Student loans – Help – Where to start

New dads out there, do yourself and kids a favor and start a 529 plan and put $200 a month or more in it. I started one for each of my kids the day they were born and they will be able to both to MIT if they wanted to. Good thing is I can pull my original investment money back out with no tax. Kinda like a ROTH I put in taxed money so I already paid taxes on that part the money made that is another story, you have to use it or can gift it to a younger sibling or use it yourself to go back to school.

I paid for my kids’ educations with a few caveats: I wouldn’t pay for a degree that didn’t provide realistic opportunities for a sustainable living wage, and I wouldn’t pay for any grade below a C-. It was interesting how during their first few semesters, when a grade was starting to flag and they were reminded how much a poor grade was going to cost, they brought that grade up. ……And get rid of the video games. The average kid procrastinate twice as long or more on a project if video games are an available distraction.

I could win the lottery and I wouldn’t pay for my kids’ education.

My dad always told me he would “help”, but he wouldn’t gamble on me. He wasn’t going to make tuition payments or foot the bill as the process unfolded. If I screwed up I was hurting myself and nobody else. If I earned a bad grade it was my checkbook paying for it, not his. I watched as every loan contract was signed. I knew what they said. My dad said that the “help” would come when I walked across the stage to receive a diploma, and then again when I showed him my first paycheck from a career job. He stuck to his word and really did “help” quite a bit at each of those specific times handing me enough cash to payoff some of my biggest loans right from the beginning. To this day I don’t take it for granted and thank him whenever college stories are brought up.

I remember a specific instance when I was about 15 and some things shifted in my parents’ careers and my mother thought she might lose her job or have to take a different job. My parents and a few of their friends were over discussing it. When they all left I remember telling my dad “thank goodness we are financially stable.” He looked me straight in the face and told me “Your mother and I are financially stable. You are dead broke…don’t ever forget that.”

Dan wrote:

would just like to say as a guy in his mid-to-late-30’s with a 3- and 1-year-old, I gain great value out of reading these posts. I know I’m years away from some of these decisions and life events, but the interactions on these posts are much more insightful, with personal experiences of what went well and what didn’t, than any broad overview internet article.

Start a 529. Quick!

We started plans for our 2 kids before they each turned a year old and now they are 11 and 13. to say it goes by fast is a major, major, major understatement!

It is amazing to me how quickly we learned to live without those monthly contributions and suddenly you just totally forget about it until I see those statements with the bottom-line totals. Wow. Amazing the power of compounding after 11 and 13 years!

I think some parents get really hung up on the “What if they don’t go to college?” thing. It’s not just for college and even if the child should decide they don’t want to do any type of education that the money could be used for, you don’t “lose” the money as others point out.

Also, with 2 kids, the money can be moved from one to the other, so IMO there is about a 100% chance the money will be used as intended.

Grouse

TheFamousGrouse wrote:

I think some parents get really hung up on the “What if they don’t go to college?” thing. It’s not just for college and even if the child should decide they don’t want to do any type of education that the money could be used for, you don’t “lose” the money as others point out.

I got hung up on that part. I was told by my financial advisor that if its not used for education, you pay a penalty to use it for anything else. So I started a Roth IRA instead. The intention is to use it for education, but should that need not arise, I can use it however I want to. Its also in mine/wife’s name, not the child’s name which means I control how its used.

buckybadger wrote:

My dad said that the “help” would come when I walked across the stage to receive a diploma, and then again when I showed him my first paycheck from a career job. He stuck to his word and really did “help” quite a bit at each of those specific times handing me enough cash to payoff some of my biggest loans right from the beginning. To this day I don’t take it for granted and thank him whenever college stories are brought up.

That is exactly how I would do it… nothing paid out of pocket by me until they earn it and get a diploma in hand. Until then, it’s on them.

gimruis wrote:

I got hung up on that part. I was told by my financial advisor that if its not used for education, you pay a penalty to use it for anything else. So I started a Roth IRA instead. The

That works if your MAGI is such that you’re eligible for Roth contributions and you stay that way for as long as you intend to save. You also only can save up to your Roth yearly contribution limits.

529 plans don’t impact your other retirement savings in other plans (IRAs, 401k) and don’t have yearly contribution limits. So you can do both.

The parents always control the 529 account and how it’s used. The child can’t make off with the money even after age 18.

