Ask the grumpies: Things to help a kid get into the college of hir choice

Sandy L. asks

If a kid has his heart set on a college, what things could help them get in besides academics. For example, MIT has these science camps for kids that are expensive but could they also help with admissions later on?

We truly don’t know.  Take everything we say with a HUGE grain of salt.  I mean, we know people who got into Stanford but not Harvard and vice versa.  It really seems to be a crapshoot at a certain level, even if you’re your state’s math champion and have straight As, etc.  I don’t actually think it’s that hard to get into MIT if your grades and testscores are good and you have a true love of math and science compared to getting into Harvard (at least, I know a lot of people who got into MIT as undergrads who didn’t get into any ivies to which they applied).  It’s more difficult than getting into your state’s flagship, but there’s a lot less competition for those slots.  So I wouldn’t think that the science camps would be necessary.  Whether or not they help, I don’t know.

Back when it was called the Westinghouse science award, it helped to have won the Regeneron Science Talent Search.

It helps to have top scores and grades at a known-name school and to have come from nothing.  If you’re first gen, low income, and have fought your way to the top, that makes it easier for colleges to decide.  Particularly if you’re a scholarship kid at Eaton or at one of the state public boarding schools for GT kids.

One of my colleagues’ kids got in to our (state flagship) school (for engineering/CS) late admissions despite being low on grades and testscores because he did an after school club with a professor in the computer science department and did a very good job at said club, and the professor was able to pull strings.  I don’t know how universal that is– certainly I have never had any contact with undergraduate admissions– but some professors at some schools might have some pull.

If Caltech has the same application it had 15 years ago, you’re more likely to get in if you take it seriously.  Fill out that page that says, “put something interesting here” with something interesting!  I filled the entire thing in very tiny writing with math jokes.  My ex-boyfriend drew a comic showing the path of his life complete with adorable stick figures interacting with the line representing the timeline of his life.  I forget what my sister put in there but I’m sure it was interesting and entertaining.  We all got in.

On the application, if there’s a place for it, have an interesting story to tell that illustrates your interests and your academic path.  One of my college ex-boyfriends got in everywhere (he picked our SLAC over Stanford) partly because his admissions essay was a delightful story about how he built a trebuchet.  My sister got in everywhere she applied (including ivies) probably partly because she talked about how physics informed her dancing.  It probably also helps to be focused and to pretend you know what you’re going to do with your life and why and you have a path mapped out to get there.  Extra points if you are unusual– a young woman in an award winning Poms squad and an all-girls math team who has taken as much math and hard science as she can who really wants to design more energy efficient engines.  (Again, that was my sister.)

Many schools will make their final waitlist/admit decisions for people on that margin based on who has visited the campus/had an alumni interview.  I think this is unfair to low income kids who CAN’T just hop on a plane or spend two weeks in the summer driving up and down the East Coast from the Midwest, but it’s policy at many schools.

Applying early action, particularly the kind where you swear to go if you get in helps, though it decreases your financial aid offer many places.

Playing (and being really good at) the right instrument/sport can help.  But it is hard to predict what the school of your choice will need the year you’re applying.  (And this probably doesn’t matter at MIT, but I don’t actually know.)

Not needing financial aid can help at some schools.  I don’t know if MIT is one of them, but MIT is notoriously stingy when it comes to financial aid.  (Harvard is exceedingly generous!)

Being a member of an Olympic team or the child of a celebrity or owning your own profitable business or app or nonprofit that you started as a teen can make you more attractive.   So can having published a scholarly paper in an academic journal.  Or having a patent.  Or a parent who gives a multi-million dollar donation.

Passing the AMC 10 or 12 and doing well on the AIME can help.  Taking college classes and doing well in them doesn’t hurt (though as this becomes more common, it may no longer be as strong a signal as it once was).

We’re told that leadership experience, state and national awards, and volunteering can help, but I’m skeptical.  I don’t know if these are necessary, but they’re definitely not sufficient.  There’s just too many people each year who have these things.

Some people swear by college coaches.  I don’t know how to find a good one or what kind of value they add to someone who is already doing well.

