Paying for College: Our Plan for Baby Girl (Part II)


Yesterday’s post discussed how Johnny and I paid for college. And today we’ll address our options for Baby Girl’s college costs. Johnny and I had to take out loans and get part-time jobs to pay our way through college, but we’re not sure we want the same for Baby Girl. On the flip side, Johnny and I learned a lot by having to work our way through school. So what do we do about Baby Girl’s college expenses? Let’s consider our options.

What We Could Do

We have three main options, which I’ve listed. And obviously, there’s variations of each of these options, but I’ve just listed them in their simplest form.

First, we could have her take out loans. We wouldn’t have to put much away in a 529 plan if we chose this option. We could help Baby Girl find the best loan options and then help her out with whatever her loans didn’t cover.

Second, we could foot the bill 100%. We would have to put a big chunk of money in a 529 plan, but hopefully it’d be doable spaced out over the course of 18 years. Baby Girl wouldn’t have to worry about finances while in college, and she could just focus on her schooling.

Third, we could foot some of the bill and have Baby Girl pay the rest herself. We would still put a big chunk of money in a 529 plan, but Baby Girl would have some financial responsibilities of her own as well.

What We Hope to Do

Footing our own college finances was tough. And starting off life after college with a -$20,000 net worth was even tougher. If possible, Johnny and I would like our kids to not have to start post-college life already in the red. But we’d also like them to learn financial responsibility.

Right now we’re tentatively considering something along these lines:

    • We’ll pay for all of Baby Girl’s necessary college expenses if she maintains a certain GPA each semester. However, this rule will not kick in until sophomore year. In other words, we’ll cover all of her freshman year of college no matter what.
    • Any expenses that aren’t necessary, she’ll have to cover on her own. If Baby Girl wants new clothes or tickets to a concert, she’ll have to get a job and pay for those things herself.

That’s what we’ve got so far. Hopefully we can save enough in a 529 plan to make that scenario a real option. There’s also one other option that a classmate of mine told me about our senior year of college. I’ll call my classmate David… David had taken out loans and worked his way through every year of college. Now that we were about to graduate, David had several thousand dollars of school debt. But as a graduation gift, his parents paid down all his debt. So he suffered through four years of working his butt off and then got a clean slate after graduation. How cool is that? I love that idea, but I’m still not sure whether I’d do it with my own kids.

What about you? How do you plan on putting your kids through college? Have any tips for Johnny and me as we make this decision?

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  • Reply Michelle February 12, 2013 at 8:27 am

    We want to do the same plan as you guys. Pay for basic tuition, etc. as long as they have good grades.

    • Reply Johnny February 12, 2013 at 10:00 pm

      If Michelle approves, we done good. 🙂

  • Reply Johnny Moneyseed February 12, 2013 at 8:28 am

    We have been actively saving for our daughters’ college since our first was born. There are a few amazing ways to get cheap to free college though. So, if we don’t have to actually pay anything, then we get to keep the money that we saved.

    My mom took a job at the university my sister was going to be attending and Boom, free tuition!

    • Reply Johnny February 12, 2013 at 10:02 pm

      I really like your approach. Save as if your kids will go to college AND will have to pay, but look for opportunities to make it cheap or FREEEEE. Your mom is a bright one. That’s a freaking brilliant plan (and amazing job perk).

  • Reply Brian February 12, 2013 at 8:30 am

    Our plan is to cover 100% tution at a state school and then the little guy will have to cover the rest. Of course if we manage to save enough for him to go to a private school we *may* pay for it, but he won’t know that up front. We will probably also have the talk with him about choosing a major. We will also dangle the carrot that we will buy him the car of his choice (up to the cost of $25K, or whatever that works out to in the future) if he gets a full ride and graduates on time.

    We do have a 529 set up and plan to put as much as we can in it, since we get a 20% tax credit on our state taxes (up to a $1k credit per year)

    • Reply Johnny February 12, 2013 at 10:05 pm

      I think it’s smart to dangle a less expensive carrot out there unless he’s absolutely dead set on a more expensive option. And I like the car option, too. We’ve tried thinking on how to incentivize getting good grades in high school, but we didn’t like the idea of just plopping over cash to her. The car (or putting it in a savings account for when she graduates) are good bets.