We’ve been very pleased with USAA – auto, motorcycle, homeowners insurance and credit card. They’ve always been responsive and have gone the extra mile in dealing with credit card disputes and insurance claims.

We have only one child, started saving when he was born. We were in our mid-30s when he was born so established in careers and financially stable. We paid for college, even offered to extend for an extra semester if he wanted to spend a semester abroad. He declined and finished his industrial engineering degree in four years. Had a job the first week of his senior year and has been on his own ever since. Fortunate for us he received scholarships that drove the cost down substantially, enabling us to pay for his college from current income. The saved money is now a nice chunk of our retirement nest egg. (I retired today!)

He is a responsible young man, totally been on his own since graduation. If he was a different kid we would have approached college funding differently. One size doesn’t fit all.

We currently have our boy attending his first year at Bemidji Tech. We filled out all of the financial aid forms up front but since we both work we qualified for nothing. We ended up buying a house up there for him to live in and the rent from his roomate pays the bulk of the monthly expenses so that helps. Dorm rooms would have been approx 10k per year and he wasn’t interested in living in a 12′ box. So far we have been paying for everything in regards to school and housing but he works partime for all of his spending $.
I’m glad his tution is not 30-50k a year. We told him that we will pay the tuition as long as his grades are good. His 2 year electrical degree will be approx 16k total plus expenses and room and board.

Jason wrote:

We ended up buying a house up there for him to live in and the rent from his roomate pays the bulk of the monthly expenses so that helps. Dorm rooms would have been approx 10k per year and he wasn’t interested in living in a 12′ box.

That is one of the more unique and intelligent ideas I’ve ever heard. Throw money away for a dorm room the size of a handicap stall or get an affordable house and build equity. Obviously that isn’t going to work for everyone, and there will be other logistics involved, but now you’re building equity. I really like that idea, thanks for sharing.

Dan wrote:

That is one of the more unique and intelligent ideas I’ve ever heard. Throw money away for a dorm room the size of a handicap stall or get an affordable house and build equity.

Some of the best friends I have to this day I met my freshman year living in a a dorm. The experience was worth its weight in gold. Not every parent can just go out and buy a house for their kid to live in while they attend college. The vast majority of freshmen that live on campus live in a dorm.

Dan wrote:

<div class=”d4p-bbt-quote-title”>Jason wrote:</div>
We ended up buying a house up there for him to live in and the rent from his roomate pays the bulk of the monthly expenses so that helps. Dorm rooms would have been approx 10k per year and he wasn’t interested in living in a 12′ box.

That is one of the more unique and intelligent ideas I’ve ever heard. Throw money away for a dorm room the size of a handicap stall or get an affordable house and build equity. Obviously that isn’t going to work for everyone, and there will be other logistics involved, but now you’re building equity. I really like that idea, thanks for sharing.

Buying a house for you kid to live in at college? You gonna buy him a business when he graduates cause he doesn’t like his first boss?

Kids are soooooo entitled today.

Buying a house for you kid to live in at college? You gonna buy him a business when he graduates cause he doesn’t like his first boss?

Kids are soooooo entitled today.
[/quote]

^^^^^, DUMB comment thanks for your knowledge or lack thereof.

Treating an investment property set up as an LLC while saving 10k a year in dorm fees and receiving a monthly rent check and expense writeoffs doesn’t look like it’s going to be such a bad idea financially on our end. As I see it our investment will pay for college 100% and I should walk away with 15+k of real estate equity. You can’t say that about your 529 savings plans.
It also provides me a place to store my boat and fishouse up north if need be.

Hey wrote:

Buying a house for you kid to live in at college? You gonna buy him a business when he graduates cause he doesn’t like his first boss?

Kids are soooooo entitled today.

Thanks for the insight. I mentioned that a liked a guy’s idea and it looks like my kids will be entitled.

That was one of the dumber replies I’ve seen on this site.

Jason wrote:

As I see it our investment will pay for college 100% and I should walk away with 15+k of real estate equity. You can’t say that about your 529 savings plans.

You don’t know that for sure. Real estate goes up and down. You could easily lose money too you know.

I understand your point gimruis. I never did the in-person college experience but it seems like sometimes the close friendships people form in college are real strong.

I just liked the idea, that’s all, something new and an interesting concept. I thought about the market too, instead of making $15k you could be losing $30k. No sure thing there. I mentioned in my reply that there would be tons of logistics involved and it would be challenging, including it possibly not physically being there for periods of time.