I don’t know what we’re going to encourage our kids to do.  This is more timely for DC1 who starts high school in a year and a half.  Zie is really into math, but not competitions.  Zie like robotics, but not competitions.  Zie loves computers and games and likes programming but needs more formal training in programming.  Zie loves music but although better than I was at that age, is not at competition level either in piano or violin (the piano teacher is pretty lax and zie just started violin a year ago), and again, is not crazy about competition.  We might be able to get hir an unpaid summer internship with a professor at my school, or zie can do more work for me, possibly even something publishable.  Zie could take summer classes at the community college or the university (I still haven’t figured out how to do summer student-at-large classes, though it’s pretty easy for high school students to take college classes during the school year).  It is hard to say what’s best.  Most likely we’ll just let hir interests guide hir and focus on learning rather than on getting into a specific school.  Because for high income kids of educated parents, the specific school isn’t that important for earnings.

Anybody know more about what undergraduate admissions offices are looking for?

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Ask the grumpies: if I want to give my kids a huge amount of money as young adults, how should I do it?

Sandy L asks

Should I buy my kid a house or pay for tuition?

Student loans can be deferred etc. if the kid is paying their own way they may be more serious etc.

Tuition. The pay your own way thing is BS. Here’s our deliberately controversial post on that topic. You can compromise by having them pay their own extras (clothing, meals out, etc). Then they’ll have the same experience of learning how to budget and not living high on the hog but without the huge amounts of debt at the end.  Also, note that if you’re paying tuition directly, it isn’t subject to the gift tax.  “Under current IRS rules, a payment made directly to an educational institution to pay for the tuition of a student does not count as a gift to the student for gift tax purposes, ” according to fastweb.

Buying a child a house could lock the kid in place and create additional expenses.  A house is a lot of responsibility when you’re just starting out, and trying to deal with selling and repairs on top of job searching and dating and hobbies and anything else that young people do might be more hassle than help.  (And if the kid decides to sell the house in order to pay off hir education, basically you’ve just given realtors a bunch of transaction fees and paid gift taxes for nothing.)  If you’re only talking about providing a downpayment, that’s even worse because a mortgage is a big fixed expense and the kid might not be able to sell very easily if the house goes underwater and they get a job elsewhere.

What do you think Grumpy Nation?  Any experiences with either?

Ask the grumpies: How best to save for kids’ college

First Gen American asks:

I would love a post on savings bonds as a vehicle for college savings…pros and cons vs 529. Also is one better for high earners. There seems to be some language about earning limits on the tax deductability of the earnings but no penalty if not used for educational expenses.

Disclaimer:  We are not professional financial planners.  Before making important financial decisions, talk to a fee-only financial planner with fiduciary responsibility and/or do your own research.

According to this page from the treasury:

For single taxpayers, the [education] tax exclusion income limit [for savings bonds] is an adjusted gross income of $92,550 and above. For married taxpayers filing jointly, the tax exclusion income limit is an adjusted gross income of $146,300 and above.

So to me that says that savings bonds are not a good vehicle for college savings for high earners.  Maybe if they’re the kid’s and the kid is not filing as a dependent, but that seems risky too given how FAFSA and CSS heavily weight the kids’ savings (exceptions here).

Savings bonds are also a less risky, lower earning asset.  Given the lack of tax advantages for higher earnings and current interest rates, they’re not much better than CDs or high interest savings accounts for low-risk low-earnings savings and will also show up in financial aid decisions.

So… for both high and low earners in the “may get some financial aid” range, the best thing to do with your money is to put your savings in places that won’t count against your financial aid– so fill up retirement accounts (especially IRA Roths if you can since you can take out the principal on those in case of emergency), pay off credit cards, put money in home equity below what CSS forms pick up, fill up your HSA, and so on.  (Forbes magazine is probably the best place to look for these kinds of limits/suggestions.)  That may seem counter-intuitive that the best way to save for college is to hide money in ways that it is more difficult to tap for college, but financial aid is powerful and you can take out (short-term) loans for college but you can’t take out loans for your retirement (and taking out loans for your mortgage can be expensive and problematic).

AFTER you’ve hidden as much as you can, I still think the 529 in a state that either gives you a state tax break or, failing that, a state that has good Vanguard options with low fees is your best bet.  You could also do a Coverdell if your income is low enough (<220K in 2017 and 2018), but they’re not really any better than 529s unless you have private K-12 tuition that it could go towards, and the limit is pretty small.

If you are too high income to qualify for financial aid (and note that that income may be higher than you think) then you don’t need to play games hiding your income and savings because there’s not anything you could do to get things low enough for colleges to pitch in.  It may also be worthwhile in this case to push some savings onto the child so as to take advantage of the child’s lower income.  If you’re in this situation, don’t just read free advice from the internet– pay for a fantastic fee only financial planner with fiduciary responsibility and get all of your financials in order.

