This article is not intended to provide all the resources & information regarding the Post 9/11 GI Bill. Instead, I figured I would tell my story of how I set my children up for the GI Bill to provide an example of how it could be done. For a more comprehensive view of the ins & outs of the GI Bill program, I’ve included links to some of the better resources that I’ve seen.
My GI Bill Story
When the Post 9/11 GI Bill was signed into law in 2008, one of the first things that I did was review the Navy’s instructions for transferring my GI Bill benefits to my children. At the time, one of the stipulations was that I had to agree to an additional 4 years & sign a Page 13 (Administrative Remarks) that started the clock. I knew that I was planning to retire, but I wanted to start the clock as soon as possible so I did not have that hanging over my head.
In my opinion, this turned out to be a stroke of fortune, as I’ve talked with several of my colleagues at other commands who were burned because the paperwork wasn’t routed properly (probably a shock, since the military is known for making sure the paperwork doesn’t get lost, right?). In one case, a shipmate had to postpone his retirement because he reached the 20-year mark before he realized that his paperwork got lost, and the time he was tracking did not count.
Note: If you do not plan to use all of the benefits yourself, you should apply for transferability as soon as possible, even if you haven’t decided which of your beneficiaries will receive the GI Bill benefit. Also, monitor your status at milConnect, and use this as the reference to keep on top of your responsible administration office. Starting the clock is the most important thing, especially if the benefits change in the future.
Once we took care of the service obligation, Tania and I decided to think about how we would use the benefit. She was planning to go back to school, so we had to decide whether to use some of the benefit for her or to use it all for the kids. In the end, we decided not to use the GI Bill for her coursework. We determined that we would get more bang for the buck by waiting to transfer to the children because:
- Tania’s coursework was at a community college. We figured that we could budget the cost of her coursework & save the tuition payment for our kids, who would likely use it for a 4-year college.
- Since I was still on active duty, she would not be entitled to the housing stipend, since she was my dependent. Again, we think that our kids would benefit more if they end up going to a college where they need to pay for housing on their own.
Note: If you have more than one possible decision to make, try to determine how much value you will get from each choice, then choose the option that gives you the best ‘bang for the buck.’
Since our children are 11, 7 & 7 (twins), having made these decisions in advance means that there’s not a whole lot we’re going to do regarding the GI Bill in the near future. However, we do plan to keep an eye on changes & have frank discussions with our children about college planning so they have realistic expectations on getting the most value. My grandmother did a great job of setting me up for college success, which is captured in this video interview with fellow financial planner Holly Thomas here. Below, I’ve outlined how the GI Bill complements the rest of our college savings, and how that would play out if our children chose to go to community college, then transfer to a Florida public school.
Coordinating the GI Bill with 529 Plans
Outside of the GI Bill, Tania and I established College 529 plans through T. Rowe Price, right after each child was born. This gives us the flexibility to combine college savings with the GI Bill to pay for our children’s college. Since each child represents a $1,000 child tax credit each year, we’ve taken $3,000 right off the top of each year’s tax return and sock $1,000 away directly into each child’s 529 plan. In addition, we contribute $50 per month to each kids account. As of 1/15/16, each child has:
- Nicholas (Age 11): $26,126
- Emma (Age 7): $16,559
- Jackson (Age 7): $16,522-not sure why Jackson has $37 less than Emma, but I’ll buy him some beer when he turns 21 to make up for it.
If we contribute the same amount each year until age 18, I conservatively estimate that each child will probably about $40,000 available, as well as 12 months of the GI bill. Each school year is considered to be 9 months, so this means each child receives a full year, and roughly ⅓ of another year.
Let’s take a look at each year of college to see how far that $40,000 would take Nicholas, our oldest child, for when he starts college in 2023. This assumes that he goes to Hillsborough Community College (HCC), then transfers to University of Florida (Go Gators!). Let’s also assume that he stays home during his HCC years & does not pay for room & board–a concession his mother and I would be more than happy to make if he’s productive.
For this, there are a couple of assumptions on HCC & University of Florida costs:
- HCC’s most recent tuition, books & registration costs (for 2014-2015) were approximately $4,000 per year, according to the HCC website.
- From 2000 to 2010, the average inflation rate for HCC’s tuition costs were about 6%
- Nicholas’ first year of tuition would be approximately $6,000.
- University of Florida in-state tuition for 2015-2016 was approximately $20,600>
- 5-year inflation rate for Florida school tuition is approx. 18%, so Nicholas’ senior year tuition (in 10 years) should be approx. $29,000.
- Freshman (community college): $6,000 (assume he stays at home, so no room & board)
- Sophomore (community college): $6,400
- Junior: (GI Bill): 0
- Senior: (⅓ GI Bill & 2/3 self-funded): $19,333
- Difference: $40,000-$31,733=$8,277 left over
There are a lot of assumptions here, which may or may not be accurate, and could lead to a funding shortfall. First of all, our children may not go this route. However, they also know that if they go for a more expensive education, it’s their responsibility. (Note: some more expensive colleges and universities offer the Yellow Ribbon Program to help defray costs). Obviously, rising college costs are a concern, as are living expenses, books, lab fees, extra-curricular programs, meal plans, and a lot of other things that are not taken into consideration, or where my assumptions might be faulty.
Also not taken into consideration are: AP courses, dual enrollment, financial aid, scholarships, grants, work programs, and just good old-fashioned working a side job while going to school. Also, if our children chose to find a college closer to home for the full four years, they would save money on the cost of room & board.
Our goal is not to fully fund our childrens’ educations, but to close the gap to where they can make smart decisions and where they can combine the GI bill with other financial aid options which Tania and I believe should be a fundamental part of college planning. If this is not compatible with your thoughts on college planning, this should at least be a decent baseline from which you can make adjustments, based upon your personal philosophy.
Again, the purpose of this blog isn’t to tell you how it should be done, but rather how we plan to combine expectations-setting with college savings & the GI bill to come up with a sustainable plan for our children’s education. I can go into more depth with regards to how I believe college savings fits in with your overall financial planning, but it’s probably better to save that for another time.