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College Saving, TTP and 529


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My daughter is in the 8th grade. When she was four, we bought 300 tier 1 credits from Texas Tuition Promise (basically, three years of tuition at UT, or four years most other in state public universities). We knew the deal- it’s a great program if she ends up going to an in state public university and a crappy deal if she goes anywhere else. 
 
We also opened a 529 a little later. Of course, we never saved what we should, but it has grown to about $34k. 
 
We’re not rich, but we probably make too much for real financial aid. It looks like my daughter is set on studying something where private schools in the NE dominate. Of course, we don’t have enough money for that. 
 
Here is my question- should I withdraw the TTP funds and just put them in the 529? Can I? 
 
Any suggestions? Any knowledge to share?

 
Thanks. 

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8th grade? odds are her future interests are still volatile. My son is a sophomore and said fuck all to UT and then did an about face six months later. In my opinion having Texas schools covered is a bet you probably should stick with though I don’t know all the maths. Then if she insists on NE private school you can kill yourself* and pay for her school with the life insurance money. 
 

*I’m joking, I don’t want you to kill yourself, even if you feel like it with a NE private school tuition bill don’t do it.  

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My fourth is finishing college now so I'm on the other side of this and my advice that I would give myself if I had a do over was. Tell you kids - Pick a state school you want to go to that we can all agree we can afford - that's what mom,dad,grandma, etc can contribute and you taking out full financial aid (~21k total for four years).  If you want to go out of state you need to find a situation where you will be paying that much or less on room and board and tuition. (travel and other will be above and beyond)  If you cannot than it is off the table.  Some schools offer tuition breaks, scholarships, whatever.  Bottom line - out of state isn't worth it unless your kid is in a situation that enabled them to make it affordable (merit scholar, big scholarships, etc).   Out of state is beyond ridiculous.

Being in 8th grade, you have plenty of time starting now to let her know what you can/cannot do.  You aren't saying "no" to out of state, but she herself is going to have to find a way to make it possible.

Without "help" out of state isn't how much more it's how many times more.  Being in Texas there are many great schools to choose from.

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12 hours ago, MonkeyDoughnut said:

Being in Texas there are many great schools to choose from.

But sir, this is a Texas.  We don't do public education here.  

One word for your 529 plans.  Utah.  The fund, not the university.  Do it, and do it now.

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My wife is a college counselor and spring semester is when she starts working with 8th grade students and families.

 

If I were you I would have a private chat with the counselor about what you have saved and how east coast private schools are out of out your budget. Over the next few years a good counselor should be able to run the numbers and show your daughter what she would be looking at in student loans going private without merit or need based scholarship compared to going to an in state school. The counselor can also find public in-state schools that have the major your daughter likes or private schools where your daughter might qualify for merit aid. 
 

As a parent I’d work on financial literacy the next couple years to help your daughter understand debt, interest rates, the value of a dollar, what majors pay after a 4 year degree, etc….

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Between portfolio agility as children age towards college, performance returns, and fee structure…there is simply no better plan.  You don’t have to use it on an Utah college, it’s just domiciled there for tax purposes.  

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3 hours ago, YGIFS said:

Between portfolio agility as children age towards college, performance returns, and fee structure…there is simply no better plan.  You don’t have to use it on an Utah college, it’s just domiciled there for tax purposes.  

Yep, it’s why we use Utah. (3rd and 6th grader) 

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I would keep the TTP funds where they are at least for now. For the 529, keep contributing, naturally.

Eighth grade is but a beginning and there's a lot of learning and maturing between now and the future as to the where and what she will study. These years are for her to figure out what paths keep as many doors open as possible. Life changes so many times over its course and learning how to adapt to that and see potentials and pitfalls is part of her learning process too. Mostly, remember that the early years of high school are stormy and full of stressors and keep an eye out that mom and dad are not contributing to that unintentionally but instead being the lighthouse to the shore.

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17 hours ago, YGIFS said:

But sir, this is a Texas.  We don't do public education here.  

One word for your 529 plans.  Utah.  The fund, not the university.  Do it, and do it now.

Do you know if you can transfer funds from another 529 plan to the Utah plan? I’ve had my son’s 529 plan set through the Texas College Savings Plan since he was born (now 9) and been underwhelmed with its performance over the years. 