I just thought it was a cool way of looking at the situation. Somewhat risky, but worth looking into and something that could pay off.

gimruis wrote:

<div class=”d4p-bbt-quote-title”>Jason wrote:</div>
As I see it our investment will pay for college 100% and I should walk away with 15+k of real estate equity. You can’t say that about your 529 savings plans.

You don’t know that for sure. Real estate goes up and down. You could easily lose money too you know.

A house in a college town will almost always generate cash flow.

My girls went to state universities, NDSU & Winona State. Tuition was around 8k or so. Dorms and the food plan were equal to a year’s Tuition. I’m proud to say they graduated debt free. They both worked during school and full time during the summer. We did however pay their cell phone and car insurance
Couldn’t you refinance the student loans after graduation or are you locked in?

belletaine wrote:

Couldn’t you refinance the student loans after graduation or are you locked in?

Is that a question for me belletaine? I graduated with about $5k in student loans from a state college and paid it off in 2 years.

I am not sure if refinancing is an option with student loans.

Jason wrote:

Buying a house for you kid to live in at college? You gonna buy him a business when he graduates cause he doesn’t like his first boss?

Kids are soooooo entitled today.

^^^^^, DUMB comment thanks for your knowledge or lack thereof.

Treating an investment property set up as an LLC while saving 10k a year in dorm fees and receiving a monthly rent check and expense writeoffs doesn’t look like it’s going to be such a bad idea financially on our end. As I see it our investment will pay for college 100% and I should walk away with 15+k of real estate equity. You can’t say that about your 529 savings plans.
It also provides me a place to store my boat and fishouse up north if need be.
[/quote]

Your words—-he wasn’t interested in living in a 12′ box. So you bought him a house. If he was 100% about living in the dorms would you have even considered buying a house?

I know so many people who dream they could live in that box and have a chance at an education. That’s what I meant by entitled.

6 yrs to get my degree. My parents didn’t have much money and my education was not their burden to bear. But I paid for it all and had zero debt when I graduated.

The struggle defined me and was the best thing that could have happened to me as a young man.

Work ethic is real. Parent ethic might work out for you but does it really help your kids in the long run?

Dan wrote:

<div class=”d4p-bbt-quote-title”>Hey wrote:</div>
Buying a house for you kid to live in at college? You gonna buy him a business when he graduates cause he doesn’t like his first boss?

Kids are soooooo entitled today.

Thanks for the insight. I mentioned that a liked a guy’s idea and it looks like my kids will be entitled.

That was one of the dumber replies I’ve seen on this site.

Your good man. You looked at it purely from a financial standpoint.

The other posters kid was too good to live in the dorms.

Totally different reasons my man.

tbro2 wrote:

<div class=”d4p-bbt-quote-title”>buckybadger wrote:</div>
I could win the lottery and I wouldn’t pay for my kids’ education.

Why? I’m sure the majority will agree with you, and thats a shame. You think you’re teaching your kids one helluva lesson, don’t you?

Props to OP for looking for advice and stating that he and his wife are willing to help the best they can. Assisting in a childs education is one of the most important things a parent can do for them. I was very fortunate to get the help I needed from my parents and I am forever thankful for it. I’m now able to invest into my own future instead of paying interest off for years to come.

I’d do exactly as my father did for me. I wouldn’t just blindly pay for college or any tuition, rather I’d make it known I will be there to write a check after they’ve accomplished what they set out to do while being their biggest supporter along the way. Helping them by paying off a chunk of their loans on the back end helps establish credit for them as well.

Earning what you get, and learning that that hard work comes before rewards is a valuable lesson for me and my family. I’ll gladly instill those things wherever I can TBro. If you think the lesson isn’t valuable, that’s your opinion. We’re likely just cut from extremely different molds than you…and my children will be too.

tbro2 wrote:

<div class=”d4p-bbt-quote-title”>Hey wrote:</div

Work ethic is real. Parent ethic might work out for you but does it really help your kids in the long run?

“”My situation was close to the opposite. I paid for my first semester to prove I could do it, and once I did, my parents then covered about every penny after that. I graduated in 4 years.””

Good to go. Some of the best people I know on the planet had their education paid for by their parents. It’s nothing to be defensive about. Their parents did an awesome job raising them.

