College Savings Plan – 529

[Hobie]

“Financial Aid” is a bit of a misnomer. FA actually is a combination of your personal savings, (529, cash), state/fed grants, scholarships, work study with Fed adding to student earned income, school grants, and loans. Both parental and student.

All bets are off if you are an accomplished athlete, musician, or a dreamer in Ca.

As mentioned, private schools tend to have more endowment available for need based grants. State and UC’s, not so much.

At this point, the op is just salting away $. Good.

He will become deep in the weeds soon enough, especially when he has to fill out the CSS profile and other school specific financial disclosure forms where they ask for a ‘full’ breakdown of your net worth! ..cause you probably ain’t getting any free $!

That is when you pull out the 529 and just pay the bill ;).

Another wildcard is that you just don’t know if your star kid is actually college material at this point. Lot’s will be happening in middle and high school!

So, you can always take your $ out of the 529 by paying tax and penalty.

Oh, and don’t forget that the very generous grant and FA package made to freshman can quickly dry up the following year. Hey the kid doesn’t want to leave the school, and they now don’t have to incentivize you with $ any longer. I’m looking at you USC!!

[ltokuda]

I just opened a 529 plan with Vanguard. Contributions to 529 plans are not deductible in California so there’s no penalty for choosing a 529 plan from another state. I chose the Nevada 529 plan, which I think is what many Californians do.

[Coronita]

New promotion offer. Open a new 529 ScholarShare account (CA plan) and deposit $1000, get $100 free.

[Expired] $100 Bonus for Opening a 529 Plan with ScholarShare [9/1-9/30]

Offer over end of Sept…

Free money. Why not? lol

Actually, it’s free $100 for each account you and your relative(s) and spouse opens per beneficiary.. If you can convince 10 relatives to open an account for your kid, $1000 free money… lol.

[scaredyclassic]

[quote=flu]New promotion offer. Open a new 529 ScholarShare account (CA plan) and deposit $1000, get $100 free.

[Expired] $100 Bonus for Opening a 529 Plan with ScholarShare [9/1-9/30]

Offer over end of Sept…

Free money. Why not? lol

Actually, it’s free $100 for each account you and your relative(s) and spouse opens per beneficiary.. If you can convince 10 relatives to open an account for your kid, $1000 free money… lol.[/quote]

100 isnt enough nowadays 4 me to choose a bank.

I did jump at a recent 400$ offer from wellsfargo

[Coronita]

[quote=scaredyclassic][quote=flu]New promotion offer. Open a new 529 ScholarShare account (CA plan) and deposit $1000, get $100 free.

[Expired] $100 Bonus for Opening a 529 Plan with ScholarShare [9/1-9/30]

Offer over end of Sept…

Free money. Why not? lol

Actually, it’s free $100 for each account you and your relative(s) and spouse opens per beneficiary.. If you can convince 10 relatives to open an account for your kid, $1000 free money… lol.[/quote]

100 isnt enough nowadays 4 me to choose a bank.

I did jump at a recent 400$ offer from wellsfargo[/quote]

Yes, but that $400 is really $200 after you get that 1099 at the end of the year. Plus there’s theoretical no limit on the number of 529k accounts you can open to get that $100 credit, if you were planning to open one or more anyway. And it’s easy peasy to rollover amounts among accounts.

[scaredyclassic]

[quote=flu][quote=scaredyclassic][quote=flu]New promotion offer. Open a new 529 ScholarShare account (CA plan) and deposit $1000, get $100 free.

[Expired] $100 Bonus for Opening a 529 Plan with ScholarShare [9/1-9/30]

Offer over end of Sept…

Free money. Why not? lol

Actually, it’s free $100 for each account you and your relative(s) and spouse opens per beneficiary.. If you can convince 10 relatives to open an account for your kid, $1000 free money… lol.[/quote]

100 isnt enough nowadays 4 me to choose a bank.

I did jump at a recent 400$ offer from wellsfargo[/quote]

Yes, but that $400 is really $200 after you get that 1099 at the end of the year. Plus there’s theoretical no limit on the number of 529k accounts you can open to get that $100 credit, if you were planning to open one or more anyway. And it’s easy peasy to rollover amounts among accounts.[/quote]

True.

Still. I’ll do it for 400 pretax

[sdduuuude]

Put the funds into an account in your parents’ name or maybe one of your siblings if they are trustworthy, not yours. Why ? Because if the account is in your name, the gubmnt will consider it assets that can be used for your kids’ education and it will reduce the amount of financial aid for which they can qualify.

I was just at a college financial aid meeting. When the presenter said this an audience member piped up and said “Why didn’t you tell me this when my kid was 4?” So, I’m telling you now.

