Tuesday, October 23, 2012

Paying for College

There was a comment on my previous post about paying for college and what our plan was.  Did we do any education savings accounts - did we expect the kids to help pay.  I started to reply and it got rather long winded so I decided to make it a post instead.

First of all - I am no wizard with my money.  If I have it I spend it - so I only keep what I absolutely need to pay bills and survive available to me.  All the rest gets stocked away into retirement or stocks.  I use the stocks when I need to pay for a large purchase.  As I mentioned in an earlier post we are off credit cards so only real money gets used.  The last of the credit cards will be paid off in February.  So we have payments on the house and one car (which will be paid off next September).

As far as school, my father offered to pay for mine, but at the time I was engaged and had been working full time for 2 years and I decided I should pay myself.  Now this was easier at the time.  I started at East Carolina University in 1990 and paid $365 a semester, I think books were more expensive than tuition.  So I was able to get through school without any loans.

When I graduated I got a job and my husband went to school.  It was more expensive, I think about $2000 a year by then (1994) but we again were able to do it without loans.

We are so fortunate to live in the great state of Virginia - there are so many really good state schools, they range in cost from $13,000 to 21,000 a year.  Which when you look around is a pretty good bargain.  We always told our kids that they had to pick one of these.

When it came time for my son to head off to college he applied to 9 schools and was accepted at 7.  Then he decided to stay home at community college.  He didn't know what he wanted to study so this seemed like the better plan.  Tuition is abut $1600 and books about 800 - so again no loans as we paid this out of pocket.  He is graduating after 3 semesters and a summer class.  We figure this saved us about $30,000.

So when it came time for him to choose the next school we allowed him to choose one out of state.  It is slightly more expensive about $26,000 a year but he got a small scholarship that will basically pay for housing.  He will take out as much as he is allowed in subsidized loans and then we will take out loans to make up the difference.  When all is said and done we will look at how much he has in loans and depending on his situation at the time we may help him pay them back.

My daughter got an offer to play at a division two private school.  The tuition is much higher but her scholarship has our cost at $16,000 a year the first year with the opportunity to increase her athletic scholarship next year and moving forward.  Again she will take out as much as allowed in subsidized and we will take the same path with her on loans.  She is also going to try to be an RA which will save an additional $9,000 a year after her freshman year.

Bottom line is we didn't do any educational savings accounts, we couldn't afford to save for both retirement and college.  We decided to start building our retirement accounts.  After 20 years for me and 10 for my husband we both have amassed pretty good retirement accounts.  It just made more sense to us to save for retirement instead of education because we can use the retirement money for education if needed.

When the kids graduate and the loans become due we can decide if we want to take a loan against our 401k to pay off the loans.  The 401k loans get paid back to us at 8%.  So while we lose the interest against that money while we borrow it - we pay the 108% back in.

By the way - the kids are both going straight on to graduate school.  The plan is to have them get a Graduate Assistant position somewhere so that they can get free tuition.

And I will have a 3 year break from when my daughter graduates and my next set of kids heads off to school.


  1. Thank you for the really in-depth explanation. We're in a different place than you but are probably very similar in our approach to both retirement and underfunded college accounts. We hope to bump up both accounts while still building up a cash emergency account which is a process as well. Fortunately, we're debt free except for some student loans and our mortgage.

    I highly recommend being an RA, it's a great experience and was something I did for two years and really helped with my college costs. They look for social people who have leadership skills through work or extracurricular activities and aren't afraid to be authority figures. The process was pretty intense at my school, but once selected you've basically got "tenure" in that position if you want it again. Nice post, and interesting to see how others attack this complex subject.

  2. We are currently working our way out from underneath credit cards that we used when DH was unemployed. We have paid off two now, three more to go. I hope to help our daughters go to college, but I don't have to worry about it just yet...:)