Originally Posted by Bostonian
http://www.nytimes.com/2014/03/21/opinion/a-quick-way-to-cut-college-costs.html
A Quick Way to Cut College Costs
By STEVE COHEN
New York Times
MARCH 20, 2014

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Consider a family of four, earning $100,000 in income and having $50,000 in savings. The [Expected Family Contribution] says that this family will contribute $17,375 each year to a child’s college expenses. A $100,000 income translates into take-home pay of about $6,311 monthly. An E.F.C. of $17,375 means the family must contribute about $1,500 a month — every month for four years. But cutting family expenses by 25 percent every month is unrealistic.

Alternatively, the family could use its savings. But that would deplete their $50,000 before the start of the child’s senior year, leaving nothing for the proverbial rainy day, or for the second child’s education.
The article below discusses how the EFC depends on income and savings. The effective "tax rate" on savings goes up if you have several children. The article cites a 4-year tax rate on savings of about 23% = (22650/(150000-100000)), but savings left over after the first child graduates will increase the EFC when the second child attends. I estimate the tax rate on savings done before any child attends college to be about 41% = (1-0.77^2) for two children and 54% = (1-0.77^3) for three children. Parents may pay less for college if they have children early, since their incomes and savings may be lower when their children attend college.

http://economix.blogs.nytimes.com/2014/03/31/what-happens-if-you-save-for-college/
What Happens If You Save for College
By SHAILA DEWAN
New York Times
MARCH 31, 2014, 10:14 AM

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Let’s take income first. From your income, you get to deduct a number of expenses like taxes, employment expenses and what the federal government calls an “income protection allowance” — that is, an amount that is shielded from being sucked into the gaping maw of college costs. The size of the allowance is based on the household size and the number of college students in the house, and ranges from $14,460 for a two-person household where both are in school, to a high of $37,020 for a six-person household with one student.

Parents are then expected to contribute a percentage of what’s left over (the more that’s left over, the higher the marginal percentage, just like with income tax rates — except the rate here goes up to 47 percent).

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What about discouraging saving? The more you’ve saved, the more you are expected to pay — so why save at all? The answer is that the oversaver is expected to pay more, but not terribly much more. And unless you want to cut your expenses drastically, you will need the extra savings to cover the enormous bills.

Using the Education Department’s FAFSA4caster, I played around with various scenarios, assuming my hypothetical student had 60-year-old parents with an adjusted gross income of $100,000. With $50,000 in savings, the expected yearly contribution was $16,977. With $100,000 in savings, it went up to $19,797 — over four years, that’s $11,280 more. A whopping $150,000 in savings generated a yearly contribution of $22,617 — an extra $22,560 over four years.