  • Reply Catherine February 12, 2013 at 9:27 am

    I know more than anyone how hard it is starting life with a negative networth….to the tune of -100k… yeah, I don’t want kiddo to start life like me! but I also don’t think a little debt WITH a plan to pay it off is a bad thing. Hubby and I have decided to set aside a set amount each month for her (we already started) for the next 18 years in a registered savings account (probably similar to your 529?). Our financial priorities are debt freedom and then retirement. I guess what I’m saying is that she gets what she gets from us, which will be a decent chunk of change come 18 years time. BUT 1) she has to maintain good grades and 2) have some financial responsibility for her education as well (part time job or maybe some loans!!) I fully believe that having a little ‘skin in the game’ is good for kids in terms of work ethic. Also, If she decided to purse graduate or more education than a 4 yr degree- her responsibility. The money we give will only be used for tuition/books. If she wants to move away, go south for spring break she better get a job 🙂

    • Reply Johnny February 12, 2013 at 10:19 pm

      We’re totally on the same page. Skin in the game made us who we are. But like you said, it sucks to start in the hole. It sounds like you’re well on your way to make sure that your little kiddo will be sitting pretty come college time.

  • Reply MomofTwoPreciousGirls February 12, 2013 at 9:32 am

    My dream is to cover their tuition 100%. However, they will be required to work the moment they are legally able and during summers. I want them to be able to just concentrate on school and related activities (whatever they are interested in such as sports or academic clubs) during the school year. I dream of them heading back to our home state and attending Yale!
    I hope to keep a good balance for them as they grow up between their education and activities without too much crazy pressure (Yale is MY dream, not necessarily theirs!). I want them to learn to work for what they want.

    Brought them to the mall this weekend to get their ears pierced, and for the first time we were in old navy and they were very interested in the clothing and shoes. My mom and sister were with us and it was just so funny. They kept saying “I want those shoes” and “look at that dress”. Immediately, I asked “do you guys have a job?” My mom thought I was mean and got each of them a couple of shirts they wanted. I just laughed at her and said I learned from her!

    Luckily hubby and I are on the same page on making sure they learn to earn for the things they want. There will be no cell phones and iPads for them, unless they save for the and can pay the bills themselves. As the oldest children in our families we always had to work and we see we turned out way better than our spoiled siblings!!!

    • Reply Johnny February 12, 2013 at 10:32 pm

      Yale! No pressure, girls! 😉 I think it’s great you’ve got such high goals for them. And I love your “learn to earn” philosophy. Hope you don’t mind us stealing, I mean, borrowing it.

      You bring up a great point about balance though. I feel grateful to have been able participate in a lot of sports and groups through high school. But that didn’t mean I couldn’t work, too. Kids don’t need to be babied.

  • Reply Gary February 12, 2013 at 9:43 am

    Most likely,my children, all 3 of them will go to a state school. I want to emphasize to my children that the name of the school of is not important. Getting good grades, picking a nice major, and obtaining interniships will be the most beneficial for them. As for paying for college, I am hoping to be able to cover 2 years of college via a 529 plan. Then hopefully, my children will have earned enough money in their lifetime to cover at least 1 year of school. So, if they had to take out a loan it would only be for 1 year.

    • Reply Johnny February 12, 2013 at 10:37 pm

      I agree with you on state schools. I’m conflicted because I want my child(ren) to be able to choose their school, but there’s still got to be a budget involved. I like your thinking of covering two years. We might have to rethink our current minimum of one year.

  • Reply John S @ Frugal Rules February 12, 2013 at 10:17 am

    We’re probably going to be going with #3 or something close to what you’re thinking. We want to help them through, but also want them to learn about the hard work that’s needed if you want to accomplish something. I know it sounds a little cold, we just want to make sure we prepare them for life beyond college so they can succeed.

    • Reply Johnny February 12, 2013 at 10:40 pm

      That’s the hardest part about all the parental planning stuff is “being cold” and mean. But without some good ol’ fashioned tough love and telling our kids to get a job, we’ll end up doing them more harm by babying them through life. Must. Be. Strong.

