Paying for Initial Costs

The costs come out of the cadet's paycheck. So, instead of getting around $900 a month, the first year or so, the paycheck is much less. They take out any of the fees. Now normally, the cadet really doesn't have a lot of expenses, so even the smaller paycheck isn't a problem.

If for some reason you think your cadet needs more money, simply put money in THEIR checking account to offset their lower paycheck for paying for their uniforms, laptop, etc. Or, find the things that are out of the blue that your cadet needs/wants money for, and pay for them. E.g. If they want to buy ski lift tickets, pay for a flight, etc.

Point is, the air force academy takes the money out of their pay check for the first year or so. After that, they'll get full paychecks. Don't try and pay that debt up front or ahead. Simply put money in your child's checking account if you feel inclined. Maybe you put a bulk check in their account at christmas and again in the summer. Same difference. Isn't it.

I had a similar thing with my 2 kids. In high school, I didn't allow them to get a job; except in the summer. During the school year, their job was to get the best grades possible and get accepted to all the schools that they applied to. They did both. Both kids received numerous acceptances and scholarships from numerous schools. So basically, we didn't have to pay for any of their college. In return for their hard work, and so they didn't have to get a job while in college, I gave them a monthly stipend for spending money. I gave them each a check every 6 months. Christmas and summer. This way they'd have the spending money they needed. And I saved a lot of money having 2 kids on full rides and I could pay off the house.

Don't make it complicated trying to pay off the uniform/laptop/etc debt ahead. Simply put money in your kid's checking account as you see fit.
 
Christcorp said:
Don't make it complicated trying to pay off the uniform/laptop/etc debt ahead. Simply put money in your kid's checking account as you see fit.
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The exception to this is that if a parent has saved money in a 529 account and they do not have another child to transfer it to, they can still use it tax free to pay certain expenses that are going to come out of the cadet's pay. Be careful about spending this money "too soon" as you could possibly need it if they withdraw and attend another school. This is nothing you need to be in a hurry about completing right away. In fact, you can wait until later in the plebe year and contact the treasurer's office and ask them how you go about doing it. It was fairly simple with USMA and I am sure the same with USAFA.

There is also some exception to the taxability of some of the college savings accounts when a student attends a service academy. That is an option as well but someone with more knowledge on that than me can post a link or provide info.
 
You are correct jebdad. People do need to look at the tax implications of 529 and other tax free/deferred accounts. There are times when if you aren't going to use it, that you can transfer it to other tax free/deferred accounts. e.g. medical savings, etc. However, this is something you need to check with your accountant or tax advisor about.

But so you all know; things like Books aren't automatically taken out of a cadet's account. They have to buy them. Amazon, book store, etc. There are still ways to use the 529 accounts for these. And being the military doesn't really charge for dorms, medical, etc. most times you can't use the accounts for these expenses anyway. Probably not for uniforms either. The parents I've seen using the 529 accounts, usually used it for books. But check with your tax professional to learn all the things you can use that money on. And if you can't use it, it's not that you'll lose it. Simply means you'll transfer it and count it as income; which you deferred previously. Not a loss or anything.

But definitely agree with holding the accounts in case your cadet decides the academy isn't for them. Approximately 15-20% of the cadets will not make it the full 4 years. Approximately 1200-1300 will start, but only around 1000 will graduate 4 years later. You may need this money later for their educations.
 
If you have a 529 College Savings Plan - Service Academies can accept up to $17,500 which will be used to off-set the cost of uniforms, textbooks, computers and other issue items. (You can also apply scholarship $s but be very clear how those scholarship $'s are authorized to be used - if the scholarship is for tuition and housing - it can not be used at a Service Academy). Your Cadet/Mid will be fronted whatever funds are needed to pay for the these items and the Service Academy will re-coup those funds from their pay. Part of the reason C4C's get $100/month net.

It is essentially a 0% interest loan - the funds that are fronted.

At USNA, even if you pay down the 'loan' provided your Mid will not see the excess funds until their junior year, so there is really no reason to take the money out of a 529 Plan until they complete their second academic year.

I am not a financial planner - but if you are using your own $ to pay the 'loan' down vs scholarships or 529 funds - you will be just as well off to give those funds directly to your cadet/mid. Otherwise you are just giving it to the government and hope they properly track it and allocate it back to your cadet/Mid.
 
In the information packet or at I Day you will see what is deducted from the pay. It shows what is paid and what is deducted. The pay goes up a little each year. They give the loan for books in year one, but for future years the Cadet must pay for those expenses. This is a time when you can help if you want.

For those who are financially strapped the Academy is set up for the Cadet to be able to pay for everything they are not given on the salary they are paid.
 
xcmum said:
Perfect- we can now use that money for A-day/PW should DS get an appointment. Thank you!
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Yeah, between I-Day, A-Day, PW, and Thanksgiving trips, we already spent two semesters worth of college tuition! :eek2:

But, it was worth it.:)
 
Cerberi said:
It is essentially a 0% interest loan - the funds that are fronted.
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Even better than that, it's like a negative interest rate loan. The value of the sum of the loan is higher than the NPV (net present value) of the sum of the deductions from the cadet's pay over time. To equalize that, we would need an interest rate which equalizes the debt to the NPV of the sum of the payments over time, using a discount rate of inflation + whatever discount you need to apply for the risk that the cadet leaves the academy prior to paying off the loan and defaults on whatever the remainder is.
 
My DS is a 2020 and so far the only thing you can offset from being deducted is the book allowance. You can give your Cadet book Money which in turn they do not have to take the loan. Other than that the deductions are mandatory minus scholarships. I just put money in my cadets checking account
 
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