I’ve been away on vacation for the last week. I decided that you didn’t need to read a “giving thanks” article for the dozenth time (either on my site over the years or through other bloggers that you may read.) Similarly, I didn’t think it made sense to write about Black Friday. The streaming media deals were what I focused on. It’s not too late to get the Hulu deal.
Today, we’ve got a guest post from regular writer Kosmo. I’m grateful for having a friend like him to continue to contribute excellent articles like this one. I also appreciate reading from parents who are closer to the college decision than we are. (We still have four or five years before we get too far into that.)
My daughter is now sixteen, and we will soon be focusing on her college plans. It seems like only yesterday that I was sixteen and going through the same process.
My background
I am not only a first-generation college graduate but also a first-generation high school graduate as well. My parents had an eighth-grade education. I’m the youngest of eight and the only one who attended a four-year college.
I grew up on a small dairy farm without many of the advantages that often predict future success as a student. Luckily for me, I was a voracious reader and was able to supplement my formal education with information I was able to glean from books. I was anxious to get away from farm life and dedicated myself to my studies.
My parents were in no position to help with college costs, so it was up to me to figure out a way to pay for my education – and to navigate the financial aid process. This was in the early 1990s when you couldn’t just jump on a website to find guides or simply Google a question that you needed an answer to.
I was an excellent student, but with few extracurricular activities (other than farmwork), and didn’t get a lot of scholarships. I was able to cobble together some Pell Grants, part-time jobs, and $25,000 in loans to pay for my education. My first job out of college paid $31,000 per year, so $25,000 was quite a bit of money in 1997.
529s
We have been investing in 529 plans for our kids for several years. The main advantage of a 529 plan is that the gains are not taxed. If you invest $10,000 into a 529 and it grows to $50,000 over time, you can use the entire $50,000 for qualified educational expenses and not pay any taxes on the $40,000 in gains. In some states, such as Iowa (where we live), you are able to deduct 529 contributions on your state tax return if those funds are invested in a state-sponsored 529 plan.
We started a 529 plan in 2008. We used the economic stimulus payment of 2008 to start a 529 for my daughter, who wasn’t yet walking. We’ve invested every year since and began a 529 plan for my son when he was born in 2009.
We also have a mini-529 plan for each of them that is tied to a Fidelity credit card. We get 2% cash back on our credit card purchases – half of the cashback goes into a Fidelity 529 plan for each kid. There’s much less money in these accounts than in the main 529 plans, but it’s a case of “set it and forget it”. If we spend $100 with the credit card, they automatically get an extra dollar in their accounts.
High school
Both kids have been exceptional students throughout their careers. Now that my daughter is in high school, she has more choices in her educational journey and is able to chart her own path.
Her path has been one that consists of a lot of hard work. She’s currently a year ahead of the standard for math and science and has a schedule full of AP and honors classes, with a community college class thrown in. The community college class is Introduction to Business, which my wife and I strongly encouraged her to take. She has a completely full schedule, with no study hall or PE (you can get a PE waiver if you have a full schedule of academic classes). She’s also active in band and art.
At this point in her high school career, she has straight As and also a good mix of extracurricular activities, including a couple of honor bands.
The high school recognizes students for volunteer work at high school, based on two different levels of hours volunteered. While recognition shouldn’t really be a driver for volunteerism, it has been a good way to get kids interested in volunteering. At this point, most of my daughter’s volunteer work has been at a food pantry that’s within easy walking distance from our house. This is a good way to reinforce the idea that not everyone is fortunate enough to live in a middle-class home. Many households rely on food pantries because they simply can’t afford groceries.
About a month ago, she took the pre-ACT test. Her results indicated that her composite score was in the 99th percentile. She needs to continue to focus on her schoolwork, but she is well-positioned.
College finances
Naturally, we’re hoping that she’ll earn a lot of scholarships. My wife and I are in a much better financial position than either of our parents were, making need-based aid unlikely. While we have a healthy amount saved in her 529 plan, it would be nice to have the 529 actually cover all of her expenses.
I do think it would be a good idea for the kids to have some financial stake in their college expenses – either by contributing some money from part-time jobs or taking out a small amount of loans. During my college experience, I noticed that students who had “skin in the game” typically got better grades than the students who relied on their parents to pay for everything.
College choices
We actually live in the same metro area as one of the state universities. If the kids go to this university, it would be about a fifteen-minute drive to campus. They’d be able to live at home and save a lot of money on living expenses.
My daughter has begun to think that this might not be the best environment for her. She’s not the most outspoken person and thinks that she might not be comfortable in such a large environment. She’s probably right.
She has had a couple of opportunities to participate in events at a smaller state university that is about seventy miles to the north and will be at a multi-day band event in January. If I were a betting man, I’d say that this is the college she’ll end up at.
However, we’re in the very early stages of the college search. She has just begun receiving mail from colleges, and I suspect that this will quickly turn into a flood. She’ll likely be intrigued by colleges that she has never heard of.
So the question that’s bouncing around in my head is where she’ll end up going to college. The University of Northern Iowa? Princeton? Pepperdine? Texas (ugh)? Something that I find interesting is that she and her friends really don’t talk about their college choices yet. They’re only sophomores, but high school graduation is approaching fast.
Financial impact
The choice of college has a big financial impact.
The current costs for tuition, fees, room and board at Northern Iowa is $18,754 per year, with other costs (such as books and transportation) pushing the annual estimated cost of attendance to a bit over $23,000. Starting at a community college and transferring would lower the cost a bit more. In contrast, the cost of attendance at Princeton is $83,140 per year. My son (13) was shocked that the total cost of attendance for four years would be six figures. As parents who have been paying attention, we were not surprised at all.
But the sticker price isn’t the whole story. While we’re unlikely to get much need-based aid, merit-based aid may be a different story. With her stellar academic record, extracurricular activities, and volunteer work, she’ll be a strong candidate for scholarships. However, she attends a great high school, and many of her 400 classmates will also be strong contenders for scholarships.
Next in line
My son is two years behind my daughter in school. He also gets great grades, but he definitely doesn’t put in the same level of effort. I doubt that he’s going to take all of the advanced classes she is taking. He’ll still be on an advanced track, but he’ll probably have a study hall in his schedule. He’s also likely to be in a couple of sports (track and cross country) that he enjoys, even though he doesn’t perform particularly well (yet).
He’s much more outgoing than his sister, and I could see him ending up at the local university and embracing the size. If he lives at home, it would significantly reduce the costs. I could definitely see him wanting to live with his friends and not have parents around, though.
Buckle up
It’s going to be an interesting couple of years. Trying to predict the college paths this far out is impossible, but that doesn’t keep me from trying.
We’re currently on track to pay off the mortgage right as my son graduates from college. So if we’re able to get through the college years without adding a lot of debt, we could be well-positioned for retirement, with kid-related costs and the mortgage dropping out of the budget at the same time.
Your experiences
What about you, Lazy Man and Money readers? What was your college experience like? If you have kids, how was their experience different than yours?
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