  • Reply JMK February 12, 2013 at 11:16 am

    Our son is in first year and we’ve decided to split the school expenses 50/50 for the most part. He lives free at home, packs a lunch to take everyday, we buy his bus pass, basic clothing, and pay for haircuts. He is responsible for half the tuition, books, supplies etc. If he wants something special beyond basic clothing, he buys it. If he wants to go out with friends he pays for that. He’s free to borrow a vehicle for school purposes if needed, but if he’s going out with friends he pays for the gas.

    In our city there are two major universities, and several colleges. You’d have to really work at it to choose a program not offered in town. If he’d wanted to go to school out of town I’m not sure how we would have dealt with it. If it was for a program that wasn’t offered locally, I guess we would have paid for it. If he just wanted the experience of living away from home, I think at most we would have split the cost. We both lived at home while going to school, so maybe that has colored our view on the necessity of the whole campus life experience. Yes, I’m sure it’s fun, but at what cost?

    Tuition here in Canada is far more reasonable than in the US, so a DIY approach doesn’t necessarily require loans, especially if you are living at home. His program is $8k/yr (tuition, books, misc fees). Coming up with $4k by working a summer job or PT all year really isn’t all that difficult. A PT job of only 8hrs/wk all year would just cover it. We didn’t set aside anything for his education because we knew that finding $4k/yr is way less than most people spend on car payments (which we don’t have). Our younger child won’t finish high school for another 6 years, but again we aren’t putting any funds aside. As the time draws closer, if it looks like she might need to go out of town, we might start tucking a little aside to cover the extra cost of living in residence, but otherwise nope. We are expeting to begin our early retirement the same year she starts university or college. If she needs to go out of town, we might just delay our retirement day by a few months to save a little extra.

    Our approach certainly wouldn’t work for very expensive programs or countries with higher post secondary education costs. A friend of mine has a son in medical school at $50k/yr in Australia (couldn’t get accepted to a Canadian university with marks in the 90s, but that’s a whole different issue). Rather than go the loan route, she’s remorgaged her paid off house to fund his education, and he’s planning to pay her back.

    • Reply Johnny February 12, 2013 at 10:52 pm

      You Canadians, always making us Americans jealous. 🙂 I love the stay-at-home method. Unfortunately, that wouldn’t have worked with Joanna and me. We were ready to bolt and be “independent” the day we graduated from high school. But we’ve got a fresh start with brainwashing our Baby Girl into thinking her parents are “cool” enough to live with. Kudos to you guys!

  • Reply Chris February 12, 2013 at 11:20 am

    My grandmother started a CD for me when I was young and the interest rates were high. It matured to $20k by the time I was 18. I paid for college out-of-pocket because my dad recommended that instead of using that $20k for school I could keep it as a nest egg for when I purchase a house or really whatever I wanted. Because of this I graduated from school much wiser than I did when I went in and also had a positive net worth which very few people can say. This is why when I have children I will not be starting a 529 because there is no telling what they will do when they graduate from high school. They may not be ready for college right away which is fine by me. I just don’t like the limitations a 529 has when it comes to such an unforseeable future.

    • Reply Johnny February 12, 2013 at 10:55 pm

      Man, high five to your grandmother. That’s awesome to leave with a monetary head start. And now you’ve got me questioning a 529. I’ll have to do a deeper dive. Thanks for throwing out another idea.

  • Reply debtperception February 12, 2013 at 12:07 pm

    Hopefully by the time 18 years roll by, we will see some major reform in higher education and people won’t be needing to take on excessive student loan debt just to get through college. There was once a time when people could actually work part-time and it would cover tuition.

    I don’t have children yet but I would set aside some savings for college. With the amount of student loan debt I’m in, I’ll probably still be paying when my kid goes to college so the savings will be minuscule. But I will surely educate them in high school about student loans. Hopefully they won’t be necessary or as predatory by then but it’s still important information for them to know. I had no guidance, no knowledge of student loans when I was in college and I’ll be paying for that mistake until I’m 50.

    • Reply Johnny February 12, 2013 at 11:00 pm

      You’d think our government could figure out something by then, right? On second thought, I don’t know how much I trust those folks right now.