High earners and grandparents cutting down their estates may want to look into frontloading 529s with 5 years worth of 14K gift exclusions or, if they don’t want to force the money to be used for college, they can look into a gift trust.

How are you saving for kids’ college (if applicable)? 

College Savings are hard to plan

If DH and I remain employed at our current jobs for the next ~6 years (something that is not incredibly likely given DH’s job situation), then we will not qualify for financial aid at most schools.  (IIRC, we’ll be in the phase-out range for Harvard and Princeton and may be able to move money around to get some aid there.)  If one of us loses a job, then DC1 will qualify for about ~10K/year in aid at many private schools, which isn’t that much given sticker prices (although on just one income, hiding moving money around will have a larger effect).

We currently (barring weird changes in the stock market between the writing of this post and its posting) have around 98K in DC1’s college account.  That’s $500/mo for the last 10 years invested in Vanguard.  That’s enough to go to our local flagship schools for 4-5 years if we stop saving now.

And that really sounds like a lot.  But in the world of private schools it isn’t.

It’s hard to tell what DC1 will want to do in 6-10 years, but current indications are that computer science or some form of electrical engineering will be involved.  Zie might want to go to MIT or Harvey Mudd or Stanford (and zie might get in– it is hard to say).  These schools are not cheap, and at >55K/year in total costs (and rising), there’s not enough in the 529s to pay for even two years of school. We have another $170K in taxable stocks (that’s from the 50K we had in 2005 and the leftover money from leave we just put into the market) that presumably we would use for the remainder.  However, we will be taxed on that remainder, so it might make sense to start saving *more* in the 529 vehicle while we still have six years for earnings to accrue.

Indeed, the simple saving for college calculator suggests that we would need to more than double our monthly contribution for MIT and almost triple it for Harvey Mudd.

If I drop DH’s income, then the college calculator suggests we should start putting away $638/mo, which is still more than the $500 that is currently going towards college.

Both Harvey Mudd and MIT have 5-year BS/MS programs that are a good deal.  DC1 is so young– maybe we should be open to funding some graduate school.   It is also true that we have two children, and by the time DC2 is ready for college, we should know how much DC1’s experience ended up costing, so we’d be able to move some money over.  As of this typing, DC2 has $33K in hir 529 plan.  We’re on an oversaving path for hir for state school (the calculator recommends cutting back to ~300/mo), but would need to put away more for the average private school– for my alma mater, for example, zie would need more than double what we’re putting away (same for engineering schools, though it’s harder to tell if engineering is likely with a preschooler compared to a 6th grader).

Looking over all my old 529 posts, I usually contemplate putting less money into the 529s.  This is the first time I’ve addressed putting more money there.  I’ve been assuming we wouldn’t pay for any graduate school and have been worried about the risk of over-saving.  But with only 6 years left before college, I think it is unlikely I’ll end up moving to work for a university that pays even part of school tuition.  And college costs have been increasing, as has our net worth.  Maybe it makes sense to get more tax advantage, especially given that in 6 years taxes may have to go way up (or inflation may be sky rocketing).  It’s hard to say.  Not to mention that $500/month isn’t worth what it was 10 years ago.

And we’re no longer paying $1200/mo in principal and interest on a mortgage.  If DH doesn’t lose his job, that money has to go somewhere.

Under what circumstances would we regret putting more money in the 529s?  1.  If we move to the bay area for DH’s job and want to buy a house.  That scenario suggests needing loans for private school and DC1 being on hir own for graduate school.  2.  If for whatever reason neither DC1 nor DC2 end up using the money (ex. tragedy, one or both of the DCs becoming successful entrepreneurs, both DCs deciding they prefer much cheaper college options).  3.  The world goes to heck and we have to leave the country (in which case money in the 529s will be very low on our list of regrets).

Ugh, I keep going back and forth on this.  I could increase our monthly contribution to be more in line with what the simple calculator thinks we should be contributing, and then we could cut if off if DH loses his job.  We could put in a lump sum (though dollar-cost averaging seems much less risky given the current uncertain political environment).  I could split the difference and put in, say $750/month per child instead of either $500 or $1000 (which is about what we would need if I kept my job and DH stopped bringing money in entirely).  Or we could just keep doing what we’re doing, which is usually the easiest thing to do.

*note for newer readers:  We are already maxing out our easy retirement options (required contribution, one 401K, one 403b, one 457) and will pay off our house very soon.  So don’t worry about our retirement savings or debt loads!

What are you doing in terms of college savings?  How do you decide to change what you’re doing?

