The Different Ways To Pay For College: My Surprising Blind Spot

One of the main reasons why I read lots of books is to learn from people who've been there before. And after reading The Price You Pay For College, one of my biggest blind spots I realized is that I don't have to save so much for college anymore!

If you are a parent who's been fretting about the growing cost of college, this post may provide you some comfort. It certainly has for me.

Tremendous Focus On Saving For College So Far

In my constant desire to save and plan for the future, I've been focused on contributing the “maximum” I can each year to the 529 plans I have for each of my children.

First, I superfunded my son's account in 2017. Then I superfunded my daughter's account in 2019. Then I accepted 529 contributions from my parents.

Finally, I assumed the worst-case cost scenario of both my kids attending private universities and not being smart enough to get good financial aid (grants, scholarships).

I estimated the total cost of college for my son will be about $700,000 in 2036 and $800,000 in 2039 for my daughter. The assumption is based off the current $320,000 price tag of a four-year private university that grows in cost by 5% a year.

With this type of upcoming $1,500,000 financial burden, there was no way I could afford not to regularly contribute the maximum to a 529 plan. In my case, the maximum contribution is the gift tax exemption threshold, which is now $18,000 in 2024.

In addition, I’m likely going to do part-time consulting after my daughter goes to school full-time starting in September 2024. I might as well fill the void by making money for her education.

Why Assume The Worst-Case College Cost Scenario?

When it comes to financial planning, it's usually better to be more conservative with your assumptions. For retirement, it's better to end up with more money than less when you no longer want to work. For college, the same logic may hold true as well.

Hence, I suggest you assume the worst-case college cost scenario for your family as well. Here are my assumptions as to why paying for college for one kid starting in 2036 will cost us around $700,000 for four years.

  • My children will likely be of average intelligence given my wife and me are of average intelligence. Therefore, the likelihood of merit-based scholarships will be slim-to-none.
  • My children will likely have below-average personalities given what we learned how Harvard and potentially other private universities grade Asian Americans. Despite our work ethic, friendliness, generally peaceful nature, Asians are not a preferred minority (6% of U.S. population) for college admissions.
  • Despite the desire for diversity and inclusion by colleges, Pacific Islanders seem to still be lumped together with Asians, despite the cultures being completely different. Hence, my children with Hawaiian blood, will unlikely benefit from the diversity push, even though Hawaiians/Pacific Islanders only account for 0.4% of America's population.
  • My children will unlikely win sports scholarships.
  • Although our incomes are not high, our assets are above-average because we've been prodigious savers and investors since 1999. Therefore, the Free Application For Federal Student Aid (FAFSA) will generate a high Expected Parental Contribution (EPC) amount.

The Different Ways To Pay For College

Instead of having parents pay for the entire cost of college, which was my default assumption to stay conservative, here is another way to pay for college as recommended by financial aid expert Mark Kantrowitz in Ron Lieber’s book:

  • Parents pay one-quarter of tuition from college savings like a 529 plan or Roth IRA
  • Parents pay one-quarter of tuition from their current income during the four years of college
  • Student borrows one-quarter of tuition from the federal government or through work study
  • Parents borrow the rest from home equity or through a federal PLUS Loan or private lender

Do you know which bullet point I had never thought about until I read the book? Parents paying for college from their income while their children are attending college!

It seems so obvious, but is it? Blind spots are blind spots for a reason. At 46 years old today, I didn't plan to work between 58-62, when my son is in college, to pay for college. But maybe I need to. After seven years of maxing out two 529 plans, I've come to the sad realization a 529 plan is not enough to pay for college.

Another blindspot some privileged people who suffer from entitlement mentality have is that they don't realize a college degree is a valuable asset. If they did, they wouldn't feel so sour about having to paying back student loan debt after a 3-year reprieve.

Here's how to calculate the value of a college degree. For everybody with a college degree, you can now increase your net worth!

Why Parents Paying For College From Their Income Wasn't Obvious To Me

If a parent has positive cash flow from their day job while their kid is in college, why not use some of the savings for college expenses? No brainer, right?

The reason why I never thought about paying for college while working is that I never thought about working when my kids finally attend college.

It's been 11 years since I had a day job. Heck, I'm not even motivated to work now! After three years of the pandemic, I'm back in early retirement mode. So why on Earth would I want to be working 12-15 years from now? I won't.

As an older parent who has enough money to feel comfortable, the thought of still having to work to pay for college expenses near traditional retirement age never occurred to me. Working until the kids graduate college is a great goal. But I already gave all I could and wanted to give at a job in my 20s and 30s.

Further, I don't expect my wife to go back to a traditional job anymore. She's too satisfied being a mother and being the COO and CFO of Financial Samurai Inc.

Not having a day job since 2012 has permanently changed how I view earning both active income and passive income. Ideally, we earn enough passive income to pay for our living expenses and do work that we love, regardless if it pays us or not.

Recalculating How Much We Have To Save For College

Based on the paying for college proposal above, I can reduce the amount I planned to save ($1,500,000) by one-quarter. By not having to save $375,000, I can either contribute one-quarter less to each 529 savings account or accept lower returns.

On the flip side, that also means I've got to pay $375,000 from my active or passive income while my two kids are attending college. Hence, I'll have to come up with an average of $53,571 a year after taxes for seven years to pay for college while my kids are in school.

$53,571 a year sounds like a lot, but it's doable, because it is in future dollars. $53,571 a year in twelve years is more like $30,000 in today's dollars if inflation compounds at four percent a year.

If my family keeps generating more passive investment income and lives on less than 80 percent of our after-tax passive income total, then our passive income should be able to pay one-quarter of our children's college expenses in the future no problem.

Therefore, perhaps getting a day job when my kids start college won't be necessary. Although, having active income when my kids are in college can help buffer any bear market returns. When the market is down, you don't want to be forced to sell assets to pay for anything.

Inflation of various goods and services and college from 2000 to 2023

We Aren't Going To Borrow For College

If we also borrowed to pay for one-quarter of college expenses ($375,000), we could reduce the amount we have to save by one-half ($750,000). However, we aren't going to borrow for college because we don't want to take on debt in our late 50s. We want to be debt-free by 60.

Further, roughly 40 percent of college matriculants never graduate. Borrowing to pay for college and not graduating is one of the biggest reasons why there's a massive student loan problem today. We don't want to burden the government with student loan relief.

All of us like to think we will be one of the 50 percent who don't get divorced. Nor do we believe we'll be one of the 40 percent who don't graduate college. But the odds are high that we will. Accepting reality will help us make more optimal decisions in the future.

Borrowing money to get nothing in return is a bad idea. Even borrowing money to buy more property, my favorite asset class, in my late 50s doesn't sit well with me. The last thing I want to do is saddle my heirs with more debt if I die prematurely.

dropout rates among full-time first-time undergraduates for college over time

So Many Unknowns For Paying For College In The Future

Some believe saving too much for college is a mistake. If you do, you will reduce your chances of getting grants and scholarships. Here's how to game the college financial aid system and get free money if interested.

There's also a growing belief that more colleges will become more affordable or free due to government intervention, a decline in enrollment, and the growth of online learning. Therefore, there's a risk of wasting time and energy saving for college if you save too much.

