I’ve run rough numbers on this in the past, and it seems like unless you’re expecting to make so much money that saving wasn’t even necessary in the first place, you don’t come out ahead this way. If you use a 529 then your savings are tax advantaged. Am I missing something?
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I haven't done numbers; was relaying what others said who suggested that they had done numbers.
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Huh? If parents save a lot, then colleges will not provide them significant financial aid, requiring student to borrow $$$. So what's the difference here?
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the choice is between saving to pay directly for college vs saving to then pay off student loans. If the parents haven’t saved then they can’t do either.
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Yes, which is why I don't understand picking Option 2, which comes with additional interest and fees.
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I agree. This scheme makes no sense unless you conceal the money you saved ex ante in order to later repay the student loan. Which is to say, fraud.
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From the financial aid officer’s perspective savings are savings. It makes no difference if you claim that they are “for college” or for some other purpose. It makes a great deal of difference if parents understate their assets, but that can’t be Robin’s prescription, can it?
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Or maybe the argument here is don't scrimp and save while your child is growing up, try to get as much financial aid as possible, and then help your kid pay back whatever loans are taken out. That makes more sense at least.
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Yes, this is the sensible version.
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Is this still wise, given favorable tax treatment for college savings?
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Wouldn’t the college just eat that money too?
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I’m an Electrician and my daughter is the beneficiary of all of my scrape wire. Since she was very little our deal was, she helps me strip the wire she gets half the money to spend as she likes, and the other half goes into a stock trading account she manages herself.
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How about just teaching them to be independent and entrepreneurial...?
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By what mechanism do colleges impose a “tax on parental savings” and how would choosing not to earmark savings as “for college” “avoid” said tax? If you are suggesting that one can save money by defrauding financial aid offices to obtain means-tested benefits, well, duh.
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