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Rookie Mom Seeks Early Advice on Financing College for Twins

scoutmom2002scoutmom2002 Registered User Posts: 95 Junior Member
History:
Twins currently finishing sophomore year in HS; graduating in 2020
Two FT working parents with combined AGI of $200K
VA 529 combined savings of $62K Question #1: Does 529 count against you when applying for financial aid? Does it count as student's asset or parent's asset?
High Home Equity due to living in NOVA ($700-800K) - Question #2: Does home equity count against you when applying for financial aid?

I know my kids will not qualify for much if any financial aid and as they are more the B student probably little to no merit aid.

So I'm beginning to think about financing for college years with twins. We do have the VA 529 set up but have not been able to save up as much as we thought. Life happens and with elderly parents overseas we have had to take many trips due their illnesses and some last minute due to funerals. We've also wanted to give our kids opportunities we never had growing up as first generation Americans...add to that the fact that we live in expensive NOVA/FFX County. Plus they get their driver's license this year...we don't plan to buy them any cars (they have to work to buy a used car)...but insurance alone for two driving teens. Money in, money out it seems.

That being said, with $62K saved up I hope to be able to at least fully pay for each kids' first year of college -- I know community college will save money, but I want them to get the full experience of college -- living in dorms/college campus as my parents worked hard for me to have the same. They know that we plan to only pay for in-state tuition, but I am allowing them to apply to a few OOS as I've heard that sometimes they will give aid and ends up being close to in-state tuition.

I am ball park estimating that cost for full tuition/expenses will be $25K per year per kid for in-state....so $100K x2...$200K. Ouch. So, $138K needed....I'll probably be able to save another $38K in the VA 529 by the time they graduate...so where to get the other $100K ($50K per kid)??

I plan to pay for each kids' 4 years of college (as my parents did for me)...my husband prefers to think...student loans. Either way, even if they take their own student loan...I'll plan to help pay as needed.

Question #3 - Assuming each kid needs $50K....Pros/Cons of...
Student Loan? Can students get loans of up to $50K? Options?
Parent Plus Loan? I know con is higher interest rate.
Home Equity Line of Credit?
Home Equity Loan?

Thanks!!
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Replies to: Rookie Mom Seeks Early Advice on Financing College for Twins

  • AroundHereAroundHere Registered User Posts: 3,571 Senior Member
    edited April 11
    DO NOT use the 529 to fully pay for your kids first year.
    The best student loan is the federal direct student loan which is limited to

    5,500 freshman year
    6,500 sophomore year
    7,500 subsequent years

    The loan may be partially subsidized depending on demonstrated need, but even the unsubsidized version has better terms than any of your other loan options.

    If you do not take the freshman loan, you cannot get more as a sophomore. Since you know you will run out of money, take the freshman loan.

    One of the first steps in college financial aid planning is to get a handle on how much need you demonstrate here:
    https://bigfuture.collegeboard.org/pay-for-college/paying-your-share/expected-family-contribution-calculator
  • twoinanddonetwoinanddone Registered User Posts: 18,620 Senior Member
    You have to separate a FAFSA (federal) financial aid school from the CSS financial aid schools.

    On FAFSA, the 529 is a parent's asset. The value of your primary residence does not enter the calculations. Students can only borrow $5500 as a freshman on the direct loan program. The rest is on the parents to borrow or cosign. Many different programs, different pros/cons.

    Better than loans is to choose the school wisely for cost and fit. Virginia has so many good schools. B students aren't always excluded from merit aid, and there is 'talent' aid too (art, music, drama, athletics)
  • AroundHereAroundHere Registered User Posts: 3,571 Senior Member
    In addition, every college is required to have a net price calculator somewhere on the website which you can use to estimate the financial aid which may be awarded.

    Run these for a few of the schools your kids might be interested in.
  • austinmshauriaustinmshauri Registered User Posts: 7,225 Senior Member
    If you'll have $100k in a 529 when they start college, that's $50k/child. Over 4 years that's ~$12k/year. With the ~$5500/year federal student loan that gives you a budget of ~$18k. Add whatever you can pay from current income and that's your budget. Tell them what the budget is so they can manage their expectations, and make sure they apply to at least a couple financial safeties.

    Do you have a plan for what to do if one earns a lot of merit and the other doesn't? Will you still divide the 529 evenly?
  • scoutmom2002scoutmom2002 Registered User Posts: 95 Junior Member
    @AroundHere....I did the EFC calculator and I get roughly $25K as my EFC per kid.
    Thanks for the advice, assuming I don't use 529 to fully pay for first year....assuming $25K per kid for first year...so $50K needed...less $11K in student loan for both kids...will need to use $39K of 529 money.
    Then 2nd year...less $13K in student loan for both kids...will need to use $37K of 529 money (plus cash flow if needed).
    Then for 3rd and 4th years $100K needed....assuming depleted 529....and $30K in student loan for both kids...will need to come up with $70K....yes, plan to use cash flow as much as possible..but likely to be only $5-10K/year.

    While your advice is helpful, my question remains the same...for the additional costs not covered by 529 money/student loans/cash flow what is the best way to finance their tuition fees? Parent Plus Loan? Home Equity Line of Credit? Home Equity Loan?

    Keep in mind that while I'm fine with having them apply for federal direct student loans -- that would mean they each graduate with about $27K in student debt. I don't want them to have student debt. So whether I pay for it all up front...or help pay off their $54K student loans afterwards...I plan to help pay for it.

    So knowing that I plan to pay for it all anyways...should I still have them apply for the student loans? Or should I plan for Parent Plus Loan? Home Equity Line of Credit? Home Equity Loan?