Thankfully, we can now roll over leftover funds to a Roth IRA. We can also assign a different beneficiary for our 529 plans for generational wealth transfer. But the goal remains. We ideally save just enough for college to feel secure without overworking ourselves in the process.

After uncovering my blind spot, I feel less stressed paying for college now. There's no longer a need to save roughly $1,500,000 for college in 12-15 years.

How Much To Save For College For Each Child

My goal now is to save $320,000 for each kid, the current full cost of attending the most expensive private university for four years today. Once this inflation-adjusted level is reached in the future, I will no longer contribute to my children's 529 plans.

If you think your kid will be able to get scholarships, then you may want to save for the full cost of attending a public university for four years today. If they choose to attend a more expensive university, then the difference can be on them.

Remember, we don’t have to pay for the entire cost of our children’s college education. We can play it by ear once the time comes.

Ah, it's nice to know I reduced my college savings target by $860,000! Saving “only” $720,000 for college for two kids feels more palatable than saving $1,500,000.

Let's just hope their 529 plans appreciate by more than 5% a year on average. Otherwise, we will have a shortfall. Worst comes to worst, we can always send our kids to Canadian colleges for less!

Reader Questions And Suggestions

What are some other different ways to pay for college? Have you always planned to pay for college with your income while your kids are in college? How does your family plan to pay for college? If you have children in college or children who've already graduated college, how did your family pay?

Plan for college better by signing up with Empower, the best free financial planning tool. With Empower, you can track your investments, see your asset allocation, x-ray your portfolios for excessive fees, and more.

For 99.99% less than the cost of college, pick up a copy of Buy This, Not That, my instant Wall Street Journal bestseller. The book helps you make more optimal investment decisions so you can live a better, more fulfilling life. 

Join 55,000+ others and sign up for the free Financial Samurai newsletter and posts via e-mail. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009.

122 thoughts on “The Different Ways To Pay For College: My Surprising Blind Spot”

  1. Have enough saved for three kids – have one attending now, one attending in fall and one in 2 years. Middle guy decided to do ROTC @ and has asked for the full amount saved once successfully completed his education. ROTC will pay for the full 4 years and I will happily give him the ~300k. My oldest is attends school in Boston and will graduate debt free. We made sacrifices but thankfully my career has provided. Now I’m deciding how much longer I need to continue working….

  2. Sam,

    I enjoy your writing. It usually comes from a “down to earth” realistic approach. However, your private college cost estimate is flawed because the $350,000+/- you are starting with at current levels is overstated.

    My daughter went to the University of Redlands, a west coast private university. Stated price for full time student including room and board $60,000+. Negotiated price for a cash paying parent $42,000+/- per year. You seem to be a well educated and wise financial guy. Private universities, especially in CA, know they have to compete with the UC system and will negotiate. It’s like how people used to shop/buy new cars…….Prior to 2020 nobody paid sticker price. When my younger daughter got accepted to Chapman University she received an $80,000 scholarship because they knew she was also accepted to UCR and Cal Poly Pomona. She had a 4.6 GPA so Chapman knew they needed to compete with UCR and Cal Poly tuition. Their $65,000+ tuition dropped to less than $40k, which was only a few thousand over UCR.

    Based on your writings, you will be a cash paying parent also. Remember, most things in life are negotiable, especially overpriced private universities.

    Keep up the great writings,


  3. Hi Sam

    Best move we ever made was giving our kids who were two years apart $7,500 each and telling them before high school:

    You can go to any college/university you want but how much debt you accumulate will be on you;

    You must apply for scholarships and work the whole time through and in the summers.

    Both kids graduated debt free and never gave me grief about seeming cheap.

    Meanwhile, many of their “friends” flunked out as they had no skin in the game and the parents were footing the bill.

    Both are doing very well in their professions and are 24 and 26 here in Phoenix.

    Just sayin’!

    God Bless and thanks,


    1. Agreed. I worked through college (Cal Poly SLO class of ‘02) and summers and took a 3.5% student loan. My folks gave me a stipend of ~$1,000 or $1,500/month to cover rent and tuition. I carried everything over that which in the end amounted to only <$20k.

      My roommate who was 100% sponsored by his folks dropped out senior year cause he decided he didn’t ‘like’ Forestry any more. Last I heard he was installing windows… bet he wishes he finished those last 6 months.

      The mindset changes when the student has skin tin the game. Kids should contribute something, event a little. Less about the money, more about mindset…

  4. Or, you know, the whole university system in 2039 might be dominated by a couple of dozen schools, all of which offer attendance anywhere, with minimal on-campus time, primarily just for labs.

    They might charge a couple of hundred dollars an hour.

    They also might be heavily subsidized by the government and students might even be offered incentives to attend as, with AI and cognitive automation in full swing, most of the graduates will never get into the work force.

    Or they might work as unpaid interns for years to get one of the real jobs — if they are extremely talented.

  5. The Expostriate

    Send your kids to college in Europe. There are a lot of great schools here and most countries charge far less for tuition. Hell if you kid can get one of the spots that are reserved for international students in Finland (10% of all seats), then you won’t pay for these education and Finland will give your kid a monthly stipend for living.

    Why are people still so anchored to US universities?

    1. Probably because there aren’t as many opportunities in Europe, the unemployment rate is way higher, language issues, pay is lower and there aren’t as many well-regarded worldwide universities there.

      Americans view Europe, as X growth and less innovative. A place to vacation versus work hard.

  6. Christine Minasian

    My advice since I have one out of college and two in college right now, if you CAN afford to save it all before they are 18, do it! When you go to pay the big college bills, and it’s already saved – it is extremely satisfying and way less stressful!

  7. You’ve written before about possibly sending your kids to Punahou.

    Punahou tuition will be over $30k next year, and when you throw in the extracurriculars that go along with that, you’d be shelling out more like $35k/year, close to half the cost of many private colleges.

    It’s a reasonable estimate that Punahou cost will track college cost pretty closely.

    So if you already have your finances set up for cash flow to cover Punahou, keep that going for another 4 years after Punahou for each kid, and all you’ll need to save up is half the cost of college.

    And don’t forget, UH-M is a good school, and its tuition, currently $5652/semester, has recently been going up more slowly than Punahou tuition.

  8. Ms. Conviviality

    The state of Florida has some programs that will cover tuition and applicable fees for up to five years.

    Florida lottery money funds a Florida Bright Futures scholarship program. To be eligible the student needs to:

    – Graduate high school with at least a 3.5 GPA,
    – 16 high school course credits in English, math, natural science, social science, and world language
    – Minimum 29 ACT or 1330 SAT score
    – 100 hours of volunteer service or 100 paid work hours.

    The above seemed very achievable to me when I took advantage of the program.

    Florida Statutes also has tuition and fee exemption and waivers for homeless children and children with deceased parents in certain occupations (ex. firefighter, police, teacher, armed forces, etc.)

    It could be a strategic move to relocate to Florida to establish residency right before one has kids entering college.

      1. If this is a case why would you want to save and pay for a private college. State colleges are much better financially and offer more than most private college.
        1330 score would be impossible for IVY leagues admission in next 10-20.

