I am so very sorry for your loss and having to be overwhelmed with all these financial issues at this time.
So I am putting on my lawyer hat for a hot second. I am guessing your payout for the life insurance was about 900k (based on your statement that 280K was 1/3).
You and your husband previously lived on 1/8 of this amount per year. Now, you received a lump sum, and you need this money to last for 25 years.
What cannot happen is your child attends a school that costs 70K a year or anywhere near that amount unless you can guarantee that he will receive financial aid in a very significant amount.
My guess is there is a part of you that wants your son to be able to attend the selective school. He has had a terrible year and if this could bring him some joy than he deserves it.
In reality, you also have to think about your future. Will you be going back to work? Are there younger children at home or other responsibilities which may preclude full time employment?
None of this is fun to think about, much less discuss with a child. Talk to a financial advisor, and find out what is the realistic amount you can contribute towards a college education and still protect your nest egg.
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