529 plans and astonishment at compounding

Club thrifty had a post recently about funding her kids’ college education, which caused me to take a look at how my kids’ 529 plans are doing.  We’ve been putting in $500/mo since each of them was born.  At the time of writing this (though not the time of posting), DC1 is 7.5 years old.

So if we’d just put $500/mo away in our mattress, we’d have $45,000.  That’s a lot of money, and would currently fund in-state tuition for four years at many state schools without any aid.

That’s not how much my 7.5 year old has in hir 529.  How much is in there, do you ask?  $69,874.56.

Let me say that again.

$69,874.56

That means the stock market and compounding has added something like $25,000!

~$25,000 just because we put $500/mo in the stock market instead of in a mattress (or instead of spending it!)

Doing this exercise has given me a few scattered thoughts.

1.  Compound interest from stocks over a long period of time is AMAZING. It’s just in one of the Vanguard target date funds from the Utah system, so we’re really just matching the market with a little bit of adjusting to bonds as ze gets older.

2.  This kind of thing is how the rich get richer.  The best truly passive income is reaping profits from the sweat of the proletariat.   Rent-seeking is where it’s at.  Getting those returns to capital.  The poor get poorer by comparison because they have to spend their money to live and can’t have their money make money.  It’s terrible.  At the same time, as a member of the upper middle class, it’s something we need to do to keep from sliding down the income/wealth scale.  Because if you only have a choice between rich and poor, it’s better to be rich.  We need major political change in this country.  Yes, charitable donations are nice, but the entire system needs a new Great Society overhaul.

3.  Sacrificing early and starting early with savings is the way to go.  We never really felt the $500/mo cut to our income because it coincided with our employment.  We made our decisions based on a smaller income.  When you get a new job, if you can max out your retirement funding before you get used to the higher paycheck, that’s definitely the way to go.  (Of course, high interest debt is also worth paying off– the trick is not to get used to a higher level of spending that you then cut down.)

4.  I don’t think it’s time to stop contributing yet.  We suspect DC1 will end up going to a private school (or, less likely, an out of state public that costs just as much).  Right now with both of us employed we’re in the middle area of whether or not we’d be considered for any financial aid at all, and there’s that hope that by the time DC1 gets to college we’ll be in the “no financial aid based on income alone” bracket (we can dream, right?).  If not, we still have time between our two kids to adjust based on what kind of aid the eldest gets or doesn’t get.  If DC1 gets aid, then we simply stop contributing to DC2’s plan at that point.

5.  Because of the way that financial aid is calculated, most people should max out their retirement savings before contributing to a 529.  We’re doing that now, but we weren’t doing that this entire time because we had *too* much room for retirement and didn’t realize that DH would be getting a better job that paid more, so we didn’t put away all 72K/year that we could have, figuring we’d need some of that money to pay for college! [Note:  For those who haven’t been following our finances for the past few years, DH no longer works for the government so we can no longer put away anywhere near 72K for retirement because he no longer has a 457 option or a second 403b option, just a really lousy 401K with high fees and a lousy match.]  Yes, you can withdraw ROTH contributions to pay for college, but it would probably not be enough.  The 529 is still a much better place for your child’s money than a savings account in your child’s name, for financial aid purposes.  That’s because the 529 in your name counts as your savings whereas any savings in your child’s name is expected to go 100% to college, which cuts down financial aid from the school.

6.  Regular savings that you don’t miss because you’re used to that money not hitting your checking account really add up.  However, if you can’t afford auto-deducting any of your paycheck (though automatic retirement savings should be a priority), 529s are a great place for monetary gifts for your kids to go.  A little bit early on really does go a long way.

What are your thoughts on retirement and 529s and compounding stealth saving?  Also, how often do you look at your accounts?

A post for Ana on 529 plans

We were poking around on medical moms blogs when we came across this comment from reader Ana. She said she wanted to just be told what to do with 529 plans because she’d hit the paradox of choice and everything was all complicated.

The post was almost a month old so  we felt silly for replying to it there, so we figured we’d reply to it here and hope that Ana saw it.

Also:  a disclaimer.  We’re not financial advisers.  Take our “advice” such as it is at your own risk.

Step 1:  Check to see if you live in one of these states that offer tax breaks for 529 contributions.

1a.  If you do, then go with your state’s 529 plan.

1b.  If you don’t, then go with Utah.  There are some other 529 plans that are now just as good as Utah’s but Utah’s has always been ranked among the top and we hope will continue to be ranked so.

Step 2:  Pick a plan company within the plan.