  9. We home educated all 5 of our children and diligently saved for each of their future higher education. Our eldest took advantage of an accelerated program that allowed him to earn his HS diploma and his first to years of college at a local community college. He also spent a month in Costa Rica at a language program sponsored by his college. Total cost of his first two years was well under $10k. He’s now in his senior year at the University of Washington, with plenty of funds left to cover his tuition. His GPA is 3.98 and he’s applied for several academic scholarships. We’ll see… there are creative ways to ensure higher education!

  10. We raised our children to be trilingual. Our children will have the opportunity to go to university in Germany, where my husband’s family is from. Tuition fees are considerably lower than the United States. I am not sure if they will choose this option, but it would definitely be feasible for them to study abroad as international student.

  11. I joined the military after high school and was able to get a bachelor’s degree paid for within 5 years of night and online school. A year later, I got out and used the GI Bill to pay for most of my two masters degrees while working. It took a bit longer and I don’t have the college connections/network that a top school may provide, but zero student loans and pieces of paper that look good on LinkedIn aren’t too shabby.

  12. If you are truly not a member of the elite, then community college and state schools would be an acceptable route… and the best one. I attended Coastline and Orange Coast Colleges then transferred to Cal State Fullerton.

    I paid approximately $20,000 in total and graduated in 4 years with a Business degree in 2019. My younger sister did the same and attended Long Beach State and my other younger sister will graduate this year with a Civil Engineering degree.

    As a member of the non-elite like the rest of us, you should be OK with your kids taking the Honda Fit/stealth wealth approach to college and not spend 700k on a glorified sleep-away camp surrounded by the elite of the elite. You frequently mention you want your child to have experiences with the the hoi polloi anyways and a community college would get that done. It would also humble them when they have to tell their friends and friends’ parents they are going to CCSF.

    Doesn’t everyone end up working in an entry level job after college anyways? 700k sounds like a lot of money to ensure your child can sit in a cube somewhere… next to a community college grad.

    1. I agree. Community College will probably do just fine. Congrats on graduating from Cal State Fullerton, a great school. I’m very happy with our public university education at William & Mary. It was enough to give us enough opportunities and save my family a lot of money.

      If our kids go to their community college target school (hopefully City college of SF) we will use the $700,000 for our grandkids or other relatives if the money isn’t used. Then we’ll transfer the max allowable to a Roth IRA.

      What are you and your sister doing now? And do you have the same aspirations of community college for your kids as well? Thx

      1. Executive lines insurance underwriting and sister works at an auto dealership software company doing implementation.

        Hhmm… aspire… I wouldn’t say I aspired to the state school route, nor would I for my daughter. I wouldn’t use associate that word with college at all.

        I aspire for myself and for her to be economically self-sufficient and the degree is a tool used along that path- along with the other life skills you need.

        You can aspire to build a house (be economically self-sufficient). But you don’t aspire to get a drill (get a degree). You just use the drill to build the house along with all your other tools.

        So you use the tool of the degree to reach the aspiration of economic self-sufficiency.

        1. Cool. I like the word “aspire” because it points towards positivity and hope. It’s fun to aspire for more.

          Using education as a tool is one of the reasons why I am spending more time than average with my kids teaching them age-appropriate things. As they get older, I plan to teach them everything I know about business, the internet, economic, finance, mandarin etc. Practical info to help them be self-sufficient.

          And just in case I fail or they fail, hopefully they have the option of receiving a worthwhile college degree.

          Just recorded a podcast episode.

  13. For the 80%…

    If your kid is above average and a good work ethic, use AP classes and community college to decrease the bill while in high school. Our state pays for college classes if in high school, including private colleges.

    My oldest got his AA and AS from the local CC, transferred to a 4 year state university and is commuting (that is at least half the cost of college attendance). He graduates in a couple months with his accounting degree. He got a CC transfer scholarship and while at the state school got a couple scholarships to cut the cost down further. No FAFSA was filled out, it was merit based.

    My youngest is commuting to the same state school right now. After learning from the 1st he did his last 2 years of high school at the CC. He got his AS degree a couple weeks before graduating high school. It will take him 3 years to get his EE degree at a total cost of approximately $30k. The rest of their 529 money will go to their Roth IRA’s when the time comes. Both kids are 3.5ish students so nothing brilliant for sure.

    Hope this helps some people. For kids going on beyond a bachelor’s degree, it isn’t where you start but where you finish. I would go as cheap as possible for your bachelors and do as well as you can. That will get you to a good master’s or doctorate program.

  14. Great article. My kids are the same exact ages as yours. I wasn’t going to come close to 1.5 million. New amount seems attainable. I’m using an UTMA account. My plan was to transfer when they hit 13-14yo. UTMA provides more flexibility now. If school becomes free maybe I just leave in the account.

    1. When my wife was expecting with our first of three children, I envisioned the financial tsunami that will come in 17 years, so that is when I strayed “sand bagging” the beach with a 529. Since we are in NY, the tax deduction was the initial short term enticement and the years to come was a balance of giving the kid a raise or us a raise in our 401k’s. A few years into it, we decided to engage in a side hustle that allowed us to plow even more into both and the kids gave a contribution of the jobs they had. 21 years later, our 1st will graduate from a state school debt free with kid #2 in four more years and kid #3 in six years. At least that is the plan. The good news is that if one has too much $ in the plan one can roll the difference to the beneficiary into a Roth IRA. With the generous match where I work, my 401k is in good shape and never wavered during the downturns, there in healthy shape. The moral of the story is it’s ok to be a little paranoid early and take action.

  15. I love seeing all these comments and glean what others are doing. Excellent article as always Sam. I hope you’ll be recording a podcast on this!

  16. There were a couple of things that I did to save money at public state school. Similarly to most middle class people, I only received $1k of scholarships each year based on merit despite having 3.75 GPA. First, I would take the minimum number of credits to be considered a full-time student each semester, and then I would take an online community college class for basic subjects like economics, English, philosophy, etc. during the semester. I would also take a community college class or two every summer. Each community college class saved me about $1,000 in tuition and fees, and they were much easier to make good grades because they have different accreditations to meet than public universities. You’ll just want to confirm that the classes will transfer to your university.

    Second, I took CLEP tests for my US history courses and used to study and pass the tests. Modern states has free online study programs to prepare you for the materials on the CLEP tests. Using these two strategies, I was able to graduate a semester early, start my career earlier than my peers, and save myself tens of thousands of dollars. Not only that, but I only had to take one class my last semester of college which allowed me to have a lot fun and create awesome memories with my friends since I wasn’t having to spend so much time studying for classes :)

  17. Have a junior in college and a daughter that graduates high school in May. My son has 25% athletic scholarship, 30% merit scholarships and the rest we are funding from 529. He is going for a 5th year because he gets to play because of the Covid year. Merit does not cover the 5th year and we are paying from the 529. Last year to play advanced level Water polo is worth it. My daughter has committed to 6 year doctorate program in pharmacy. 40% merit scholarship on the first 4 years from private college. She got into 6 schools and the merit was about the same from the all. We will be funding the rest from 529 and a year from savings/current income. My point is, don’t assume 4 years is what it will take!

    1. Thanks for sharing. Merit scholarships seem to be more common place to help lure students. I hope there are more merit scholarships in the future! What type of university is your son going to?

