As of 10:30 (ET) today (1/20), the stock market is down ~ 800 points since the opening on Friday (1/16). This has a direct impact on 401k, the housing market, and the potential loss of jobs as consumer confidence dwindles. We all know you are not supposed to rely on 401k to pay for, or factor into, your child’s educational expense. However, there is some comfort level in knowing you have home equity or a larger surplus in 401k funds, if necessary.
Given the above, and for the purposes of this topic, let’s assume the market continues to go down over the course of the next few months.
Question: Would a sharply falling economy impact your child attending a certain university? Would you give additional considerations to enrolling your child into an “in-state” university VS a private university or an “out-of-state” public university?
"Would you give additional considerations to enrolling your child into an “in-state” university VS a private university or an “out-of-state” public university? "
-We considered only schools that offered either full tuition Merit or close to full tuition Merit award. There was no market crash at a time, so our choice was not conditioned on overall financial situation in the country. D. simply did not see any reason to attend an expensive UG as she was planning on medical school. D’s 2 final choices were one public (full tuition Merit award) and one private (very close to full tuition Merit award). D. choose in-state public because they accepted er to the program that she was interested, while the same type of program at private rejected her. Her best HS friend actually choose this private and ended up also paying very small tuition because of her Merit award.
I would not focus too much on public vs private. Private may be very inexpensive for a certain student.
The result for both girls was the same - acceptance to few medical schools.
On the other hand, Merit awards may also be influenced by the financial conditions in the country. All 10 of D’s scholarships that added up to full tuition were privately donated. I imagine, that donors could pull them out in financial hardship situation. D. liked her UG a lot, which may have resulted in attending there even if Merits were revoked for the lack of funds (if this even could happen?)
Again, as another point, the colleges may just get closed in case of total financial disaster like depression (??)
No. The only way it would make any difference to us if our son got into Stanford, which won’t happen because he didn’t apply there (even if he had applied the odds of getting in are low).
We would want to sell our house to make Stanford happen debt free, which is the only way we will send our kid through UG. Arguably a rocky stock market could affect the housing market.
Everywhere else we are looking we’d be OK (looking for merit $$).
Thank goodness, we changed our 529 plan money to non-stock funds last year, since two of our kids are starting college in 2016. Whew! Not that we had enough money in them, anyway. Ack.
This question got me thinking about the past, when our kids were in college 1996-2003. Terrible market crash in 2000. But that only affected our tax-deferred retirement funds (401k) which weren’t relevant to current spending.
Best advice to parents is that in the last 2-3 years prior to when your kids will enter college you should have as much as possible of the needed cash in very safe mode (mainly savings and fixed investment). We had money in US Savings bonds and cash. The 529-type accounts had barely been created then), but it you have those you should also have your investments in them in safe mode the last couple of years. Also, we stayed employed. So in the end the college funds (private schools) for the two kids came 1/3 from the grandparents (it’s very hand to have those), 1/3 from our savings, and 1/3 from our income. The colleges provided almost no aid, though one provided a modest NMS award.
We went through it in 2007-2008 and that was when D1 was entering college. I didn’t change course. D2 is applying to law school now, and I think I will still stay the course. What could have change my course was my divorce from a year ago, but I think I can still help her out.
You never know what the future holds. Ever. Job loss. Unexpected illnesses. Changing health care costs. Your children and their near term financial needs.
Each person here has their own bucket of money. Some buckets are much, much bigger than others.
$100,000 to me and $100,000 to someone else here can mean very different percentages of our buckets. So it doesn’t really matter what others are doing since I don’t have their bucket.
Will your choice keep you up nights. That’s the question.
My D1 entered college in Fall 2008. Even her age banded 529 took a hit. She still entered the same college she probably would have, and the few investments in stock recovered over the next couple of years and were used in her Jr/sr year.
Like @intparent, my D entered college in fall 2008 (if I recall, the stock market then was around 10,000 or 11,000). In March 2009, the stock market hit 6443.
The stock market had no effect on her college choice or her college funding.
It certainly reduce the amount of college fund we have for two kids, one entering the college in 2016 Fall. But we probably won’t change our direction because of this. Good news is, the college fund has a chance to re-grow for over the next 4.5yrs for the first kid and another 6.5yrs for the second kid. So I am sitting tight trying not to make any drastic moves.
I’m pretty much with everybody with regard to the (immediate) market not having an impact on the university selection. However, I must admit that it does make me think a little given the fact that out-of-state GaTech ($200k 4yr total) and in-state Univ of Florida (~$50k 4 yr total) are the 2 primary schools of consideration.
We didn’t get in to GT @DarkStar904, but that would have been a consideration for us too.
Think I would have gone UF in that scenario. But it’s somewhat of a close call given the value of GT though UF is an outstanding public university itself.
My dad moved to all cash last June. His reasoning, an indifferent market going sideways was no place to assume any risk. He also didn’t use a 529. I have a Uniform Trust to Minor Account he opened when I was 7, and has done very well picking stocks for me. Seems like many here did the same thing moving to cash. I think I read recently that 70% of the world doesn’t quite understand high finance. Staying the course and avoiding market timing cost many their fortunes. I thought buy and hold was discredited as an old style of thinking.