Digging Down on our College Funds

Eventually it will be time to send the boyos off to college. This is one of life’s moments I have been preparing for since before their arrival.

I suspect my obsessive desire to set aside school funding is largely based in my parents complete lack of help during undergrad and law school. My father did not feel it was a parental obligation to help with higher education. Unbeknownst to me, the money he did send during my college years, my mother misappropriated. Poor me.

This personal history had colored my thinking on just what a parent owes to child once they leave the nest. Bottom line is; 1, I believe strongly in education and 2, why would you not want to give your offspring a leg up in the world?

I am hoping that at least one of my kids gets into the very good public school we have here in our state. I am fine with them going to the pretty good public school we have here as well.

Being upper middle class white males, they probably should get on the Cello or tennis court right quick, but we do not push them in those directions.

The basis of our college funding comes from the untimely death of my in-laws. I think it rather appropriate that even though they did not have a chance to spend much quality time with their grandkids, many years later they will get to do something very important for them.

Our state has a prepaid tuition program called MET (Michigan Education Trust). It allows for the pre-purchase of tuition based on today’s rates and then it’s paid out at the future cost when the beneficiary is in college. This idea works best in proportion to runaway tuition inflation.

The way MET works is that you buy credit hours at today’s prices and turn them in for credit hours when you child starts school.

Portability – Out of State and Private Universities

Students may direct refund payments to any eligible university in the nation, both private and public. The amount paid out is the average tuition of all the four year public universities in Michigan.

Flexibility

Students have 15 years to use tuition benefits.
MET contracts may be purchased by semester, by year, or by credit hour.

Transferable

Benefits may be transferred to a sibling or first cousin in the event the student receives a full scholarship or does not attend college.

Refundable

In the event the student does not wish to attend college, monies are refunded.

Tax Deductible

Total contract price can be deducted from state income tax. Prepaid tuition earnings are tax-exempt when benefits are used for higher education.

So we went ahead and purchased 3 full years of MET for each boy. I wanted to leave some room for possible scholarships. (fingers crossed)

In addition to MET, we also use a traditional 529 plan, MESP (Michigan Education Savings Plan). This is for room and board or a 4th year of credits. We put in $100 a paycheck. ($2,600/year and the boys are 12 and 8 years old)).

CURRENT 529 BALANCE;

Total balance for all accounts

(as of 9/10/2018): 

$21,900.01

I figure this money will augment the MET contracts well and have a good chunk of their expenses covered.

Now personally, I worked no less than 3 different jobs during undergrad. I think it was a good idea. But I am ok with my kids working one part time job while in school. If they want spending money, they can earn it themselves.

What about after undergrad?

I had a friend in law school. His father told him this; if you go to Medical school, Law school, or get your MBA, I will pay for it, after you finish it. Take out loans, but I will pay them off upon an ‘on-time‘ graduation. It is an interesting idea.

I do think it is fine for young people to take out loans for higher education. I am not sure I would pay for everything all the way through as a parent even if I could.

Like most things in life, I think it needs balance. And raising entitled brats is a real danger/fear when you have means.

 

 

 

3 thoughts on “Digging Down on our College Funds

  1. I wish my state still offered pre-paid tuition credits for undergrad. The program ended up closing before I could take advantage of any of it. Very lucky to have that in your state. So pretty much my only option is to try and fund the 529 as big as possible before it is needed.

  2. I am going to need check to see if WI has a pre-pay tuition, seems a good idea.
    I have a similar funding my kids education strategy also started at their birth, one days pay per month into a 529 account. Estimates for 1 year of college for the year they start sits at about $15K/year for an in state tuition. The geek spreadsheet informs me I may be able to stop the contributions when the kids reach 10 years of age to let compounding work its’ magic. Torn between a full ride step up in their first adult years in college and the lessons hardship can teach.

    • I also keep trying to decide if I should back off being too cushy for them, I learned a lot being on my own for funding, but starting out life in a student loan hole is hard.

Let's get things nice and sparkling clear