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You might be surprised about what grants and financial aid your daughter may be eligible for. I would consider us upper class and my daughter got financial aid or grants at almost every school she applied to (with the exception of Santa Clara and Villanova I believe). That being said, you can’t beat the value of a state school (Texas tuition, room and board is about equivalent to Dallas private high schools). 

Edited by Billy Pilgrim
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On 2/1/2024 at 3:06 AM, Billy Pilgrim said:

You might be surprised about what grants and financial aid your daughter may be eligible for. I would consider us upper class and my daughter got financial aid or grants at almost every school she applied to (with the exception of Santa Clara and Villanova I believe). That being said, you can’t beat the value of a state school (Texas tuition, room and board is about equivalent to Dallas private high schools). 

This is very true, however I have seen this diminish greatly over the past decade.  First child (HS'2014) got tons of merit incentives from OOS and Private schools.  Last child (HS'2023) had similar stats (maybe better in some cases) and saw significantly less.  This is a side-effect of increasing demand and schools reassessing the ROI.  For example, as many kids are still enrolling w/ $8k tuition waiver as were enrolling with a $16k tuition waiver.  That said, ALWAYS apply for aid.  

I know it is early, but one thing to keep in mind is the university places students in its majors.  Many of the larger engineering schools have first year engineering programs (FYE), as 90% of the classes and requirements are the same.  Understand how students get placed after FYE.  An example: at Texas A&M, Computer Science is part of engineering and is subjected to the FYE program.  Students are placed based on their GPA and requests. Because of supply, only students with 3.75 GPA are automatically placed in the major of their choice.  And for CS, very few outside of these "automatics" got CS as their choice.  Knowing what can transpire in freshman year in college, a couple of bad days, a shitty professor or TA, illness, or whatever can impact GPA.  We advised our son to consider that in his decision.  For the record - son did not want to go to UT (all of his older siblings did and he wanted to be different).  And he is presently not at Texas A&M.

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On 1/31/2024 at 7:48 AM, Firemans4Horn said:

My wife is a college counselor and spring semester is when she starts working with 8th grade students and families.

 

If I were you I would have a private chat with the counselor about what you have saved and how east coast private schools are out of out your budget. Over the next few years a good counselor should be able to run the numbers and show your daughter what she would be looking at in student loans going private without merit or need based scholarship compared to going to an in state school. The counselor can also find public in-state schools that have the major your daughter likes or private schools where your daughter might qualify for merit aid. 
 

As a parent I’d work on financial literacy the next couple years to help your daughter understand debt, interest rates, the value of a dollar, what majors pay after a 4 year degree, etc….

Sound advice, a large part of the process with the counselor our daughter worked with was on the financial aspect. She felt it was easier for her to have the conversations than what parents would. Early in the process she wanted preferred budgets, stretch budgets, and then the limits and then she works with the kids to find schools in those ranges that have degree programs they are interested in. 

NE private schools are pretty outrageous and only give financial based assistance based on the ones we looked at. Most were cutting off in the low to mid $100’s on income limits if I remember correctly. Daughter looked pretty hard at some of the upper tier ones before going a different direction.

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I’m thinking about dumping some money into a fund for Thing No. 2’s college expenses (he’s in 7th grade).  My hesitation with a 529 is that withdrawals are limited to education costs (and I know there’s a separate discussion about potential loopholes for that), and if my son happens to go to a relatively cheap college and/or gets generous merit aid, then the utility of then the 529 might be diminished.

The other option is a stock account, where I already have some money parked and I fund it here and there to supplement my retirement account.

Here’s my inquiry:  Let’s assume my son ends up needing much less of a 529 for college (yes, I know it’s a huge assumption these days) — If I have a large amount in a 529 after my kids are out of college, do the tax benefits of the 529 contributions outweigh the potential penalties for withdrawals from the 529 if they aren’t for education?  Would I be better off putting that money in the stock market even if that vehicle does not have the tax advantages of the 529?

I’ll hang up and listen.

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@South Austin - a couple of thoughts about overfunding a 529.