      I think our generation kinda got screwed over. It was the perfect storm. Astronomical tuition costs, predatory loan surge, recession and terrible job market upon graduation, parents that didn’t have to deal with many of those factors and therefore didn’t educate their kids. Or maybe I’m just bitter. 🙂

      • Reply debtperception February 13, 2013 at 1:39 pm

        I definitely feel screwed over and it’s all true; The astronomical tuition costs, the predatory lending, our own ignorance, the recession, the job market and outsourcing on top of bought congress who continues the facade of serving the people. There’s a whole generation of bitter folks out there!

  • Reply Newlyweds on a Budget February 12, 2013 at 12:11 pm

    i don’t know what we’ll do with our children’s college (we don’t have kids yet). Ideally, I would love to help out as much as possible, as long as it doesn’t hinder our retirement savings. I don’t think it’s bad that children contribute to their college bills. Plus, paying for one child’s college may be doable, but who knows about two or three…(or four?). And I wouldn’t think it fair to pay for one in full and then not have enough for the third…

    • Reply Johnny February 12, 2013 at 11:10 pm

      That’s where things seem overwhelming to me. Saving for Baby Girl seems pretty doable. But heaven forbid we pop out two, three, or nine more of those little rascals. And Joanna dealt with a similar scenario where child one (and maybe two) had help, and then the rest of them were left to fend for themselves. Not cool.

  • Reply Grayson @ Debt Roundup February 12, 2013 at 1:28 pm

    I plan on something similar. I want to put up all of the school expenses and then have the little man pay for anything else. I will put something together for grades and if is not maintained then the funding for that semester will disappear.

    • Reply Joanna February 12, 2013 at 11:18 pm

      Awesome, Grayson. The tricky part will actually being sticklers when it comes to the GPA rule… as I’m sure you’ve already found out, it’s so easy to give in to our little cuties!

  • Reply Shannon @ The Heavy Purse February 12, 2013 at 2:01 pm

    College funding is so tricky and personal. My husband and I have been saving money for our girls college education as we, too, want to not only make sure they opportunity to attend college, but without accruing massive debt. On the same token, I agree that having some skin in the game is a good idea too. When things are handed to them, kids don’t always understand the sacrifices we make for them to appreciate. Honest conversations are the best. We’re going to cover in-state tuition at a public college, etc.

    • Reply Joanna February 12, 2013 at 11:24 pm

      I agree with what you said about honest conversation. I want our kids to have an understanding about money before they ever move out on their own.

      Johnny and I haven’t discussed whether we’ll cover all colleges, but my guess is that, like you, there will only be certain schools (like an in-state school) that we’ll be able to cover!

  • Reply Do or Debt February 12, 2013 at 2:18 pm

    I think paying for most of it and having your child work is great. Although I desperately wish my parents helped me with my student loans, I learned a lot and my work ethic is stronger than most people who don’t have debt. I think that is a skill and a fire to work harder, better and can ultimately be used for a lot. But debt can also be psychologically and economically crippling, so help is good! This is so great that you guys are thinking about this now! Kudos to you!

    • Reply Joanna February 12, 2013 at 11:26 pm

      I hope by the time Baby Girl is college-age, we’ll still be able to remember how it felt to be college students so we know how to help her. Like you said, we learned work ethic, but it sure would have been nice not to have had debt when we graduated!

  • Reply Jacob @ iHeartBudgets February 12, 2013 at 4:34 pm

    I like the 3rd option that you’re choosing. I hope to have enough money to pay for college if we can, but to let our son understand responsibility, work and the motivation it takes to pay his own way. So I like having year 1 paid for while he gets his footing, then only paying for tuition/housing if a certain GPA is maintainted. My main struggle is where to park the money, because if he doesn’t do traditional college, or does it on the cheap and there’s a huge chunk of money stuck in a 529, that’d suck. Still haven’t figured that one out.

