Paying for College

Kelly, from Tax Girl, sent me an article that I think you will all find very interesting.  It basically gives the ups and downs of saving for college.

If you are a greedy person like me, this will be a no-brainer: tell your kids to suck it up and take out some student loans (since I don’t have any kids, I can say that).

For the rest of you over-achievers, there’s the college fund… But what are you doing wrong?  Apparently CNN knows.  Here’s some snippets of what they had to say:

• Problem #1: The Wilkes want to help their kids pay for college but have few assets to tap besides their home.
• The plan: Consider a home-equity line of credit, but set a limit on how much they intend to borrow for school.
• The solution: This way Bruce and Lorri can take only as much of their home equity as they need for each child, when they need it.

• Problem #2: Their children are nearing college age. Yet their school savings are being invested aggressively in equities.
• The plan: Shift Leah’s account into CDs and bonds. Invest their other two children’s accounts more conservatively as well.
• The solution: By doing so, the family will reduce the chance that these college funds will drop in value just as the kids start school.

• Problem #3: The couple’s retirement funds are concentrated mostly in one type of asset: large U.S. stocks.
• The plan: Diversify that mix by also investing in bonds and foreign-stock funds.
• The solution: This will reduce the potential for major losses if the U.S. stock market drops further.

Well, I would have quoted more, but I would really be posting the whole thing.  If you don’t understand the names, read the article.  In fact, even if you DO understand it WITH the names, read the article.  It will help you decide how to balance your nest egg with your college fund.  Here’s the college student method: Ramen for every meal, no insurance because you are invincible, and pizza box chairs with cinder block book cases.  Problem solved.