I’m trying not to be judgmental, but it’s hard to be sympathetic with all the “whoa is me” after learning that you have assets tied up in and income from a second property. Most people who self-identify as “not rich” and middle class do not have a second property that produces income or can be used for vacations. Schools probably think, in part, that you can afford an expensive education for your child because you have a second property. Everyone makes choices. For whatever reason, you have become the owner of a second property. Can the property be sold to help fund the education? Yes, I understand that the rental income would then go away. Can the second property serve as collateral for a loan to help fund the education? How can you make this property work for you instead of letting it be a drag on need-based financial aid?
Multiple property ownership is much more “whoa” than “woe” for sure LOL.
I will share what we are doing, in case it helps you explore some alternatives. I am a public school employee, and my spouse earns less than I do, so being full pay is definitely a huge expense for us.
We used a home equity loan to pay off our mortgage two years before our son was going to enter college, since the interest rate was lower on the home equity loan than on the mortgage. Then we paid off the home equity loan as quickly as we could, leaving the minimum amount in it for the minimum amount of time it has to be kept until it can be paid off.
We are using 529 money from us and grandparents to pay for the first three years. We will pay the fourth year out of our savings account.
At that point, we will not have that much left in savings. So, for any graduate school, our son is planning to work for a couple of years before grad school to earn some money to help out, and we also are planning to take out a new home equity loan from the home equity line of credit we already have set up. The 529 also will be rebuilding during that time, so we will use that, too.
friends, let me be clear once again, I am not trying to get money from schools but only trying to explore the smarter ways of paying the full fee. Period.
We used the monthly payment plan…actually it was 10 months of the year. Both of our kids’ colleges offered this.
We were full pay…although one of our kids did get a decent merit award.
We were paying out of current earnings only…and this helped us manage our cash flow.
Most colleges have this option, usually through a third party vendor.
If your state offers a state tax deduction for money ina 529, and the 529 does NOT require the money stay in the account for long (most states do not) you can “launder” they money into the 529, something safe like a money market etc, and then pay the $35k for fall 2019. This might net you a few hundreds dollars in state tax savings each year.
@middleclassparent If your state has a benefit to funding a 529, you should fund a 529 to the maximum needed to get full state benefit. For example, Illinois gives a 5% credit back on state taxes (up to a $20k contribution per year) for families contributing to a 529. So, you could save $1,000 on your taxes by putting $20k into a 529 each year as an Illinois resident. You can turn around and use the $20k you contribute each year for school expenses that year, you don’t have to ‘season’ the money for any length of time.
You can buy savings bonds (both EE and I series, I believe) under your child’s name and the bonds can be used to pay for college expenses without paying taxes on the interest earned on those bonds. Much like the 529 plan, the savings come from less tax paid, not necessarily ‘getting money back’. Unfortunately, the amount of interest earned on those bonds would be pretty negligible if you haven’t been doing that through your child’s life. Not an effective plan if your child is in high school already.
You can see if the college your child attends accepts credit card to pay tuition without a transaction fee (some do, or do to a certain amount). Get those miles via the credit card rewards and cash those in.
I am not a financial advisor, but having worked in the financial markets I would definitely warn you away from buying an annuity, playing merry-go-round with assets or other ‘brilliant’ ideas I sometimes see people saying an ‘advisor’ suggested. The advisor is usually a salesperson who stands to make money on your desire to ‘get a good deal’ rather than always getting you a good deal.
There aren’t a lot of ways for you to save/earn money while paying for your child’s college tuition. Don’t let the tail wag the dog when investigating options. I’ve seen a lot of people end up paying a lot of money to financial advisors, tax accountants and lawyers in their search to pay less taxes. Most of the time, it comes (at best) as a wash when looking for ways to ‘ease the pain’ of paying and sometimes you actually pay more in your quest to do anything to pay less.
…or you can pony up the money, painful as it may be it should be doable at your income level. Most likely would mean living on one paycheck instead of two.
One of the best things we did when my oldest was in 9th grade was hire a financial adviser to help us set up with an eye toward college for 2 kids and retirement. We are also full pay. The financial adviser recommended a figure that was about 1/4 of what the FAFSA says we can afford. Just because those calculators spit out a number doesn’t mean it’s actually meaningful to your actual situation.
