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Old Dec 16th 2017, 1:40 pm   #1
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Default College Saving Plan

Hey there,

A brief background.

British Expat now married and living in the States. New baby with dual citizenship.

I want to start a college savings account and the most obvious option is the 529 for my state (NJ)

I have always entertained the idea that my child would possibly attend college in the UK (if she wanted) as the passport would allow her to enjoy that experience with minimal hassle. I am aware she would not get UK rates as she did not live there 3 years prior to attending college.

My question is, has anyone saved for a 529 and then their child did attend a UK college? If so how did they use those savings?

Perhaps its worth saving into a different kind of account so that she has the choice to attend where she likes and I can use the money for either?

Any advice appreciated?

Thanks
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Old Dec 17th 2017, 3:32 am   #2
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Default Re: College Saving Plan

Just a warning . . .

Before I left the Middle East I remember having dinner with my manager, a South African, and his wife.

They had kids who were near university age (we do not).

They told me that a real eye-opening moment for them - and an emotionally jarring one - was when discussing university options. Dad went on and on about the pros and cons of various South African universities, only to be hushed by his daughter - "YOU are South African. WE are not. WE want to go to university here [in the UAE]."

At that point the parents realised - having been in the UAE for a decade, with 16 and 17 year old kids - that those kids would have had no idea about South African, and had a much, much smaller emotional bond and connection to the country than the parents did. The kids felt South African in passport title only.

So, be prepared, 15 years from now, when you bring up the prospect of going back to the UK for university - to be told, pretty decisively - that YOU are British but SHE is not.

Probably amplified, because to Americans, university forms much more of a cultural and social experience than it does in the UK. "Old ties" are not formed in high school in the US, they are formed in university, and where you go to university forms a substantial part of your identity that lasts for life. Going across the pond, to her, will mean abandoning friends and family (it will be very important to her where her friends go to uni) and not partaking in the "college life" she will have heard so much about.

I am in Australia now - know tons of Brits here - none of whom have kids who wanted to go to uni back in the UK. I also know tons of Brits in America, more than I know in Australia - and ALL of their kids consider themselves to be American. Annual trips back to the UK were just that - trips to the UK - not "visits home." I only know of one who even moved back, and he went to Ireland, and still went to university in the US.

So . . . I understand you feel you are being prudent in keeping both options open, but if the plan is to stay in the US . . . keep the vast, vast majority of your focus on plans for the US. It is not likely your American daughter - and that is how she will identify - will want to leave and go to (what for her) will be a "foreign" country for anything other than a visit or as a base for an OE.

This is part of the adjustment of being an expat.
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Old Dec 17th 2017, 3:51 am   #3
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Default Re: College Saving Plan

Quick answer is yes, some do. Depending on how brilliant your child is, you may want to plan on doing subject SATs to help place them directly in a three (or four depending on subject) year degree course, or the uni may want the student to do a foundation year first. Our daughter is currently studying on her foundation year in UK, despite feeling American, and absolutely loving it. The savings plan does not cover the foundation year, but at this college, will cover her subsequent three year degree.
The savings plan website has a list of which overseas universities are covered.

Last edited by mommapudding; Dec 17th 2017 at 3:54 am. Reason: Adding
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Old Dec 17th 2017, 3:51 am   #4
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Default Re: College Saving Plan

Quote:
Originally Posted by carcajou View Post
Just a warning . . .

Before I left the Middle East I remember having dinner with my manager, a South African, and his wife.

They had kids who were near university age (we do not).

They told me that a real eye-opening moment for them - and an emotionally jarring one - was when discussing university options. Dad went on and on about the pros and cons of various South African universities, only to be hushed by his daughter - "YOU are South African. WE are not. WE want to go to university here [in the UAE]."

At that point the parents realised - having been in the UAE for a decade, with 16 and 17 year old kids - that those kids would have had no idea about South African, and had a much, much smaller emotional bond and connection to the country than the parents did. The kids felt South African in passport title only.

So, be prepared, 15 years from now, when you bring up the prospect of going back to the UK for university - to be told, pretty decisively - that YOU are British but SHE is not.