  • scoutmom2002scoutmom2002 Registered User Posts: 95 Junior Member
    @austinmshauri - no I don't have a plan... right now I'm thinking of dividing it equally.
  • DadTwoGirlsDadTwoGirls Registered User Posts: 4,291 Senior Member
    I agree with a lot of the good advice above. While the thinking of admissions officers and financial aid officers seems hard to decipher, I have consistently heard that 529 plans count against you for aid the same exact way that having money in a parent's bank account counts against you. It seems that the advantages of a 529 are that any gains are not taxed, and you know in your mind that you have set aside this money to pay for college. One downside we have found but which is mostly unlikely: If you student gets a really great scholarship, you might find that you have too much in your 529 and it is not obvious what to do with the remainder after paying for college.

    Definitely run the NPC for schools that your students are interested in. If you own a small business, are self employed, have rental property, own a farm, or are divorced or legally separated then the NPC might not be accurate. Otherwise they tend to be pretty good.

    You have very good in-state options in Virginia.

    With elderly parents overseas, by chance do your kids have dual citizenship?
  • AroundHereAroundHere Registered User Posts: 3,571 Senior Member
    The better your credit rating, the more options you will have.

    Student loans are exempt from the truth in lending regulations, so read the fine print carefully. Many loans have terrible penalty rates if you miss a payment for example. You can learn about private loans at the website privatestudentloans.guru

    Yes, knowing that you plan to pay for it all anyway, the best student loan is the federal direct student loan. Private loans and PLUS has worse terms. Someone with good credit may do better with a personal or home equity loan from their bank, but as far as college-specific loans are concerned, you should use the federal direct student loan first, then other products to fill any remaining gap.


  • gearmomgearmom Registered User Posts: 3,885 Senior Member
    edited April 11
    @scoutmom2002 What can you pull from salary per year for the kid? 7k a year each???

    You have your Stafford loan ($5500, $6500, $7500, $7500). !2.5 k per year savings. You need to pull some from salary. The KIDS needs to start working summers. Starting this one and saving. During college expect them to earn 2k a summer.

    With Stafford, 12.5 saving and summer earnings, you are at 20k. So you would need to pull 2-5k per kid from salary per kid. I wouldn't bother with loans if you are making 200k. And that might only be for Freshman year. Upper years they can save 2-3k by living off campus and cooking themselves.


    What state are you in? I think ours only costs 22-23k with best merit.
  • twoinanddonetwoinanddone Registered User Posts: 18,620 Senior Member
    The direct student loans (the $27000 per student/4 years) is always going to be the best loan the 'family' can get. Much better than the Plus loan, and I've never seen a private loan with better terms/rate/protections.

    What type of loan is 'next best' really is up to the family. Better rates usually on a home equity loan, more risk of losing the house. Some like Plus loans better than private, others get better rates on private loans.
  • scoutmom2002scoutmom2002 Registered User Posts: 95 Junior Member
    Thanks for all advice...FYI..I ran the NPC at one of the average Va public schools and ended up with $23,836...$0 aid..$5,500 student loan..so $18,336 per kid per year.

    FYI - my kids do work...all year round/summer as available. During Spring Break, my daughter was offered $100 to pet sit all week...but we said no...we had plans to go out of town..she was upset to lose money ;-)....but quality time with family is precious to me...I lost my dad at 21...it put things into perspective....

    This summer...gone for 3-4 weeks...1 week daughter going to Dom Rep for service learning trip to earn her Girl Scout Gold Award. 2 weeks son going to Philmont Scout Ranch - opportunity not to pass up for Boy Scouts as he's working towards his Eagle. Then required 2 wk family trip to Portugal. Both are working/fundraising and helping to pay for part of their scout trips....so any money saved going towards this...yes, it's a choice, I know. But, these are experiences that will in the long run be worthwhile.

    During the school year....how do teens find time for steady jobs? I only see winter breaks and occasional weekends as option...especially when you add in keeping up grades, school activities and ECs.

    Next summer they will be able to work more, but we are in such a saturated area it is actually hard for teens for find jobs other than babysitting/pet sitting for my daughter. My son is a soccer referee and he makes good money but over the summer there are less games available and they usually go to older kids...even young adults.

    Yes, they will likely earn $2k a summer during college...but shouldn't I expect that to pay for car insurance and paying/saving for a car? I assume that's what they'll be working for next summer....


  • AroundHereAroundHere Registered User Posts: 3,571 Senior Member
    IMHO, cars are a luxury item to be considered once college is paid for. Unless the car is necessary for getting to a job that pays well over minimum wage (possible for an engineering internship), the car is just a money sink.

  • twoinanddonetwoinanddone Registered User Posts: 18,620 Senior Member
    I have two kids who are about the same age and it was actually the younger one who wanted her driver's license. I couldn't afford the insurance! We have one car and it was always with me at work, so I didn't see the value of her getting her license and getting insurance on her. For just me and my at-the-time 14 year old car, the insurance was about $700 per year. To add her would have added about $2000 even though I was still the one driving it 95% of the time.

    She did finally get her license at 17, just before graduating. I moved, she moved to college, and now it is about $200 per year to have her on my insurance, even though she STILL doesn't drive my car. Other child is also on the policy now, even though she CAN'T drive my car because it is a manual and she doesn't know how to drive it.

    We (really I) just made the decision that we couldn't afford car insurance for two 16 year olds and afford college.
  • AroundHereAroundHere Registered User Posts: 3,571 Senior Member
    I am allowing them to apply to a few OOS as I've heard that sometimes they will give aid and ends up being close to in-state tuition.

    There are places where this is true, but more where this isn't. Read the scholarship information on the school website and run the net price calculator before letting your child apply.
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