    • Reply Joanna February 12, 2013 at 11:30 pm

      That’s a good point, Jacob. Johnny and I still have a lot to learn about 529 plans and what our other options would be for saving for college. I’m sensing a future post, perhaps? 🙂

    • Reply JMK February 13, 2013 at 10:03 am

      I had a friend in university whose parents did it the opposite way. She had to completely pay for first year and if she made it through that, they paid for the rest of her schooling. I think the logic was that many kids party away the first year. This way she would be partying away her own investment. With their arrangement, she had to prove she was taking it seriously and then they would happily cover the rest.

      • Reply Johnny February 13, 2013 at 8:46 pm

        Very interesting approach! And the logic actually makes a lot of sense. If I remember correctly, some of the grants that Joanna and I received weren’t available to freshmen for that very reason.

  • Reply Michelle February 13, 2013 at 12:25 am

    When I think about my imaginary future children this is the approach I want to take.
    1.)My spouse (who isn’t real either right now) and I would save steadily from said child’s infancy until senior year of high school
    2.) Child will work in some capacity and put money towards that specific fund during high school
    3.) Child will have to work while in college. No compromise on this.
    4.) I will pay 75% of all costs, child will contribute the rest. Hopefully, the already saved amount would make this amount fairly low and manageable for the kid.
    5.) Only pay if the kid has good grades. You don’t get something for nothing.
    6.) Work with them in high school to identify scholarships, grants, etc. to also apply towards the bills.
    7.) No Student Loans!!! I am still paying for mine. It’s frustrating. Will be done in 3 years, but that’s a lot of years of having student loans. I don’t want my kids to stress about their finances when they graduate from college.
    8.) They will take a personal finance class in high school and before college

    Wow, I’m tired raising my imaginary kid! It’s so much work.

    • Reply Johnny February 13, 2013 at 8:49 pm

      Hahaha! You’re the best imaginary parent/wife, everrr.

      I think we’re pretty in line with your approach. And I think you’re smart to think through the things that will help them BEFORE college, like taking classes on personal finance in high school. I think that’s the biggest problem facing students today—their completely blindsided with loans and costs when they get to college.

  • Reply Neville February 13, 2013 at 1:04 pm

    How much are you planning to save to play for all of her college expenses? What if she gets into a school like Stanford, which currently costs $55k per year. With tuition rising at an average of 5-6% per year, 4 years of room and board college could cost anywhere from $5-$600k!

    • Reply Deena Dollars February 13, 2013 at 1:21 pm

      Schools like Stanford do not actually cost most people $55k per year. That’s a “sticker price,” and most people pay nowhere near that. Sure, millionaires’ kids pay that much, but top tier schools have huge endowments and it is really important to them to admit people based on merit and not exclude people for financial reasons. For an example, check out this website from Harvard’s financial aid office:

      I went to really expensive private schools for undergrad/grad for the price of a state school in the case of undergrad and essentially free in the case of grad, even though the sticker prices were high. This was due to a combination of parental income and huge scholarships.

      • Reply Johnny February 13, 2013 at 8:56 pm

        I had no idea school’s like Stanford has a “sticker price.” I knew about the incredible wealth of their endowments, but I had no idea they were using it to help cover the costs of “average” students.

        Helpful info, thanks.

    • Reply Johnny February 13, 2013 at 8:54 pm

      Good point. Joanna and I are pretty much of the same mindset that the name of the school doesn’t matter as much as what you get out of it (internships, connections, etc.). Does that mean that one’s career path wouldn’t be easier having graduated from a Harvard or Stanford? No, they’ve definitely got an edge. But I think our kid’s will end up fine with a degree from a state or religious school that is comparatively inexpensive.

      So what we’ve planned is to save roughly the amount of state school tuition, and should she choose to go somewhere else that costs more, she’ll have to help make up the difference in scholarships, grants, and savings.

  • Reply Deena Dollars February 13, 2013 at 1:17 pm

    My partner and I are not planning to have children, but my brother recently had his first child. My bro & his partner have fairly low earning potential because of their chosen careers and education level, and my partner and I are at the opposite end of the spectrum.