Probably amplified, because to Americans, university forms much more of a cultural and social experience than it does in the UK. "Old ties" are not formed in high school in the US, they are formed in university, and where you go to university forms a substantial part of your identity that lasts for life. Going across the pond, to her, will mean abandoning friends and family (it will be very important to her where her friends go to uni) and not partaking in the "college life" she will have heard so much about.

I am in Australia now - know tons of Brits here - none of whom have kids who wanted to go to uni back in the UK. I also know tons of Brits in America, more than I know in Australia - and ALL of their kids consider themselves to be American. Annual trips back to the UK were just that - trips to the UK - not "visits home." I only know of one who even moved back, and he went to Ireland, and still went to university in the US.

So . . . I understand you feel you are being prudent in keeping both options open, but if the plan is to stay in the US . . . keep the vast, vast majority of your focus on plans for the US. It is not likely your American daughter - and that is how she will identify - will want to leave and go to (what for her) will be a "foreign" country for anything other than a visit or as a base for an OE.

This is part of the adjustment of being an expat.


My son British by birth, french by upbringing and US high school for 4 years... chose to go back to Europe for university. He feels European, not British and not American.

On the 529 - I read somewhere that when you apply to colleges, they regard that 529 plan as "their" money. You declare it on the FAFSA and the colleges see it and reduce any potential financial aid accordingly. If you put the money into another tax efficient vehicle - at least if it's retirement or HSA type of thing then the colleges disregard it. No idea if that is true since we did not have time to to it but it makes sense.

As far as UK and 529 goes, then I think there are requirements which the "educational" establishment has to meet in terms of Title IV or something which a UK university won't have.
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Old Dec 17th 2017, 3:10 pm   #5
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Default Re: College Saving Plan

Thanks all for the responses. There are some good points here. My daughter may very well decide she wants to stay in the US and experience college here. I was just under the impression which kid wouldn't want to go abroad for the experience of a lifetime, especially those who have easy access. I guess only time will tell..

Thats interesting, I didnt realise a 529 could be used for some overseas college. I will check the website
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Old Dec 17th 2017, 3:11 pm   #6
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Default Re: College Saving Plan

Quote:
Originally Posted by carcajou View Post
Just a warning . . .

Before I left the Middle East I remember having dinner with my manager, a South African, and his wife.

They had kids who were near university age (we do not).

They told me that a real eye-opening moment for them - and an emotionally jarring one - was when discussing university options. Dad went on and on about the pros and cons of various South African universities, only to be hushed by his daughter - "YOU are South African. WE are not. WE want to go to university here [in the UAE]."

At that point the parents realised - having been in the UAE for a decade, with 16 and 17 year old kids - that those kids would have had no idea about South African, and had a much, much smaller emotional bond and connection to the country than the parents did. The kids felt South African in passport title only.

So, be prepared, 15 years from now, when you bring up the prospect of going back to the UK for university - to be told, pretty decisively - that YOU are British but SHE is not.

Probably amplified, because to Americans, university forms much more of a cultural and social experience than it does in the UK. "Old ties" are not formed in high school in the US, they are formed in university, and where you go to university forms a substantial part of your identity that lasts for life. Going across the pond, to her, will mean abandoning friends and family (it will be very important to her where her friends go to uni) and not partaking in the "college life" she will have heard so much about.

I am in Australia now - know tons of Brits here - none of whom have kids who wanted to go to uni back in the UK. I also know tons of Brits in America, more than I know in Australia - and ALL of their kids consider themselves to be American. Annual trips back to the UK were just that - trips to the UK - not "visits home." I only know of one who even moved back, and he went to Ireland, and still went to university in the US.

So . . . I understand you feel you are being prudent in keeping both options open, but if the plan is to stay in the US . . . keep the vast, vast majority of your focus on plans for the US. It is not likely your American daughter - and that is how she will identify - will want to leave and go to (what for her) will be a "foreign" country for anything other than a visit or as a base for an OE.

This is part of the adjustment of being an expat.

Very interesting perspective. Thanks! I guess Im thinking "what would I want for her, or what would I do" - her perspective might be very different. You are right, her only connection to UK is me and the odd visits. There is nothing really british about her so why would she feel strongly about going. Come the time, I will offer her the option and leave it up to her.. Part of my plan is also the savings in money lol
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Old Dec 18th 2017, 7:04 pm   #7
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Default Re: College Saving Plan

Quote:
Originally Posted by petitefrancaise View Post
On the 529 - I read somewhere that when you apply to colleges, they regard that 529 plan as "their" money. You declare it on the FAFSA and the colleges see it and reduce any potential financial aid accordingly. If you put the money into another tax efficient vehicle - at least if it's retirement or HSA type of thing then the colleges disregard it. No idea if that is true since we did not have time to to it but it makes sense.
I just looked into this, and I think I've checked it before.