      When your children were under 10 years old, what type of assumptions did you have regarding who and how much to pay for college?

      I figure if I assume the worst, four years at a private university with no scholarships, then I will save accordingly, and won’t be disappointed.

      1. My son goes to a small private liberal arts college. Cost per year is not that bad ($40k per year with room/board). He is there because of the water polo program. Will graduate with a teaching degree.

        We always assumed we needed to cover $50k per year per kid. Target was $400k total. Started funding 529’s at birth. We have contributed $277k to date. That has grown to $387k. My sons will cover his 5th year. I will continue to put $20k per year in my daughters for the next 5 years for the state tax write off.

  18. Another option…..

    I attended one of those Top Tier Ivy League schools, class of ’04, and most of their scholarships are need based now/then. No merit.

    I had about 30-50% covered based on the year. I made the rest at 3-5 jobs I took on over the course of the year (80-100 hrs/week) including working fulltime for facilities management of the university, 40/hrs a week. I cleared between 12k (freshman year) and 120k (senior year), so the tuition/board were easily covered. I can only imagine now, that some of those jobs would be paying double, and I would definitely clear 200k.

    I was an education major,/premed and continued working thru the 1st year of med-school, but only 3 jobs, because, Med School….

    I guess my point is, they could work. Also as a result of the above, I took on zero debt, and my parents covered prolly 3k my first year, I also had local home home town scholarships my first year (12k), and then none after that, because, well I had it.

    Teach your kids to work, and they might get it done.

      1. Doing very well. I’m ahead of your “what your networth should be by this age” curves.

        Starting out with zero debt, and allowing myself to jump on the houseing ladder early helps. Jumping on to the housing ladder after the 2008 bubble helps even more.

        Also I had 40/hrs at one specific job. After sophmore year, 60 was the minimum, but 80-100 was the avg.

        1. That’s so cool. I guess the question though is do you want that for your kids – working 80-100 hours per week, while in school trying to study and socialize, or do you want something else

          1. I say if my kids can work + study 80-hours a week (I think this is what he meant, not just work 80-100 hours a week), more power to them. The real world will look so much easier once they graduate!

    1. Hey Rey,

      Your story/situation is impressive and inspiring. However, most students who try to do what you did would likely need help to do well enough in their classes or be at risk of falling behind academically. Of course, I am happy that things worked out for you, but we can’t assume the average student studying at the margin of their abilities could afford to work full-time or part-time. I was also premed at a private college and sometimes worked part-time, and it was hard to keep up with the pack.

      Like you said, they might get it done, or not.


      1. Honestly I think the hardest part of my k-12/college/med school education was International Baccalaureate (IB) in Highschool. After that the rest was easy and I picked my college classes around my work schedules. The one major advantage I had was that I knew I was going to Med-School (pre-accepted), and if you are still “figuring it out”, then you might need more time to explore different majors. It also helped that IB credits covered the majority of my Pre-Med Requirements, only leaving Orgo, and Biochem, which were relatively easy.

        I also picked a major (Educational Studies), that was essentially based on Essays, no exams, there might be a final Essay, but it was all written in my free time. Then if you paid attention to the syllabus, you knew all of your assignments/reading and written on the first day of class, point is, you could knock out all the work as early as you wanted to. Most fall semesters I would have the Final Papers written in October. Which would leave November/December for working, and that college partying experience.

        I think the major obstacle to overcome was, not caring that I was delivering dorm room fridges to students at night (or whatever the job was that day), while they were pre-gaming for the party. I only met one other student at my school willing to work that hard….so I hired him.

  19. Anthony Perreira

    As a Native Hawaiian who went to college, I’d advise you review Kamehameha Schools for financial aid. They have scholarships for need (which you likely won’t qualify for) and for merit (more likely to qualify for). Kamehameha Schools requires some info for you to validate that your children are Hawaiian but once they do, they receive access to these resources (which are near exclusively for Hawaiians only)

      1. Birth Certificates. Probably your wives if hers indicates Hawaiian. If not, one more generation back. They also have extensive pre-school scholarships but that is almost entirely based on need. Once you register you can apply for future aid. Your wife could even qualify for post-grad education opportunities if she was interested.

        1. Thanks. I got my grandmother’s death certificate which says Chinese / Hawaiian. If we move back to Oahu, we will apply to the Kamehameha schools.

          What did y’all end up doing after high school?

          1. Graduated in 2009 to a bloodbath in Honolulu. Couldn’t get a job parking cars or bussing tables. Took an internship for the government in Procurement, transitioned to Contract work, then civil service, and recently moved on to public transit procurement and inventory management.

            1. Tough timing. But glad you survived and found something new to do.

              Are you satisfied growing up and staying in Oahu? Or have you wished to do something on the mainland or elsewhere?

              Oahu is my favorite place in the world and my plan is to die there one day. I am trying to make it back, and I’m ready to apply to school there when my daughter is 5 in two years.

              1. I’m originally from Maui, so honestly Oahu has just so much more opportunity and when I was younger it was an exciting place to be. I want to probably move on and try something new at some point in time, probably Pacific NW. We want to own a home (we currently have a condo) and between median home prices, wages that are ok and the cost of living eating us all alive, idk I think I might be jaded on Oahu. It’s a great place to raise kids and a magical place. If you want to continue the conversation please feel free to email. Long time fan and enjoy your work.

    1. Both daughters graduated from(in state) Va. Tech with zero debt after graduating from private school. Oldest graduated in 3.5 years, youngest in 3 years. Dual enrollment credits are great. We Funded 529 accounts since birth, found safe reasonable housing with great landlords for them, and each was an excellent money manager while enrolled. Grad school for oldest only cost a new laptop as she taught a class in trade for tuition. Transferred remaining funds to start grandson’s account. Looked like a daunting task 32 years ago. Somehow it all worked out.

      1. All these numbers seem daunting in the beginning, don’t they? And then, thanks to the time and the power of compound interest, Financial Growth happens.

        What are your thoughts about sending your kids to private grade school and then attending public to university?

        1. Would do it again. Had to get the best foundation possible and access to other enrichment opportunities.Our public school had little academic rigor along with a host of other issues. It was a sacrifice to send them but well worth it. Va.has many excellent public universities as you well know.

  20. I don’t get why you would even give your kids the option of attending an elite school. Unless its for YOUR status or your kids are extremely gifted the cost benefit analysis doesn’t pan out.

    My wife and I harped on your daughter to attend college from a very early age. We promised we would pay for 4 years of college if she got the grades. We sent her to a private high school (10k a year) for 4 years to try to get a leg up. She had the grades to attend a tier 2 private college but her mom and I weren’t willing to pay for it. She went to a out of state college that was cheaper than our in state schools because they had one of the top 10 marine science programs in the country. Total cost was 125k. She graduated a year ago and received 2 offers to attend Grad school completely paid for as well as a 28k stipend a year if she agreed to be a research assistant while she was attending school. She realized marine sciences wasn’t her thing and is now getting her masters in biomolecular sciences and chemistry.

    Yes, this is a humble brag. We are very very proud of our daughter.

    My point is, your the parents, your the money. If your footing the bill its your decision where they attend college. If your kids want something different than let them pay for it.

