it's still helpful but certainly won't prevent kids from needing to take out loans.

ETA: I posted this before seeing your last post. It looks like they are using the FAFSA number. A lot good that does.

[disneysteve]

I just pulled up our FAFSA report. They have our Estimated Family Contribution at $53,732. So even at a "100% need" school, we would be expected to pay the first $53,732 - which would require loans absent any scholarships.

[MooseBucks]

I just pulled up our FAFSA report. They have our Estimated Family Contribution at $53,732. So even at a "100% need" school, we would be expected to pay the first $53,732 - which would require loans absent any scholarships.

Depending on income and non retirement accounts they are going to take a large chunk of your savings. They'll take even more if it is the student's. The nice part is any home equity and retirement account savings aren't factored into your EFC.

[disneysteve]

Depending on income and non retirement accounts they are going to take a large chunk of your savings. They'll take even more if it is the student's. The nice part is any home equity and retirement account savings aren't factored into your EFC.

All true. I was just trying to make the point that the whole "100% of need" thing is largely promotional fluff. If we are expected to pay over 53K/year, that would cover 100% of the cost of most schools. Of course, we can't really afford to spend 53K/year for college unless we sell our house and cars and live in a refrigerator box under a highway overpass and ride bicycles everywhere.

[moneybags]

I researched on college education fees at various top universities in the US and the average amount is around $35K per year. given this, can anyone advise me how much money should i contribute to 529 ? I am looking at worst case scenarios where both of my kids dont get any funding during their 4 year period in college.

The $35K seems low for top universities. Does that include room & board? A top private university or out of state tuition at a top public university is currently in the $50K range.

I funded less than 25% for my 2 kids tuitions via 529s. I wish I had funded more since we didn't qualify for any aid. I didn't like the idea of the unknown with a 529. There will be a point when you realize your kids will go to college and you can figure out how much you'll have to pay, but it's not when they are really young (which would give you the best 529 growth).

Does your state have a tax deduction for 529 contributions? This gives you an extra tax break when you make the contributions. In Illinois, you get a tax deduction for up to a $20,000 contribution. During the college years, I fund my 529 for that amount and withdraw it for tuition in the same year.

[TexasHusker]

No way would I fully fund a 529 for my kids. For us we put away a half of semesters tuition each year since they were born at the local state school. The amount we go off of is just tuition + fees no room and board. By the time they are 16 they will have enough for 4 yrs full paid at a local school. The thing is if your kids get into a great Ivy League school you will most likely not have to take out loans. If they go to a great private school you're going to be paying insane amounts for their college.

The privates are often extremely competitive. My son is a junior and we have looked at several private universities. While the "top line" (retail) tuition and fees is running anywhere from $34K to $60K (on the most pricey one), reality is that even decent SAT/ACT scores translate into scholarships that cut costs by 40 to 50 percent.

In other words, few are paying retail; most are paying way less.

The one he is really focused on is $35K a year, but with an SAT score of 1200, they give you a $11,500 scholarship right off the bat, renewable each year. That gets you to $23,500 a year before any other scholarships or grants. Not bad.

[disneysteve]

few are paying retail; most are paying way less.

This is very true. Our daughter gets over $20,000/year in scholarship and grant money.

Something like 4% of students get no aid at all.

[butler]

We put money in privatecollege529 where you can pre-pay for future college credits for private colleges. Our goal is to buy about 1.5 months of college tuitions a year so that by the time our daughter is ready for college we will have about 2.5 to 3 years of college tuition in a private college paid off. She can take loans or we can fund rest with our savings. And if she is able to get into a State school (which is becoming increasingly tough in CA....for an Asian), then we will just transfer the funds to a normal 529 and use the same funds.