Read all about FAFSA and the ECA and you’ll know what I mean.

As FLU says, if you have 5 rental properties, financial aid is out the window anyway so maybe not important.

I’d consider setting up a company to manage those 5 rental properties, make the kids an employee of that business, give them a little salary on which they will pay tax at the below-poverty rate, and the business can pay up to $5200 of their tuition tax-free on top of that.

[Coronita]

If the College Board really wanted to help make college more obtainable for poor people, instead of mucking around with this Adversity Score (which I’m happy they backtracked on), they should reconsider reducing all the fees and costs that they impose on students, particularly since the CEO of the College Board, a non-profit BTW, took home over $1million/year in total compensation. Probably even more now, since that number was back in 2009. Lesson to learn.. Just because an organization is non-profit, doesn’t mean the executives aren’t milking others while serving in that non-profit.

https://en.wikipedia.org/wiki/College_Board
The consumer rights organization Americans for Educational Testing Reform (AETR) has criticized the College Board for violating its non-profit status through excessive profits and exorbitant executive compensation; nineteen of its executives make more than $300,000 per year, with CEO Gaston Caperton earning $1.3 million in 2009 (including deferred compensation).[18][19] AETR also claims that College Board is acting unethically by selling test preparation materials, directly lobbying legislators and government officials, and refusing to acknowledge test-taker rights.[20]

Those increases have bolstered the College Board’s financials. As of 2016, the nonprofit was sitting on $1.1 billion of assets and paid its top executive, David Coleman, more than $1.4 million in compensation.

Regarding costs…
It’s $48 to take the SAT, $65 with the essay portion, $51 ACT, $67 with the writing section, and $22 for each SAT subject test, not including the $26 registration fee….each time…. The PSAT costs $17-20…

Each AP class costs $94 ($124 abroad) and an additional $40 late fee if you register after Nov16. If you cancel your exam or don’t use it, there’s an additional $40 cancellation fee.

If you are “poor”, the College board gives a “generous” $37 discount off of the AP class (late fees still withstanding)….

[The-Shoveler]

I know a guy who started a non-profit,

Lives in a 5000sqf home on 50 acres in Colorado springs.

I want to start a non-profit.

[bibsoconner]

Hey everybody (especially Flu!) I’ve been following this thread with interest as I have a 12th, 10th, and 6th grader. Please post to the group as there is a lot of interest. I suspect there are a lot of lurkers like me that don’t bother to post political or cultural comments. We are just interested in useful info!

I have 529s (and Educational IRAs) via Vanguard. I’m not advocating this. It was just a painless path for me. The 529 is actually through Nevada and given that none of my kids have even a remote interest in moving to Nevada (can’t say I blame them 🙂 ) this seems sort of silly. If there are 529s that people like that give me some sort of cost advantage for Californian schools I’d like to know.

My own limited research is that for somebody like me (~240K/yr income) there is not a chance in hell of getting financial aid so I should max out on things like 529s. I mention this because I have heard arguments that the 529s will be counted against you for purposes of financial aid. That might be a concern for some. If folks have other tips to save for college, please share.

Finally, I’m particularly curious how folks with older kids (FLU, I’m talking to you!) got on with trying to get residency in other states to lower their tuition. Back in my day when dinosaurs roamed the earth, one could establish California residency (for example) after 1 year and thereby lower the tuition for UC Berkeley. You basically just had to get a driver’s license and maybe live with your aunt for the summer or have a part time job. My understanding is that it’s much, much harder now in every state but I’d like to be corrected by those who know. All of my kids are interested in California schools but one of them is also interested in University of Hawaii* and maybe University of Oregon. Turns out that University of Hawaii non-resident total cost is roughly the same as a University of California school resident cost. The resident cost of University of Hawaii is dirt cheap so hence my interest in what it takes to become a resident. Heck, it might even be worth buying a studio condo to get her residency. But again, I think most states have clamped down and make rules like “must have been there 3 years prior”.

Thanks!

*Yes, I’m well aware that University of Hawaii is not as prestigious as UC Berkeley or Santa Barbara. Whether one gets more out of a prestigious school or whether your results come from what you put into it yourself is a (long) topic for another thread!

[sdduuuude]

[quote=bibsoconner]*Yes, I’m well aware that University of Hawaii is not as prestigious as UC Berkeley or Santa Barbara.[/quote]

I’m told in Marine Bio they steal students from the top tier colleges with ease.

[sdduuuude]

[quote=bibsoconner]Finally, I’m particularly curious how folks with older kids (FLU, I’m talking to you!) got on with trying to get residency in other states to lower their tuition.[/quote]

I have not heard about anyone establishing residency in another state when the kid graduates from HS in another.