    1. For many parents the “what you want” in terms of your kids if for them to attend the best possible school they can get into, or what you want is for them to do what they want, and to pay for it.

      Just another side of the story

      1. I get what you’re saying Jake, a lot of my friends parents feel that way. I’m just not one of them. I provided 4 years of college for my daughter debt free. I’m very proud of that. She’s definitely doing what she wants, just not necessarily where she wants. I feel it’s my job to provide her with what she needs, not what she wants.

    2. My savings isn’t for an elite school. It’s for a lower-tier private school to assume the worst-case scenario regarding the cost of college.

      It would be nice if my children could have a say, and where they want to spend their next four years. I think that’s reasonable.

      Congrats on your daughter’s academic success.

      1. Thank you Sam, I appreciate that. My daughter had a say in which school to attend. She also had a budget. If she wanted something more than I felt necessary it was her job to figure out how to pay for it.

        1. This post really has me thinking. I think another blind spot is that you live in a very hyper competitive environment. It’s not like that everywhere. In our county the 2020 median income was $28,600. The median household income is 54k. My general manager who quit school in the 8th grade to help his family started in the warehouse at $8.00 a hour. 12 years later he’s making 6 figures a year. My office manager, who I got from a AT@T store making $19.00 a hour is well over 6 figures working for me. I’d put her against any Ivy League student when it comes to a financial statement, balance sheet, or cash flow statement. I have a high school graduate as my sales manager who has been making well over 6 figures for years simply by being consistent.

          College is great. It’s what I wanted for my daughter but it is far less important than drive, street smarts, and experience in a lot more places than you see in San Francisco.

          1. What county and state do you live? We can only know what we experience. Competition is everywhere, especially from overseas.

            “ drive, street smarts, and experience in a lot more places than you see in San Francisco.”

            What are some ways your daughter gained these things that she couldn’t have gained in a city like San Francisco?

            For background, I grew overseas for 13 years and lived in 5 countries, worked in international equities for 13 years, and speak Mandarin. So I’m used to interacting with different types of people. But I have little experience living in non-coastal cities in America. Only visited for work.

            Do you think you have any blind spots? If so, what do you think they are?

            Maybe your daughter wants to leave your county to do other things?

            1. I live in Yakima County in eastern WA. Go Miners drive in! It’s a relatively small farming community. Most of us align far more with middle America than our crazy neighbors in Seattle.

              My daughter is nothing special. She’s doing the college route. She works extremely hard and is being rewarded for it.

              I have a lot of blind spots. In this case it’s understanding the competitiveness and pressures parents have when it comes to their child’s education. Sure, we all want the best for our kids, but at what cost?

              The drive, competitive comment is not a dig. It’s my experience that those traits are far more important in middle America than college pedigree.

              My daughter went to alaska for her undergrad. She’s in another state for her masters. At 22 she’s already visited or interned at a dozen different European and Asian countries. The world is a small place to her.

              1. Very cool. I took a family trip to Denali national Park and it was magical.

                Cities like New York, and San Francisco are ultra competitive, so I am providing a glimpse at what the competition looks like as I’m living it.

                But it’s fine as well because I enjoy competition. It’s like a game. Sometimes you win, sometimes you lose. And that’s OK.

                What I do find solace in as being able to downshift to a less competitive, lower cost area of the country as an option. For example, Honolulu is at least 20% cheaper than San Francisco. What a wonderful place to retire to!

      2. The amount you’ve posted will probably be enough for elite schools.

        Most of the elites cost about the same as lower-tier private schools, and are more generous with need-based aid.

    3. Bravo Bill! My daughter is now graduating in biology as well from a state school debt fee. I think his point is preparing for worst case and see what happens.

  21. Sam, can I make an article request? There’s a lot of articles and information out there on saving, investing, which types of accounts, growing your wealth, etc. There are much fewer articles on what happens when you hit retirement / stop having an income and need to start withdrawing 3-4%. It would be helpful to understand for those with 5-20m how one goes about withdrawing for tax optimization assuming they have all the basic accounts but not cash flowing real estate (i.e. taxable brokerage, traditional and roth monies)

  22. Hi Sam,

    This is a timely article as families are finding out which schools their teens will be attending next year. I just updated our plan with some actual numbers.

    We’ll be funding college with 50% cash flow, 25% merit scholarship, 20% 529 and 5% student earnings. The school did offer unsubsidized loans, but I couldn’t believe there was an origination fee. It will be interesting to see how it evolves each year.

      1. No negotiation available but it was a nice surprise. I think the state school is trying to come closer to instate tuition for good students from other western states. I did learn the biology AP exam is often worth double the credits as other AP exams.

  23. Another path is……Post covid we skipped high school after 1 year and child will get their community college associate degree by time they would have finished high school and then can take gap yr or go finish 4yr degree in final 2 years. Community colleges have so many resources now for students and are used to having high school age students now…

    You don’t even need your high school diploma or ged to get community college degree and colleges only look at your community college grades….this path works for the right kid

    1. Fascinating! I have never heard about skipping high school and going straight to community college. Do you really not need a high school certificate to eventually end up at a four-year accredited university? I’ve gotta look into that if you have any resources to share, let me know about the subject. Thanks!

      1. We have a friend whose daughter is doing this at West Valley College as a soph – they call is Middle College I think – she loves it

  24. Anybody looked about the cost of college abroad? I am thinking to take a close look at the European Universities when the time comes. I am sure there is a fee for international students, but it might be much less that some of the US colleges! Not sure.
    My kids (just 5 and 9 now) have dual citizenship (UE) so I am hoping this will help and also they will be willing to do so. ha!

    1. We have friends whose kids have gone to school abroad.

      Several went to school in Canada, where costs are much lower than the US, especially if at least one parent is Canadian.

      Another went to the UK, where I think cost was mitigated because he graduated in 3 years, which I think is the norm there.

      Several others went to school in Japan, but they’re dual citizens.

      What country is UE?

  25. College choice and tuition are about the only time my wife and I have argued about money. We have two in college, fully funded through 529 and brokerage, and cash savings. We also plan to use current income to pay when possible to preserve the non 529 portions of the savings if we can. I want the best for my children, but it is hard to see the tuition worth a beach house going out the door!
    Education and healthcare are the bane of my existence. America can do better.

    1. Really??” Education and healthcare are the bane of my existence. America can do better.”
      Seems too me your very blessed, are you for real? Tuff’n up buttercup…
      Much more difficult times ahead for the USA and probably you and your family

  26. I had planned to sell my Seattle house to pay for my two kids college tuition (I am currently back in Madrid) But making some adjustments we are being able to pay 100% yearly tuition from our salary for now. But having this asset in case things go wrong give us peace of mind. The elder one is attending UC San Diego. Although the dorms conditions are poor… Being polite, he is pretty happy with the academics.

    1. “ we are being able to pay 100% yearly tuition from our salary for now”

      Huge! You can keep your Seattle rental as insurance and an asset to pass down.

      Must actually feel good to be able to pay 100% via salary.