2a.  If Vanguard is one of your options, go with that.

2b.  If not, then look at the fees.  Pick one with low fees.

Step 3:  Pick a fund from your choices.

3a.  You want to look for terms “age-based”, “life-cycle” or “target-date”.

3b.  If there are multiple choices among these options, then it doesn’t really matter which one you pick.  They’ll be different in terms of risk and possibly fees.  You’ll again want to focus on the lowest fee plan first.  If your kids are little, more risk is better, if they’re closer to college, less risk is fine.  Don’t worry about the risk if you can’t decide– flip a coin or something.  It’s better to pick something randomly than to pick nothing at all because you’re worried about getting the “best”.

So, if you’re in a state that doesn’t give a tax advantage, you want the Utah UESP Vanguard Age-Based Aggressive Global fund.  And you’re done.  If you’re in another state we’d be happy to poke at their options for you.

Put in what you can.  We like putting some away automatically each month.  Something is better than nothing.

Are you saving for your kids’ college?  How?

Thoughts on Harvard

The other month on Wandering Scientist’s blog, an anonymous poster told me that I would regret it when the dean at Harvard calls to tell me that my child has flamed out, if ze gets in.  (Why did said anon do that?  I think because six year old DC1 does workbooks on weekends, and therefore must not be enjoying childhood?)

I responded that Harvard is a cakewalk for kids who get in and my kids most likely wouldn’t have any trouble there.  And I wouldn’t encourage them to apply there because I’d hope they would go someplace where they’d get a better education.

Seriously, Harvard has really high grade inflation (yes, there “have been studies”).  They have large lectures taught by graduate students with little practice, both their own and graduate students from other schools who they hire for peanuts.  (What they offer to adjuncts in my field is a joke.)  Many flagship state schools give better undergraduate educations, and, depending on your parents’ income and the state you’re from, at a considerably lower price.

Harvard is great for graduate school.  But undergrad, it’s an easy A.  Very difficult to flunk out or even to get more than a few Bs.  You have to work at not getting As.  I suspect the grade inflation is to keep parents happy given that so many classes are large lectures taught by people who are not yet famous professors.  (They argue it isn’t really inflation, just the student body quality, but outside metrics disagree.)  [Exception:  One of the colleges doesn’t have the same grade inflation that the others do– it curves to a B rather than to an A- or A.  I always feel sorry for those students.  They can actually show up to class and do the work and still get the occasional C!]

Now students at Harvard do run themselves ragged, but not with schoolwork.  Harvard tends to accept students who did a million extracurriculars as high school students and who try to do the same as college students.  Many of them fail at that and do mediocre jobs at several things rather than focusing on doing well at a small number.

That’s not to say that Harvard isn’t a good school or there aren’t reasons to go to Harvard.  Certainly the student body is elite and a kid can make great connections that will last a lifetime.  There’s also the imprimatur on the resume.  Exceptionally good students can get research assistant work.  But all in all, I would put it up there with Michigan or Berkeley (both great State schools with the same problems at the undergrad level, though perhaps not so much killing with extracurriculars) in terms of the educational experience.

Personally, I prefer the SLAC model, and I know that ‘tech schools are far more challenging.  If my kids want to go into a field that isn’t offered at a high quality SLAC, we’d be looking for schools with strong supportive programs in their area of interest.  I can’t really see a good reason for recommending Harvard to my children.  As a parent, I have concerns about the big ‘tech schools too, but if they really want to go, we’d have to talk about it.  DC1 would definitely have to be able to emotionally manage that perfectionist streak that shows up from time to time.

Now, for a kid whose parents make under 75K [update:  see comments for actual numbers], I think is the current number, Harvard is free.  That would push it above the state flagship.  There’s also some evidence suggesting that having an ivy on a resume helps out children with low SES although it has no effect on those from high SES backgrounds.  (Our kids are high SES, even if their parents were not.)

As for whether or not my kids could get into Harvard, I know as well as anybody that at those levels it’s a crap shoot.*  One of our friends from high school had straight As, perfect SATs and was the state math champion.  He didn’t get into Harvard.  After all, there are 50 state math champions.  So he went to Stanford.  (And did very well.)

Parents with gifted kids generally aren’t about competition.  We’re more concerned about helping our kids fulfill their potential, something that can be a precarious business when the K-12 system isn’t set up to work with you.  (Also, we’re too exhausted!)  And no, a Harvard education isn’t a holy grail for us.  We know better.

*Legacies, apparently, have a much higher chance of getting into Harvard.  So there’s that.