My elite stat kid is probably going to an honors flagship U with merit money and we’re actually going to be paying considerably less than I originally thought. Just be open with your kid up front that you can apply but at the end of the day numbers matter and it may mean turning down a more elite school. My kid was admitted to more prestigious schools and we’re letting them go.
You don’t NEED to pay 70K to get your kid a quality college education.
The OP has plenty of money for college tuition. He wants to know about any benefits he can get for spending a lot of money. Is there a reward program for college tuition payments? We have mileage reward, credit card rewards, drug store reward…why not tuition rewards?
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@MusakParent - Definitely agree on getting quality education through any of the top 100 universities. However, the other opportunities such as connections, research, and rigor may differ between T10 and others ( at least i hope so).
In the end, if it’s worth paying 70k for it is very subjective. If a student is intrinsically motivated nothing can stop him/her though
We found it helpful to use the 10 payment plan that the U offered, to stretch the payments out. We were also able to charge these payments with no extra expense and put them on a cash-back CCard, which we paid in full so no interest or finance charges were due. H at one point needed to have Required Minimum Distributions from his retirement accounts (he turned 70), so that helped us with cash flow as well. I was able to increase my income at my job by obtaining several grants that helped the nonprofit I founded be able to pay me for the countless hours I spent working. All of my salary went toward the kids tuition and expenses.
Doesn’t the child have to have enough earned income to qualify for not being claimed by parent on taxes and claiming AOTC?
How could that be possible, if parents pay $70,000 a year for child’s school?
The child would have a hard time providing more than half of their support.
The AOTC would be claimed by the parent for a dependent child.
At some schools you can lock in current tuition by paying for 2-3-4 years in advance. Also look at the PrivateCollege529 from Oppenheimer Funds. You may be able to lock in Years 3 and 4 at the current rate.
Have your child share the burden without debt and learn to manage $$. Use their research or work study and summer internship pay for books, personal expenses and after freshman year, good in place of a meal plan. Without loans, this will total about 27k = federal loan limit.
Yes, the FA system gives no reward for staying married and working hard. However, your student will learn a lot by contributing to their education and at the same time observing the monetary diversity and difference in spending habits of the ultra rich and those on full need scholarships such as questbridge.
Some states give a deduction or tax credit for a tuition amount over a certain % of income. Needed 2 full pay in one year to meet this threshold.
“Doesn’t the child have to have enough earned income to qualify for not being claimed by parent on taxes and claiming AOTC?”
The child has to not be claimed as a dependent. That’s an election the parent can make (and forego $500). Providing half of your own support is only necessary to make the credit refundable. If the child earned (say) $20K from a condo they owned, they could use that money to pay tuition and claim the AOTC to reduce the federal tax that would otherwise be owed. But it’s possible that the kiddie tax might be an issue if they are not actively participating in the business.
You cannot pay tuition with a credit card at many universities and colleges. We looked into that. We use monthly payment plans, and pay a small fee to an outside vendor. ETA, if you like, you can pay the vendor with a credit card, but you get charged an additional four percent or something, which kind of defeats the point of earning miles.
Our daughter was offered nice merit awards at other schools. She very much wanted to attend the school that didn’t offer merit. We felt it was fair that she have an investment in her education so we said that if she chose the more expensive school, she would have to take out a small federal loan. We explained how long it might take to pay back the loan. She agreed to that, and she will pay back about $11k worth of loans. That’s a manageable number. She thinks it’s worth it, and we do too. So your child can also contribute to his education if you want to make it a little less painful on your wallet.
Regarding credit cards for college payments.
- Some do not take any kind of credit card...at all.
- Some take credit cards BUT they charge you the %processing fee which often negates any rewards or cash back.
- A few still take credit cards with no additional charge...but good luck...because a few might be overestimating it!
We are full pay, at $72K next year. Our income is below the threshold to qualify for the AOTC, so we take full advantage of that.
We have not bothered applying for financial aid from the school or the government after the first year, when the school of choice – a meets-full-need-school – said they thought our family’s financial strength was sufficient to pay the full bill.
And somehow we’ve been making it work. I guess it helps that we live below our means, and have been for years.