  27. My confusion/question is why there is such a push to save such a significant amount in a 529 plan vs traditional savings/taxable brokerage account. As a CPA, there are obvious taxable benefits of a 529, but if you look at the likelihood of the total educational cost potentially being significantly less than you propose in this article, you’re stuck with a very inefficient and restricted set of assets. Even with the recent rule changes on how one can rollover a 529 plan, it’s still limited to income thresholds and only $30k if you even meet those thresholds. Understanding you can perhaps pass down the 529 to another generation, but that’s assuming your kids will have kids and their kids will want to go to college. All these factors simply seem too high risk and uncertain to lock up so much funding into a 529. Don’t get me wrong, it’s a constant struggle I have whether I’m not contributing enough, but when I see I have it covered under my traditional taxable brokerage, I’m ok losing out on the capital gains taxes. Still seems better than taking a risk of restricting those funds for the foreseeable future or even worse paying penalties for withdrawing for non-education expenses.

    1. What would you use the money for instead of on covering their education? It depends on your financial situation and current wants.

      “but if you look at the likelihood of the total educational cost potentially being significantly less than you propose in this article”

      What are your assumptions to make it significantly less 12 to 15 years from now? I’ve listed out my assumptions and the top part of the post. Assumptions are important. And I assume the worst.

      The tax diversification of funds or something I really enjoy. Especially since I have not contributed to a Roth IRA.

      1. Hi Sam,

        What if one purchases a rental property near the campus where your child goes? Possibly the rent(s) from x students will cover the costs of your child’s tuition? The when he/she is done potentially sell the asset for a profit? Just a thought.

    2. I’d like to save the max for a 529. My reasons are: (i) I’m unlikely to die with 0, so the extra funds will just be inherited in a certain type of account (and the tax free growth for a grandchild will be huge) and (ii) if I truly do need the money, then I can pay the penalty. Given the likelihood of not dying with 0, I feel good that the expected outcome is positive.

      But I understand your side of it too

  28. “The assumption is based off the current $320,000 price tag of a four-year private university”

    Why private and not a public in-state college? The college I attended lists cost of attendance as $28,875/yr before any aid (Western Washington University). This includes tuition, books, room/board, food, and transportation it says. Is the extra $204K really worth it?

    $320K is about what Harvard costs. You said your kids were likely average intelligence with below average personalities. Would a $320K college really be in their future even if money wasn’t an issue?

    1. My assumption is based off the worst case COST scenario bc I like to be conservative when it comes to money.

      The lower your intelligence, and the worse your personality, the lower the chance you will get any scholarships, and the higher the chance you will end up paying for cost for a lower to your private university.

      I make the assumption they will not have the rationality to attend a cheaper state school. However, many of the best state schools are extremely hard to get into. Which means one of the easier options is to go to an expensive private university that is lower ranked.

      What are your assumptions for your children and how do you plan to pay for college?

      1. I planned to financially support my children in going to a public college but I wanted them to contribute meaningfully in order for them to feel invested in their education. But I never considered public schools would be more competitive than a private school. Private schools seemed to be an unnecessary luxury for rich kids to socialize with other rich kids.

        I recently learned that if your income is below a certain threshold that they don’t take into account assets when calculating the Student Aid Index (SAI) and just give you a 0 or negative SAI. And retirees are often able to control their taxable income for a particular year, assuming they have enough after tax funds. Not sure if I would be retired by then though.

        *A very small percentage of schools have another layer in their aid calculation which would likely include assets still. I think it was called a CSS Profile.

  29. My oldest kid will graduate this year from the University of Oregon. She got some scholarship, but far from a full ride. My youngest is at a similar caliber school, but in the UK.

    Even including 3 round trip air fares each year, and zero scholarship in the UK, we expect the UK degree and lodging to cost us 50% of the American degree.

    We did have a stroke of good luck for us, bad luck for the UK… the currency hit a historic low which boosted the power of our savings.

    The UK (and other parts of Europe) option is open to most Americans. Schools list their SAT / AP requirements on their websites. My kids happen to be dual citizens, but this does not get them any assistance on the fees. UK citizens pay non resident rates if they have been away for 4 years, it just saves us having to go through a visa application.

    The desire to do this has to come from the kid, and be about more than just saving money. But for a kid who wants to do it, it is a wonderful opportunity.

  30. Join the Army, have them pay for school through ROTC, have them pay for law school or med school (while paying you a full salary), give the GI Bill to your kids.

    GI Bill will pay 100% of college plus housing allowance ($3500/month tax free in Los Angeles)

    Sure it’s not gonna blow a I Banker salary out of the water, but you’re gonna do interesting work, jump out of airplanes and see the world while paying for your kids college.

      1. Why? It galavanized the Greatest Generation. Our son is going for Marine PLC Aviation (ROTC is a ton of work and daily early morning PT precludes staying up late to study) and looks forward to the opportunity to defend his country. Employers love former officers too.

        Given we’re a couple years removed from the college app process it’s also important to understand the college admission process as it relates to the school your kid is at. Better colleges have quotas for area schools. I imagine in SF most are for Lowell and then the lowest performing schools for their equity/AA quotas, and the fanciest private schools like Crystal Springs. College is where living in SF can handicap your kids college admissions chances; much better to be in a high performing suburban district with a 50/50 Asian/caucasian demo like our son’s Silicon Valley public high school so they’re not stuck with Oregon, ASU or a low tier Cal State as their only choices. Out of a graduating class of ~400 kids over 10% got into Cal/UCLA/USC. Of course as an alum of Bill and Mary you should just send them there – excellent state school.

        1. Just trying to minimize potential death, that’s all, no matter how small the chances. ROTC is a fine, fine program. I respect the discipline immensely.

          In terms of handicap, I already expect my kids to have the toughest time getting into a top university and little-to-no chance of getting financial aid. I’ve accepted this, which actually gives me peace of mind.

          I’ve got 12-15 years to figure out how to build more wealth, grow a business, build a larger rental property portfolio, and educate my kids myself. Seems like enough time.

          Where are your kids going to college and how much does it cost?

          1. Yeah – ROTC discipline required to succeed, avoid getting booted for what may seem to others like ticky tack reasons and commission is a crazy outstanding achievement.

            Upper tier Big 10 school, CS major pursuing the Top Gun dream via PLC. He’s close. $50K/yr all-in, Paying for it with RSUs/cash savings. Actually a great value for out of state considering the prestige of most depts at the University, 3 nonstops a day from SFO and his private room in a luxury apt is only $1K/mo. He loves it there as well.

  31. The Alchemist

    Pay close attention to what’s going on at the “top” colleges and universities these days. Scrutinize very carefully what they express as their values and goals. For many, their telos is no longer truth and knowledge, but something entirely different.

    Anyone notice what happened at Stanford Law School earlier this month? That kind of episode is becoming increasingly (and disturbingly) common on many campuses, particularly the most elite ones.

    Guide your kids to choose wisely.