I have heard, however, of parents legally “disowning” their kids on paper so they look like an very poor, independent student so that the financial aid commissions can legally ignore their parents’ resources for the purpose of calculating need. I don’t know all that is involved in doing this. I just know it is done and it takes considerble effort.

[quote=bibsoconner]I suspect there are a lot of lurkers like me that don’t bother to post political or cultural comments. We are just interested in useful info![/quote]

That’s a good policy. Difficult to do. When I see scardy
“Why the hell is parental wealth taken into account for student aid?” I want to ask “why is the gubmnt paying for ANYONE’S school in the first place?” But somehow I restrained myself and didn’t post it.

Damn. I just did.

[Coronita]

My kid is in middle school so I don’t have answers about residency because we haven’t considered much yet. started my kids 529k and custodial accounts much earlier, before the first birthday..There was also a point in time I was planning on going back to school for an MBA, so I had a 529k for myself before I decided not to go back. So there is a rollover that goes on…

Exactly how you rollover matters if your kid is somewhat eligible for financial aid.. It doesn’t matter that much if they are not. What matters is rolling over between beneficiaries are subject to gift tax rules… Which don’t matter if you stay under the limit per rollover per year or do t plan on exceeding the lifetime exclusion limit.

I am in the Nevada/vanguard plan because i generally like vanguard funds. I think the ScholarShare plan is ok, but it doesnt matter really which one. except I was tempted to get the free cash offer(s)

[Coronita]

Some states offer a state tax incentive to participate in the 529plan of their state. However, for California, no advantage exists, so for practical reasons, any of them will do… There are websites that rank the performance of 529 plans…

For example,
https://www.savingforcollege.com/529-plans/performance-rankings

However, I think more important than which plan “is better” is how are you allocating your investments in the 529k. I chose the Nevada plan simply because it’s run by Vanguard, and I am familiar with Vanguard funds and indexes, and generally I have been happy with them elsewhere. So I stuck to something I’m familiar with. Some people really like the CA ScholarShare plan. Probably good too..

But again, imho, it’s all about the allocation. We had an incredible run if you just allocated most of it to Vanguard total stock market or Vanguard Index 500 + Vanguard Total International Stock Market Index… I’m afraid, though the trend will not continue indefinitely, and especially as your kid gets closer to college (within a 7 year window), it’s time to slowly change the allocation to be “safer”… I’ve been slowly moving out of stock market funds into some corporate bonds, some inflation protected index funds, some income funds, and some cash based funds. So I’m am about 50% in the stock market right now for the 529k’s. That would have happened, irrespective of who is in office, whether we had a trade war or not, or any other external events.

It’s a strategy that people with 401k/IRAs have been preeching to me about… as you get closer to using it, take less risks and put more things into something more predictable that won’t swing wildly. I think for a 529k account ,especially if you only plan on using it for 1 kid at one time, it’s even more so the rule. Assuming you start when your kid turns 1, you have about 18 years. Statistically we have a good run at the market maybe for 10 year period followed by a downturn.. So if you milked it for the first 10 years, imho there is an increasing odd the next 10 years won’t be that great in the same investments… Since I had a pretty decent returns for almost 18 years between my account and my kids, I am over due to take a beating, so I’m not expecting things to continue. It’s time to plot a “safer” course for me. If you have more than 1 kids, then you have a largere timeframe to recover from prolonged downturn, since if you can’t’ take advantage of a large capital gains for your first kid, you can roll it over to an account for your second, third, or four… or their kids eventually… or their kid’s private K-12 now….

The magic number to beat is 4% per year. That’s roughly the average annual increase in college expenses and that has not changed.

[bibsoconner]

My apologies Flu. For some reason I thought all your kids were in college. I’m trying to make you older than you are :).

Like you, I’ve been pretty happy with Vanguard for my own retirement and mutual funds so I just went with them for the 529s. I went with the “age” funds where they start out almost all in stock and now (for my 12th grader) are almost all in cash/bonds.

Like you, I’m not particularly interested in gaming the system. I’m too lazy for those games and I think the money is needed for those less fortunate. I don’t consider getting residency in another state gaming the system. Besides living there for four years, based on my experience, one often ends up settling down near the university or grad school. If the kid has a condo in that state, he/she really does have a vested interest in that state and is paying into it (ex: property taxes).

However, my brief research indicates that it is not trivial to establish residency for purposes of in state tuition. I’d be interested to hear from folks whose kids are recently in university if they considered getting residency in another state and if they were successful.

[Author]

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