“”I respect you for working as hard as you did and getting out of school with no debt. But just because it worked for you doesnt mean it will work for everyone else. Why Doesnt mean its wrong for anyone to go about it any other way.””

No disagreement here. I already have my kids tuition money saved up although they will have no knowledge of it.

“”Point is, you and I are both successful but had different paths along the way. Just because you had to work harder in college doesnt make you any smarter or better off than I, or anyone else with help during college.””

Agree. Especially with me being smarter.

Here’s the deal though. Entitled kids are not created at the age of 18 and only if their parents pay for college. They get entitled many years before that.

And when they get to college the world still revolves around them and the cycle continues with parents that enable it and justify it.

gimruis wrote:

You don’t know that for sure. Real estate goes up and down. You could easily lose money too you know.

This is one of the safest bets out there imo. If the market tanks (which only happened once in the last 80 years), you have a rental property in a college town (constant demand), if the property matures in value (which is most likely) you can get paid. My Dad did this with my brother and I and it helped both of us purchase our first homes on our own, and we have turned both of those into long term revenue generating assets by basically allowing us to use his credit as a cosigner once. My brothers path being the most interesting, a 80k rental in Duluth in the 90s turned into a rental in the cities while going to law school in the 2000’s, which turned into a duplex in Nordeast after law school, which he got a mint for from the neighboring grocery store, which turned into a cash flowing storage business on 50 acres of hunting land bought free and clear.

Dan wrote:

That is one of the more unique and intelligent ideas I’ve ever heard. Throw money away for a dorm room the size of a handicap stall or get an affordable house and build equity. Obviously that isn’t going to work for everyone, and there will be other logistics involved, but now you’re building equity. I really like that idea, thanks for sharing.

I know three couples that have bought houses for their kids to live in at college and then rented out the extra rooms. Two made it work, one couple had an epic fail and lost their @sses on the deal.

1. It was a great idea until everybody started doing it. This worked before the flipping and investment property trends. Cheap houses were everywhere in college towns because nobody wants to live next to students. Totally different situation now with the real estate price runup and flippers snatching up houses before they even hit the MLS. Add to that the fact that a million other parents are trying to pull off this little gambit in the same college towns. Much more difficult to find a decent house for a price that makes the whole deal work out.

2. The parents and the kids have to good at DIY and the parents have to live close by. The house is going to need work from the initial “make it safe/clean” work to repairs. If it’s affordable, it’s going to be a fixer upper. If you have to call a plumber every time the toilet is plugged or a locksmith to fix that busted front door lock, you’re going to lose your arse on the deal. Because DIY requires tools and equipment, mom and dad need to be within easy driving distance.

3. You have to plan for 365 days a year. If your kids plan to spend the summer living in their college town, great. Otherwise, who mows the lawn and watches the house and does the maintenance?

4. You better love being in the landlord business. Kids generally aren’t great at being the “heavy” and collecting rent and bills that are due from the other kids they are living with. Sooner or later you’re going to have to step in. See above about the benefits of living nearby.

Also, you will often have to deal with the other tenant’s parents and sooner or later you will get a Safety Karen parent that is on your @ss about every little perceived safety issue. On Monday the doors aren’t ADA compliant, on Tuesday the furnace hasn’t been inspected in the last 3 months, on Wednesday she’s calling the city to complain about the outlets in the bathroom that haven’t been upgraded to the new code-required outlets at $300 a pop…

Basically, it isn’t the easy-peasy, free money scheme that it seems like, but it can pay off if money means more to you than time.

gimruis wrote:

You don’t know that for sure. Real estate goes up and down. You could easily lose money too you know.

… or you could be guaranteed to lose money paying for room and board. More times than not, real estate is a safe investment. Different strokes for different folks. Lot of guys hating on the guy for investing in some real estate. If nothing else, its an investment that he can hold for however long he wants.

TheFamousGrouse wrote:

<div class=”d4p-bbt-quote-title”>Dan wrote:</div>
That is one of the more unique and intelligent ideas I’ve ever heard. Throw money away for a dorm room the size of a handicap stall or get an affordable house and build equity. Obviously that isn’t going to work for everyone, and there will be other logistics involved, but now you’re building equity. I really like that idea, thanks for sharing.

I know three couples that have bought houses for their kids to live in at college and then rented out the extra rooms. Two made it work, one couple had an epic fail and lost their @sses on the deal.