  32. My wife and I butt heads on this topic. We were both fortunate to go to college and graduate debt free. Our paths were much different. Her parents foot the bill for her, something she is extremely grateful for.
    My parents couldn’t afford to send me even if they wanted to. Especially since I have a twin brother. After High School, I enlisted into the Marines. I didn’t get 100% schooling paid for, but I got a decent amount from the Montgomery GI bill at the time. I was a non-traditional student and worked full time, and went to school full time at night. I took as many classes as I could at a community college, transferred them to a four year state school and graduated. A few years later I finished my MBA while working full time as well, and got an assist from my employer. In all, I stayed at the company and didn’t pay a whole lot out of my own pocket.
    I have already started talking to my young kids about their options. My wife and I are funding 529s for each of them, and are keeping it from them b/c we don’t want them thinking they have this safety net. It’ll be more of a surprise once they start hammering out their plans. But I have encouraged them each to think about borrowing and the long term affects versus working hard and having some skin in the game (which could be an added bullet point to the article; getting your kids to chip in). I’ve also talked to them about joining the military, getting into the trades, etc. They’re too young now to even care (ages 6 and 9), but I don’t think it’s ever too soon to get ideas into their minds.

  33. 320K per kid for the most expensive private school just seems insane to me (even adjusted for inflation) unless filthy rich. Even then, I could never justify it. Unless there is an incredible GUARANTEED return on that investment from attending the top private college, it just seems ridiculous to me. Think of the opportunity cost of giving a private institution 320K with no guaranteed return to justify.

    First child is about to get her MA in 7 weeks with no school debt. Will serve a year paid internship and then have a six figure job a year later. All in, her education cost <40K. Next one is going to be even cheaper as he is completing the first two years free at a JC and will end up with a similar undergrad degree as the other 18 year olds partying it up at a four year with their parents 320K! Additionally, by selecting virtual at the JC, it allows him to spend his days working (getting experience) for two years while living at home and saving for his first home purchase.

  34. Airforcegav

    Sam, I can relate very much to this post. We started saving for our daughter’s college education when she was one. It was hard for us at the time, but we felt it was the most important thang we could do, outside of our own retirement accounts. This was a huge outlay for us at the time, and my anxiety was high about her being an only child and what that might mean if she decided to be a wanderlust artist that didn’t want the college path or recieved a scholarship. Rules on the account were more restrictive then. Years later when we started to see a decent balance and she was older, we began to contemplate something you’ve written of as well. How do we make sure she doesn’t take this gift for granted. To respect her privilege in so many areas of her life. We decided we would have a phased approach to make sure she had skin in the game. 100% paid year one. 75 in Year 2 and so on. She would be expected to work and pay the gap. What you dont know when they are toddlers are the actual people they become. How they grow and feel and work and love. It will change your perspective from the analytical decision you made. You make your decisions from worry then, but have a different perspective when they’re older. You know who they are and what they are capable of. She worked her tail off starting at 15. We gave her choices. This was the dollar amount we had saved. She could use it as she liked and take loans for the rest. She chose to go to a local state school because she understood the value of the money she had and that it would go furthest by doing this. She lived at home the first two years and moved out with friends in year 3. She graduates in two months with two degrees and no debt. I’m so proud of her. The takeaway Sam is that once your children grow and become the people they are…this becomes part of your analysis and it may change everything.

  35. Hi Sam. We are older than you, and I think our kids are around your age. 529 plans were not available to us for most of their lives, so we did not have them. They both went to our state’s flagship university, and had some merit aid. They were 5 years apart in age, so were not in college at the same time. We paid from our current income while they were attending. They both worked also during the summers and about 10 hrs a week during the school year. Son’s major had more scholarship opportunities than daughter’s. Daughter had $6k in student loans from undergrad and paid off during the grace period. She has a MAcc and a CPA. She took the CPA tests before and right after she graduated. Son graduated debt free and has a PhD in food science. I want to let your readers know that the USDA has fellowship programs for agriculture fields where there are not a lot of advanced degrees. They are trying to educate the next generation of research scientists and college professors. The fellowship paid for our son’s tuition and also provided a living stipend, and a stipend for his research. We found that smart people are needed in every field, and there is a place for everyone, even if it is not the Ivy League. I am sure your kids will find their places like our kids did.

  36. Interesting article. As a parent of 4 this is an area I’ve kept a close eye one, especially because living in an expensive has curtailed my savings in this area. There is one huge factor that will drive the costs down (at least transfer them away from the student/parent diad). Demographics will drive down the labor pool in the coming decades and beyond. Smart employers will contract with potential candidates early (think high school) and agree to fund the cost of education in exchange for a time commuting to their organization (I call it the service academy model). Best thing you can do is exposure your kids to STEM related extra curricular activities…. The current US college structure is an educational shell of its former self, high costs are largely driven by resort style amenities that encourage more schooling vice venturing out into the world. All backed by cheap debt, ugh. You should also do a piece of the post 9/11 GI bill benefits….

  37. Students can save big on college and get into a better school in California through the community college to UC transfer program. The rules are always changing, but in short if you get a certain minimum GPA at a good community college for 2 years you can transfer to a UC (not UCLA, Cal or UCSD now) guaranteed. The cost is then 2 years of community college + 2 years UC. Great program and deal!

    1. My son took 2 gap years, went to CC for 2.5y, worked during that time and his company paid for most of it. He saved much of his paycheck into Roth and 401k during those years. Upon turning 23y he was guaranteed transfer to Rutgers Business School with a 3.0 GPA (which he could not get into straight out of high school bc his grades were average). Then when he turned 24y FAFSA no longer counted our income and they could not count his 401k balance so on paper he was a pauper; so he got his last year of college completely free bc of his low income during that time as a part-time intern. The whole cost of college graduating with a diploma from Rutgers Business School <$40k. Though he did not follow a traditional path and he preferred working to college he did get his degree and we paid very little. There is no reason to pay hundreds of thousands – just buy your kid a house and let them pay for their own college! They will be the better for it and well off financially too.

  38. Yeah I think saving some in a 529, having student take some loans, and then having parent just fork out cash every year for tuition is probably how most parents fund college. Having $700-800k/kid saved up I think is overkill and not a reasonable expectation for vast majority of people. I have heard that 529’s can be somewhat restrictive? What are all the approved uses of 529? What if kid doesn’t go to college or drops out?

    On a different note, how do schools end up choosing students then now? If metrics don’t count as much or if everyone has such high metrics, then is it just more based on demographics or chance? I wonder if Supreme Court decisions in June may alter admissions selection criterion.

  39. Jim Johnson

    You give so much great advice for free. Life changing, multigenerational positive advice on so many subjects. I would bet you learned none of it in college. Why the love affair with sending your kids to college? Why not put the 320k for each of them in an index fund…let them go to Jr College and call it done? Or better yet home school them and give them the tools you are so capable of passing on to them?

  40. Something else worth noting is that the 4 years of tuition isn’t due all at once, so the 529 is still earning interest for 3 of those years even as you de-accumulate.

    For a traditional 4-year degree, I’m planning on my child attending community college for the first 2 years, which is free in our state. The bachelor’s degree at a top university looks the same whether you attended for 2 years or for 4, so why not? In many state college systems, an Associate’s degree from CC means guaranteed acceptance too.

    1. That’s true. If 80%+ is in cash or treasury bonds today, the 529 fund will grow by 4%+ a year.

      The plan to send your kid to community college is a good one. But they might decide never to transfer. Our best laid plans tend not to go according to plan.