If it is tax-free merit aid, I believe you can remove the same amount (w/o penalties) if the merit aid is tax-free.
It can be rolled over to another beneficiary (you or another kid).
The SECURE2.0 act allows for up to $35k to be converted, penalty-free, into a Roth IRA.  If overfunding occurs, set yourself as beneficiary and then move to a Roth.
Worst case, you use it for something else and pay the additional 10% penalty on the gains.  In almost all cases, the taxes and penalty on gains of the overfunding will be much smaller than the taxes had you put the money in a traditional brokerage account WITH SIMILAR INVESTMENTS.  The traditional brokerage account does give you more freedom, as I suspect you know.
 

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Do you know if you can transfer funds from another 529 plan to the Utah plan? I’ve had my son’s 529 plan set through the Texas College Savings Plan since he was born (now 9) and been underwhelmed with its performance over the years. 

Yes you can. Years ago I had a shitty financial advisor that had me in the Alaska 529. I got rid of him and moved the accounts to Utah.
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1 hour ago, boilerhorn said:

@South Austin - a couple of thoughts about overfunding a 529.

If it is tax-free merit aid, I believe you can remove the same amount (w/o penalties) if the merit aid is tax-free.
It can be rolled over to another beneficiary (you or another kid).
The SECURE2.0 act allows for up to $35k to be converted, penalty-free, into a Roth IRA.  If overfunding occurs, set yourself as beneficiary and then move to a Roth.
Worst case, you use it for something else and pay the additional 10% penalty on the gains.  In almost all cases, the taxes and penalty on gains of the overfunding will be much smaller than the taxes had you put the money in a traditional brokerage account WITH SIMILAR INVESTMENTS.  The traditional brokerage account does give you more freedom, as I suspect you know.
 

Very helpful. Thanks!

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I did not know about the 30k to Roth thing, and hadn’t thought about grandchildren. Probably won’t be an issue but that does quell a little bit of noise in my head about that. I’ve got like $15k in a 529 for the almost three year old but will probably have to slow down now that there are two.

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Not only can you switch funds from sibling to sibling, and also grandchildren, but also nieces/nephews/cousins.  Obviously the age difference warrants a markedly different investment alpha/beta approach, but I've know folks who've overfunded or kid got a partial scholarship and they transferred it to over the other family with no penalty (just takes an hour of paperwork) and then the other parents just paid them back under the annual gift exemption so the original funding parents didn't have to pay the penalty.  And they went out a nice steak dinner as a thank-you for no tax bullshit.  

I still laugh to this day at how lax the 529 transfer rules actually are, and that they were basically invented in Utah...the state where everybody is pretty much married or related to one another anyway...

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I originally liked the idea of transferring it back to me, thinking, "I could go back to school..."   Then I thought, "why the hell would I want to doo that?"  The 529 -> Roth transition, though, makes the "transfer back to the funder" choice more palatable.

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15 minutes ago, boilerhorn said:

I originally liked the idea of transferring it back to me, thinking, "I could go back to school..."   Then I thought, "why the hell would I want to doo that?"  The 529 -> Roth transition, though, makes the "transfer back to the funder" choice more palatable.

This seems like a no-brainer to me. I’ll run it by my financial planner. When I set up some investment accounts with him (which did not include a 529), it was a year or so before the Secure 2.0 act, so the Roth transfer of leftover 529 plan funds wasn’t an option. 

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Posted (edited)
16 hours ago, tchookem said:

My son is a senior this year. Have had a 529 since he was born. How do I get that money? I've not heard a thing about actually using the money.

Should be a withdrawal option with whoever is holding it. Can pull out partial amounts or whole. Mine i could wire direct to a linked account, mail me a check or pay school directly options.

All that done via a web portal.

Edited by MonkeyDoughnut
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^^^This^^^^

Our children have 529 plans and thus far the oldest ended up with the fortunate situation of scholarships rendering much of it unused but will pass it along to the next generation (that's the plan anyway). Next oldest had a mix of scholarships and then whatever that did not cover then we pulled out the remainder each year via the fund directly paying the school through the portal (first time was a simple phone call until we got electronic set up). Will still have some left over and IIRC will have some time before a decision will be necessary as to naming another bene or transferring $$ to another type of account. We determined that the funds were each theirs and left the decision with them as opposed to passing it down to the next in line.

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