1. It was a great idea until everybody started doing it. This worked before the flipping and investment property trends. Cheap houses were everywhere in college towns because nobody wants to live next to students. Totally different situation now with the real estate price runup and flippers snatching up houses before they even hit the MLS. Add to that the fact that a million other parents are trying to pull off this little gambit in the same college towns. Much more difficult to find a decent house for a price that makes the whole deal work out.

2. The parents and the kids have to good at DIY and the parents have to live close by. The house is going to need work from the initial “make it safe/clean” work to repairs. If it’s affordable, it’s going to be a fixer upper. If you have to call a plumber every time the toilet is plugged or a locksmith to fix that busted front door lock, you’re going to lose your arse on the deal. Because DIY requires tools and equipment, mom and dad need to be within easy driving distance.

3. You have to plan for 365 days a year. If your kids plan to spend the summer living in their college town, great. Otherwise, who mows the lawn and watches the house and does the maintenance?

4. You better love being in the landlord business. Kids generally aren’t great at being the “heavy” and collecting rent and bills that are due from the other kids they are living with. Sooner or later you’re going to have to step in. See above about the benefits of living nearby.

Also, you will often have to deal with the other tenant’s parents and sooner or later you will get a Safety Karen parent that is on your @ss about every little perceived safety issue. On Monday the doors aren’t ADA compliant, on Tuesday the furnace hasn’t been inspected in the last 3 months, on Wednesday she’s calling the city to complain about the outlets in the bathroom that haven’t been upgraded to the new code-required outlets at $300 a pop…

Basically, it isn’t the easy-peasy, free money scheme that it seems like, but it can pay off if money means more to you than time.

Grouse nailed it.

This was a great strategy 10-15 years ago before prices exploded in real estate. In today’s world it’d be very difficult to pull this off and come out ahead in most college towns outside of the most remote small college towns. These properties are becoming more and more difficult to insure as well. I know a local agent who blatantly refuses to deal with insuring homes near college campuses. Most of the close properties aren’t anywhere near up to code with layers of DIY band-aids. Most will have kids partying and doing obnoxious things on the property, and they’re all subject to vandalism, theft issues, even if the renters are top notch kids.

gimruis wrote:

<div class=”d4p-bbt-quote-title”>belletaine wrote:</div>
Couldn’t you refinance the student loans after graduation or are you locked in?

Is that a question for me belletaine? I graduated with about $5k in student loans from a state college and paid it off in 2 years.

I am not sure if refinancing is an option with student loans.

No, just in general.

Join the Navy for four years, there are a myriad of great rates (jobs). You can then get a VA home loan, free medical for life.
A friend’s kid got out last year and is now making $80,000 as a aircraft mechanic.

We insisted that our kids move away for school, reason being that they learn just as much outside of the classroom.

Kids too entitled to live in a dorm?
It should say they’re too smart to live in dorms, incredibly expensive as opposed to renting a house with other kids, again learning more like paying bills.

Gitchi Gummi wrote:

or you could be guaranteed to lose money paying for room and board. More times than not, real estate is a safe investment. Different strokes for different folks. Lot of guys hating on the guy for investing in some real estate. If nothing else, its an investment that he can hold for however long he wants.

I’m not against investing into real estate as a short term option for a college kid. I lived in a house who’s parents did that for him for 2 years and paid rent to him. It was about the same as paying rent in an apartment the year before. The selling point was not having to sign a lease or abide by the complex rules.

My point was that not everyone can just go buy a house for their kid while they’re in college. I paid room and board my freshman year…because I had to.

My kid is 3 years old and I started a Roth for him 3 months after he was born, and I make monthly deposits to it. It has done very well so far. Not so much in 2022 though.

gimruis wrote:

My point was that not everyone can just go buy a house for their kid while they’re in college. I paid room and board my freshman year…because I had to.

Absolutely – it’d be ridiculous to think everyone can buy their kid a house to live in during college. I was just saying it seems like a lot of folks on here attacked the guy because he is able to do so and they wanted to point out every negative and possible flaw in that approach.

I am in the same boat as you – paid my whole way thru college out of my own pocket, including room and board when I lived on campus. Doesn’t mean I am passing off any judgement for those that pay their kids way.

Gitchi Gummi wrote:

Doesn’t mean I am passing off any judgement for those that pay their kids way.

I agree, Grouse made a really good post about what it takes to buy a house for a kid in college too. There’s quite a bit that goes into it.