[quote=Raybyrnes]Nicole.
Remember , when the kids go to school they will have loans available to them.
JMTC[/quote]
Raybarnes,
The way things are going, this may very well not be the case… I was doing some research about this and discussing this with my friends who are in similar boats. From the looks of things, it appears more and more likely that for your kid to qualify for need-based financial aid…your home’s equity will start being used more significantly moving forward.
Hypothetically, if that is the case, if you were one of those people that worked hard to say pay down your mortgage and have amassed $500k in equity, but didn’t save for your kid’s college, you may very well be in situation in which your kid don’t qualify for a lot of the need-based financial aid, and be expected take out part of your equity for your kid’s education. That’s a big deal especially if you are dependent on a “job”, because at the time you are sending your kid off to college, you are most likely *not* in the peak of your incoming generating years and while you had looked forward to being less-debt ridden during your older year, and now need to take out equity to finance your kid’s college.
Based on what some folks that I’ve discussed this with, if you are able to afford a $500k+ mortgage right now, most folks advise me don’t count on your kid being able to get a meaningful amount of need-based financial aid unless you get totally financially wiped out. There’s also the risk if you spent your time paying down your mortgage and your home value gets slaughtered, your kid also will be SOL. Anyone have any thoughts about this?
I’m not advocating to not paying down a mortgage early, but there is so much uncertainty into how some of these rules will be, and so much uncertainty in how our economy will be, it just seems like the safest thing to do is to pay yourself/kid first and then pay your debts. Also, i believe IRA’s/retirement plans generally are not assets creditors can seek (could be wrong). (College saving plans, I’m not to sure about.)
While no one plans on getting wiped out, you never know.
I contribute approximately $300-400 month to my kid’s revocable education fund, and any 10% of any financial windfall/bonus each year. She is 3 right now. Key word here though: “revocable” fund (If kid turns out horrible/doesn’t go to college/etc, it gets yanked) 🙂 I max out my 401k/espp/etc, and pay myself a fixed amount each month into a self-directed investment each month…Then I pay my bills (kids bill/utilities/mortgage/etc). Anything else goes into discretionary spending for next month (entertainment/etc). There are some months with no discretionary spending 🙂