There are no income tax benefits of a 529 in Texas, the only benefit is growth is not taxed. So you should fully fund any retirement account and HSA before a 529, even ignoring the college assessment position. In states with an income tax benefit for a 529, it may not be so clear cut.

Yes 529s do get at least partly assessed for college contributions. But as far as I can tell, you're still better off using them to save for college than a savings account or taxable brokerage account.

In addition, many expat families are going to be above the income and savings limit for college assistance anyway.

Quote:
As far as UK and 529 goes, then I think there are requirements which the "educational" establishment has to meet in terms of Title IV or something which a UK university won't have.
Not sure about this. I haven't checked it recently, but I believe when I looked before, a lot of UK universities are qualified institutions for 529 funding. How the details work, though, I don't know.
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Old Dec 18th 2017, 8:44 pm   #8
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Default Re: College Saving Plan

Quote:
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I just looked into this, and I think I've checked it before.

There are no income tax benefits of a 529 in Texas, the only benefit is growth is not taxed. So you should fully fund any retirement account and HSA before a 529, even ignoring the college assessment position. In states with an income tax benefit for a 529, it may not be so clear cut.

Yes 529s do get at least partly assessed for college contributions. But as far as I can tell, you're still better off using them to save for college than a savings account or taxable brokerage account.

In addition, many expat families are going to be above the income and savings limit for college assistance anyway.


Not sure about this. I haven't checked it recently, but I believe when I looked before, a lot of UK universities are qualified institutions for 529 funding. How the details work, though, I don't know.
The OP is not in Texas so they will have to check their own state rules on this one.

In terms of FAFSA and college applications. Most colleges use the FAFSA form to assess not just financial NEED but also as the basis for other college scholarships or bursaries. I think they just take all the information and put it in their own databases or something. Certainly in UT Austin, if you don't submit the fafsa then you don't have entry to most of the other scholarships that the university provides. My daughter got a scholarship and we are certainly above the "need" threshold.
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Old Dec 18th 2017, 10:53 pm   #9
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Default Re: College Saving Plan

If you start a fund early and invest properly then the growth should far exceeds the contributions.

However, if there is a chance of the kid wanting to study outside of a 529's remit then it may make sense to take the capital gains hit.

I also wouldn't bother factoring what potential financial aid changes it could make 18 years down the road.

Maybe it's my fiscally conservative views, but one should aim to be self sufficient and not aim to attain income means tested scholarships.

Definitely hunt for as many non income means tested scholarships! I feel this is what differentiates US college system from other countries.

One other option is maybe to enroll in a US college and do a year in the UK. A friend of mine did and enjoyed the experience.
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Old Dec 19th 2017, 2:02 pm   #10
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If you start a fund early and invest properly then the growth should far exceeds the contributions.
While the growth is useful, and tax-free in a 529, I'm afraid it is very unlikely to "far exceed" the contributions. That's the sort of statement you can only really make over the timescale of saving for retirement.

If you assume dollar cost averaging into a college savings plan, you'd need an average of over 7% growth for it to even be level with the contributions. 7% real growth is unlikely to happen, especially with most 529 plans transitioning towards bonds as the start of college approaches.
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Old Dec 19th 2017, 2:05 pm   #11
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Quote:
Originally Posted by petitefrancaise View Post
In terms of FAFSA and college applications. Most colleges use the FAFSA form to assess not just financial NEED but also as the basis for other college scholarships or bursaries. I think they just take all the information and put it in their own databases or something. Certainly in UT Austin, if you don't submit the fafsa then you don't have entry to most of the other scholarships that the university provides. My daughter got a scholarship and we are certainly above the "need" threshold.
That makes sense, thanks. I'm still learning about how college works, and have it all ahead of me. Our eldest has decided that she wants to be a surgeon, so it's likely to be expensive.

But I think we agree on the finance side - 529s are useful, but fill retirement and HSA accounts first.
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