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April 09, 2012

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Most people who have students headed to college should be first putting their money into IRA's and paying off house debt rather than investing lots of money into personal investment accounts.

It's really very sad and totally inexcusable that since 2000 this great country has behaved so improperly handling its own finances and debt that we now find that local state universities have tuition fees that in some cases are higher than those at prestigious private universities with large endownments such as Harvard.

Only one of our three children had the desire to get a university degree. She lived at home and paid her own minimal tuition and the cost of her books at a California State University through part time jobs. The ever increasing high costs of attending state universities will have a very negative impact on future generations the way things are going. I am afraid that this country has lost it's way and is in a hole that it will be very difficult, and maybe impossible to dig its way out of.

Limey, I don't think there are any public schools with in state tuition rates higher than Harvard. Harvard has generous financial aid but thats not the same thing. Lots of people still get free rides at public universities too. Tuition at Harvard is about $38k a year. I doubt any public universities are close. Out of state tuition is another matter and has always been high and close to private school rates. Furthermore the increases in tuition are really state specific and California is raising rates faster than most states, yet Cal State tuition is still only around $6-7k level and thats not bad.

@jim
We had an article in the San Jose Mercury newspaper recently that compared universities in the University of California system with private universities and it's true that a few are now actually higher than Harvard and some of the other old universities with huge, well run, endowments.

Hooray for you and your wife for paying off your mortgage and saving for the future. You've given your children a good money lesson. Now try to convince your children that a college education is an investment and that going to the most expensive/prestigious college/university doesn't guarantee a great pay. Hopefully, you'll explain that high college loan debt can hamper graduates from reaching their goals. FYI: my mortgage will be paid off May 1--no debt just 1.5 years shy of retirement--yippee!!!!

Congrats to you on paying off your mortgage! I also applaud your good sense for buying a reasonably-priced home and not "trading up".

In Virginia, where the budget was balanced great comparatively elsewhere since 2000, also experiencing high clip tuition rate hikes. When you take Harvard's endownment and policy to middle income earners, those how qualify end up paying less tuition after 4 years at a Harvard versus public institutions of higher learning.

Many teachers here ask why the tuition rate hike since they are seeing ZERO hikes in their salaries but buildings erecting every other year on campus. Take thier question and see if someone here knows how to answer this.

Limey,
Possibly this article? :
http://www.mercurynews.com/breaking-news/ci_20101265

They are talking about the costs AFTER financial aid.

Harvard tuition is around $38k. No public school in CA charges close to that for tuition. Yes Harvard has generous financial aid. But if you don't have financial need (like the writer in this article) then you don't get the aid and may end up paying that full $38k bill versus a $8k bill for Cal St. Sac.

Sorry to hear about the FAFSA problem. I'm pretty sure we will be in that position when the kid is old enough as well. Only a percentage of the 529 counts toward FAFSA right?
Great job paying off your mortgage and investing. I'm envious.

Of course getting into Harvard is another matter... if you can get into Harvard then go for it. 99.9% of us can't do that...

Take 100k as your student loan debt. Take 2% as the spread between federal and private student loan. Take the max repayment term (10 yr federal, 15 yr private). What is the total difference in dollars?

Luis, Would be in the range of $30-40k extra interest. Why?

This exercise can help us plan ahead for how to invest our money when you know a child will be headed to college soon. We can then make a sound choice influencing the outcome on FAFSA.

retirebyforty,

I believe that 529 plans are considered parental assets for FAFSA purposes, which means 5.6% of the money in one is allotted to the Expected Family Contribution. Many private institutions, however, require that applicants for financial aid fill out additional, school-specific applications. Private institutions do not limit themselves to considering only 5.6% of parental assets when determining how much aid to award an applicant. I have heard anecdotal evidence that financial aid officers significantly decrease the financial aid they award when an applicant's parents have set up a 529 plan. That money is ripe for the taking.

Here is a basic work sheet of the FAFSA.

http://www.fafsa.ed.gov/fotw1112/pdf/fafsaws12c.pdf

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