      1. We’ll check options once she’s nearing that age, but even if the 529 doesn’t cover it all, the money will be there in our taxable account that we’ll take a hit on. We’ll call the capital gains tax “529 Overage Insurance.”

  41. IMO, I don’t think it’s worth it to pay for most of these expensive private schools vs going to your flagship state university. Other than the HPYSMC type schools, I’m unsure if it’s worth it. Looking at my firsthand experience of admission acceptances for this year, if you’re a typical upper middle class Asian or White applicant, a 1560 SAT score, being valadictorian, playing a varisity sport, founder of a couple of school clubs, being involved in you community, winning local/regional awards, etc. usually won’t be good enough to get you in HPYSMC (I know Ivy day hasn’t arrived yet but I’m assuming the SMC+UChicago/CMU acceptances are a good indicator). These stats plus great essays will likely land you a “tier 2” private school (say Vanderbilt, Notre Dame) but most likely won’t get you in the top tier. And what if your kid isn’t quite this strong? These “tier 2” schools can be a stretch. And if admitted, do you really want to shell out more than double college expenses for a dubious “advantage” vs a flagship in-state school? IMO, only if your NW $10M+ (today’s dollars). And forget merit scholarship as they are mostly for the underprivileaged. Yes, you can get merit scholarship at expensive private “tier 3/4/5” schools but those usually aren’t enough to hit parity with your comparble state university.

    My point .. be mindful of the odds in getting your kids accepted into the target private university you’re saving up for.

    1. I expect the worst for cost. That they won’t be smart enough or the right demographic enough to get scholarships, they will forsake the perfectly good state school, and want to go to an expensive private university that isn’t in the top 25.

      It feels good to have low expectations. Hooray!

      Are you a parent or a student? You mentioned your first time experience of getting acceptance letters. Where are you going and why? Or where is your child going and why? And how do you plan to pay for tuition?

      1. I’m a parent speaking to first hand knowledge of my senior kid and his friends. These experiences referenced are about kids that all attend a single, academically OK public HS who typically graduate maybe a couple of kids going to a “top tier” school each year … from what we’ve observed, those that are admitted are usually “disadvantaged” kids like a family with financial hardship (last year’s Asian valadictorian) or this year’s sole Stanford admit (an under-represented racial minority). The rest of the top 8 (by class rank) are being rejected by “top tier” schools (mostly East Asian) and will likely be going to a univeristy like the University of Washington for engineering or pre-med. Unless you’re going to MIT for engineering or Johns Hopkins for pre-med, is it really worth paying for an expensive private college that’s pretty much just as good? With about $150k+ in the 529 and UTMA accounts, there’s no need dip into after-tax funds or the W-2 paycheck (I’d rather retire) to pay for a kid’s expensive private college for marginal/zero incremental benefit (IMO) vs something like in-state tuition at the University of Washington. I just can’t understand why a middle-class parent would send their kid to, say USC instead.

        That said, I project you will probably be able to afford that luxury (e.g. hit the $10M+ thresold by the time your kids go to college) of not caring about the incremental expense. At $10M+, an extra $200k per kid for undergraduate eduation is perfectly affordable (IMO) in this situation.

      2. “They will forsake the perfectly good state school, and want to go to an expensive private university that isn’t in the top 25.”

        As my father used to say, you’re old enough that your wants won’t hurt you.

  42. Great article. I think your 50s is a great time to buy levered real estate. Your not passing debt onto a child even if you get hit by the ice cream truck in your 60s or 70s your leaving them an appreciating, cash flowing asset that in the worst case scenario they sell and take a tour around the world with two of their closest friends and they may even say a kind word about you while they are doing it!

    Also keep in mind, YOU have the ability to buy a home, whereas in the future, who knows what it will take for your children to close on one.

    I know an 82 year old that just took out a 30 year fully assignable mortgage to the tune of 32 million dollars to build a multiunit complex that went into a family trust. Nobody else in the family can, or in my opinion, will ever qualify for something like this. The debt is the greatest gift they could give!!!!

    1. Interesting perspective! Taking on mega debt at 82, nice! That person is clearly going to win.

      You’ll enjoy an upcoming post on how parents can reduce your anxiety of taking care of their children.

      1. For clarity, this is a high net worth individual that has been in real estate from a young age so debt to them is a tool, not a hinderance. If something went sideways with this deal nothing would change for them in their daily life. Obviously taking on a lot of debt in your older years for people who do not have a large security blanket in place would not be a smart choice. This is a situation of, if I can do it, why wouldn’t I do it for the next generation.

  43. Wife working at University hospital got 2 of our 4 kids a 50% tuition break at the affiliated University. 2 kids lived at home while attending. Paid 95% of remainder out of current earnings. Fortunately we made enough to do this.

    1. That’s great. I’ve often wondered whether I should strategically try to get a job at a college to help pay for college. After all, I’m in the education field and enjoy teaching. I’ve got 12 years to make it happen!

      Sounds like you don’t have to be a professor, but can do many full-time jobs at colleges to get the college tuition benefit. I know that one college provides half tuition subsidy that can be applied wherever your child goes, not the college you work for.

    2. What fantastic savings! I’m very curious though – what was the experience like having them live at home during college? Did you loosen up on rules and curfews? Or did you keep things the same as when they were in high school? And were they able to leave the nest after graduating from college?

  44. What is the point of this article? You have millions of dollars and earn 6 figures per year in passive income. why would you need to save an additional penny for your kid’s college? You already have it. Pointless article.

    1. Howdy Nate, thanks for your criticism. After realizing my blind spot, I thought I would help elucidate the different ways to pay for college to help other parents who may feel anxiety and stress about the prospects of paying for college.

      If I felt the pressure of saving for college, maybe other parents do as well. Maybe other parents have blind spots since it’s hard to know what we don’t know.

      I’ve always tried to share my experiences to help other people. If you have any helpful experiences to share about paying for college, I’d love to hear them. Thx

    2. What’s the point of being a d—head Nate? Sorry if no one ever had the courage before to tell you that’s how you’re acting. Take your negativity elsewhere mate. Nobody wants to hear it. If you’re lashing out because you’re hurting inside or have nobody who loves you enough to have kids, that’s on you. Seek help.

    3. Indian Tiger

      What a d_bag comment, Nate. Sam is trying to help parents here, don’t you get it? Or are you too stupid to understand? Have a nice life.

  45. Like you, my goal now is to save $320,000 for each kid, the current full cost of attending the most expensive private university for four years today. Once I reach that goal, I hope that market growth will keep up with inflation. I just save up to the gift tax amount each year because it is attainable and it pencils out. I don’t want to have to work while my kids are in college, and I’d be thrilled to have leftover money in their 529 plans to pay for grad school or assign it to the next generation. My parents were able to pay for all of my grad school and it gave me a huge head start in life to have a good career with no debt. I’ve worked hard all my life so I don’t see this as a disincentive to hard work or achievement. It’s the one financial gift I want to give my kids.

    1. Ah yes, getting help paying for graduate school woulda been nice! Fortunately, my old company paid for 80% of it, so it wasn’t expensive. But the working and studying at the same time for 3 years was a real ass-kicking!

      It’s ironic how valuable education is, yet it’s so expensive and free at the same time.

Leave a Comment

Your email address will not be published. Required fields are marked *