Kids’ College
Disclosure: Post may contain affiliate links, meaning we earn a small commission if you make a purchase, at no cost to you. As an Amazon Affiliate, we earn from qualifying purchases.
Today, in part two, I’ll expand on the next of three topics that hang people up and make them think that early retirement is impossible to achieve.
- Part 1: Health Insurance
- Part 2: College
- Part 3: How to access your retirement money early
This week we’ll take on college expenses for the kids.
This is an area for concern, for sure. But, of course, we have a plan.
Primarily:
- Scholarships
- Financial Aid
- 529 Savings
- Employment Income
Scholarships
By retiring early and spending a year travelling the Great Loop, we’re aiming to provide our children the education of a lifetime, which will most certainly be reflected in quality scholarship essays. Because of our lifestyle, extracurricular activities, and the fact that we homeschool anyway, there will be extra time for our kids to become experts at applying for scholarships during their final high school years. They will also be spending lots of time studying hard for their college entrance exams to qualify for a good chunk in academic scholarships.
Financial Aid
Most FAFSA-based financial aid is based on adjusted gross income (AGI). Because we’re hanging up the day job and our AGI will be low, there is a better chance of getting financial aid. This might take the form of:
- Federal Pell Grant
- Federal Supplemental Educational Opportunity Grant (FSEOG)
- Direct Subsidized Loan
- Federal Perkins Loan
- Federal Work-Study
Although, if you know us by now, we’re not big fans of debt, so taking out loans (even if they’re subsidized, have forgiveness options, etc.), is not our preferred method.
529 Savings
Since the kids were born, we’ve been saving in 529 accounts for their college. These are savings accounts that grow tax free if used for college expenses. There is not enough there for two kids to make it 100% of the way through, but with compound interest between now and when our children are college-aged, we should have enough to cover a large chunk.
Note that these accounts do show up on the FAFSA application and will reduce the amount of financial aid from the sources mentioned above. That is why this will be the first block of money used to pay for college expenses.
Employment Income
We want to instill a strong work ethic in our children. We fully expect that they will work to generate income during their college years. Their primary jobs are to:
- Do well in school
- Apply for scholarship opportunities
- Accept work opportunities in their field of study (paid internships, teaching assistantships, etc.)
- Part time, summer, or other traditional (fast food/retail) employment
College funding is a complicated topic and all of these areas are connected. For instance, if a student earns too much income, it will reduce the amount of their financial aid. Being awarded scholarships also reduces the amount of financial aid. Savings in the student’s name is counted heavily on the FAFSA where savings (even including 529 accounts) in the parent’s names are counted to a lesser degree.
Corporate Monkey CPA has one of the most authoritative posts on the topic of funding your kids college in early retirement here. I recommend anyone facing this situation to scour this post thoroughly.
We have a few years before we really need to have this figured out and can become experts on all the nuances of this system, but for now, this is how we answer the question about how we intend to fund our kids’ college education.