    So, I’m the crazy aunt who is going to give cards for birthday and Christmas that say “I put $100 in your college fund!” and things like that. I plan to help with a pretty significant portion of the little guy’s college career, contingent on grades and him showing that he is responsible. If I have enough money, I would not even expect him to work a part time job that was unrelated to his major (or, not for more than a few hours a week for beer money). The reason for this is that I was fortunate enough with significant scholarships and my parents’ help to come out with a BA from a great school with no debt, and a really solid resume. All of my success from there (full ride through an MA at an Ivy, great career opportunities) I attribute to having only one focus in college, and that was killing it academically. If I am able to, I would like to do the same for him, if he is interested.

    • Reply Johnny February 13, 2013 at 11:58 pm

      Haha. Not that aunt! Actually, your nephew is going to think you’re a super aunt come college. That’s awesome.

      I think my hesitancy in covering all of the kiddos’ costs is that I had a handful of friends that had their parents pay for everything, and their performance in school was the exact opposite of “killing it academically.” I think it just depends on the student. For Joanna and me, I think we actually did better in the classroom because we held jobs and had less time to get into trouble. But I love that you’re fully prepared to take him under your wing and give him an debt-free opportunity at college.

  • Reply Brick By Brick Investing | Marvin February 13, 2013 at 2:00 pm

    My wife and I plan on introducing entrepreneur concepts to our children between the ages of 10-13. We them to understand early on in life that you can either be an employee or an owner, along with the benefits and downfalls of both. We’re doing this because we want our children to formulate an idea of what they want to do with their lives early on instead of frantically trying to decide at the age of 18. With that said, my wife and I will not fund a degree that is in anything else other than science, engineering, or some other techincal trade that requires a degree. Quite frankly by the time our daughter goes to school I believe the entire system will be revamped and prices more negotiable.

    • Reply Johnny February 14, 2013 at 12:02 am

      Looks like Joanna and I would have missed the funding criteria in your house. 🙂 We’re not the most keen technical learners. I considered doing computer science, but the computer science kids scared me. So I did the exact opposite of a technical degree and majored in Advertising.

      That’s a great idea to teach your kids what it means to be an innovator and owner of an idea. Super empowering. I would have loved to have learned more about that as a kid.

  • Reply Jen February 13, 2013 at 4:59 pm

    Luckily, we haven’t had to think of too much of a plan as our 2 year old has received enough in gifts from a loving grandparent to cover most of a state school right now, but with interest (sucky right now), it should be a nice nest egg for her. We are debating keeping that account a “secret” from her and opening another one for bday $ and whatever else, and waiting until she graduates to gift her with the $. We really want her to be motivated to apply for scholarships and grants, and not just blow the $ set aside for her education.

    • Reply Johnny February 14, 2013 at 12:04 am

      That’s AWESOME! Hooray for generous grandparents! I think you’re smart to keep it a secret and keep her motivated to do things without the impression that she’ll have everything covered. Either way, what a fantastic situation for your girl, though. Congrats!

  • Reply KK @ Student Debt Survivor February 14, 2013 at 8:15 am

    My parents weren’t able to pay for any of my schooling so I was negative $30k when I finished. It definitely set me back a couple of years, but otherwise I made it through OK. I’m hoping we’ll be able to help our kids pay for at least part of school (when we have kids).

    • Reply Joanna February 14, 2013 at 3:19 pm

      Yup. Same with us… it set us back a few years, but no permanent harm done. It’d be awesome for our kids to not start off in the red!

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  • Reply The Insurist February 18, 2013 at 3:51 pm

    As a society we tend to go on auto pilot and think 529 plans are the way to do the save for college thing. They can be a good tool, but shouldn’t be the ONLY tool. The limitations on how to spend the money once ready do not create a one size fits all solution. If Baby Girl is the world’s next big entrepreneur, she may forego college, or if she’s a rockstar student, she may receive scholarships and grants. Also, your financial situation may change which may change how you approach the three options you’ve laid out in the beginning of your post. My advice is to spreadsheet all your options and compare them with your values. Those two should always intersect.

    PS…in the name of transparency, I had to Google Levar Burton. Please don’t tell him.

    • Reply Joanna February 18, 2013 at 9:59 pm

      Those are great points. We’ve still yet to really hash out all of our options for how we’ll save for Baby Girl. You raise some important considerations that I’m sure will impact our final decision!

      And when it comes to you and Levar, my lips are sealed! 😉

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