Donut hole reality

[Anonymous]

I told my kids I would spend $50K per year for college. If they want a school that costs more than that, they'll need merit aid.

I just don't see the value in some of the private recognizable names.

[Anonymous]

Anonymous wrote:

Anonymous wrote:What do they live on?

300k in
100 to taxes
100 to college
100 to live on

It’s okay to not save for college, retirement these four years. Just tread water. That’s a pretty good spot considering you didn’t save for 18 years.

These are all skewed numbers. For tax, 300k will have MANY deductions and child credits. If cap gains is part of that 300k, also a lower rate. Retirement, not taxed.

They could have saved over 10-15 years and easily be halfway or 3/4 there, paying only 25-50k for college. This notion that it's cashflow everything or save 400k by 18 is ridiculous.

How so? Most people lost all their deductions with the tax system change and are stuck with the standard deduction.

[Anonymous]

Anonymous wrote:It is amazing that all of us are falling for blaming each other, rather than blaming a rigged system, which is the real problem. It is like working class people and new immigrants complaining about who gets or deserves Medicaid or food stamps while the 1% laughs and counts their money.

The problem isn't that upper middle class people aren't saving enough. It is that a corrupt higher ed system has no restraint on its pricing and acts more like Gucci than a public good, despite claiming non-profit status and accepting tons of government funding.

The student loan industrial complex has supported this, and rather than keeping tuition affordable schools are building luxury amenities that we all managed to do without in the 80s and 90s. Yet they outsource teaching to adjuncts who make poverty-level wages. And now there's a sticker price vs some opaque real cost that involves the equivalent of haggling with a used car salesman.

But sure, point the finger at someone who makes $50k more than you.

I agree so much.
Got a great education with real professors teaching my classes at JMU, in the 1990s. I can't believe how much wasteful fancy crap these colleges spend money on, charge a fortune, and the kids aren't even taught by professors.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:That’s not donut hole. That’s a comfortable family. The rest of our kids go to state schools.

This. If you have sticker shock, but the ability to pay you aren't really a donut hole.

Ability to pay when that ability means constant struggle, isn’t really comfortable.

Families with more than one kid and $250-300k don’t get financial aid. Paying $180-200k/year for kids’ tuition isn’t easy.

You save starting at birth, consider your spending and live way below your means.

Colleges have become the modern-day version of the pyramids. Basically for most of your adult life it's this massive constant drain on your resources, and for what!?

It doesn't have to be. Simply attend a school you can afford. Most states have several good schools that cost only $25-30K. And there are plenty of private schools that offer merit that will bring price down to similar. So take $5.5K loan, kid works and earns $10K+. You have $15K left. Parents can either cash flow part of it or have saved for that $15K/year (60K total). Then your kid should easily be able to pay off $27K in loans within 5-6 years.

If that doesn't work, then start at CC for 1-2 years and transfer to a 4 year. Live at home during the CC and your kid can totally fund it and be saving for the last 2 years with a job during breaks and PT during the year.

If your kid has a 3.5+ UW at HS they can easily find good merit (my 3.5/1250 kid did just that without even trying, had they stepped down a tier they could have found much more merit if it was needed). My kid had two in-state (not the flagship) options that gave $5K merit even with those stats.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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Anonymous wrote:

Anonymous wrote:Having been through this process, and saved quite a bit towards college, we still chose public school as do many people in our financial situation. The biggest problem with the belief that "donut reality" means being shut out, is letting rich people convince you that expensive is better. Despite what US news claims, in reality, a kid can have the fabulous life and a quality education and not deplete their parents of every cent they saved, plus take on debt and undue stress, for an undergrad degree.

And they should stop reading this forum and the private school forum immediately .

So many prestige strivers. We had kids get into top 10 schools, but with no aid and enough in 529 to fully cover in-state tuition. They chose the in-state option.

Frankly, the tables are turning. More and more high stat UMC families are no longer paying for private/ivies. The top in-state schools are getting stronger and stronger as a result. Add in the fact that many top employers have stated that they would rather have a top state college kid than many of the Ivies and you really are going to see a shift.

The high cost of tuition has reached a tipping point. It seems $85-90k is it. It will be six-figures a year for privates by the time a Freshmen makes it to Senior year.

Now you only have the poor and the uber rich at Ivies which is an awful dynamic, but mirrors the US.

And it's crazy. We drive only Hondas. We have one that is a 2006, in addition to a 2020. We aren't wearing fancy clothes or traveling to Europe. Travel sports are the biggest expense.

Yeah, middle class kids aren't doing "Travel sports". That is typically $5-10K+ per year. So see, you could have easily saved $5-10K/year for college, you chose not to. Most rec sports do not cost more than $500/year.

beg to differ. MANY middle class kids are doing travel sports. they shouldn't be, but they are.

Then their parents shouldn't complain about finances. Travel sports is a "luxury" not a requirement. It's not fiscally smart to do travel sports if it prevents you from saving for college or retirement. Your kid can still play sports for $400-500 for the year (or less).

Do you really think 7 years of basketball at $700 a year is the difference between an 80k a year SLAC and a 40k a year public?

Travel sports is much more than $700 per year. It's a $10-15K/year commitment and extra training in the off seasons that often costs another $5k+. So yeah, if instead of putting your 8 yo into travel sports and save that $10-15K for the next 10 years, it can be the difference, or at least a huge part of it.

My kid plays EYBL. We don't pay for training, there are enough open gyms or very scrimmages.

[Anonymous]

Anonymous wrote:Yeah, it's ridiculous. Send your kid to a decent public school - there are plenty of them.

This!

[Anonymous]

Anonymous wrote:

Anonymous wrote:What do they live on?

300k in
100 to taxes
100 to college
100 to live on

It’s okay to not save for college, retirement these four years. Just tread water. That’s a pretty good spot considering you didn’t save for 18 years.

? you assume one child. And it's not ok to not save for retirement and just tread water. That is a stupid move.

Yes, we did save, but it's not enough for 4 yr * 2 kids * $100K/year. We had saved probably a little over $300K for two kids.

Sure, they don't need to go to an expensive school, and they aren't. DC got merit to our in state flagship and is doing well there.

My point is that people assume that a HHI $300K should be able to afford $800K for college over 4 years. That is not true. We are in our 50s/60s, and ageism has hit us. We are probably going to be forced to retire soon, and with no subsidized healthcare.

I wouldn't recommend the cash flow it for 4 years. When your income went from $150 to 200, you take 20-25K/year and invest for college. Next income increase you add another 50% of the increase. You also put the remainder of "increase" into retirement, because front loading any investment is the better choice. Then you let compounding and growth over time work in your favor. It's a CHOICE you could have made as your income increased.

If you didn't save, then yes, funding $100K college per year is not the smartest financial idea. And that is okay. Your kid will have tons of excellent choices that cost only $40K or less and you should be able to cash flow that or have saved enough if you wanted.

[Anonymous]

Any school that has students accepting federal loans should have tuition caps. Full stop. Otherwise we taxpayers are artificially inflating the cost of college to our own detriment. Especially with loan forgiveness programs nor being rolled out there is no backstop on tuition prices.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:There used to be a belief that higher education was a societal goods that we all had a vested interest in supporting. We believed in social mobility and having an educated populace that could compete with any nation in the world. It is why there was a GI bill, Pell Grants, etc.

You can save a lot, but tuition has been going up at a rate much greater than average income. It is more out of reach than it used to be. So people are understandably frustrated. They can’t keep up and they’ve seen higher ed shift from a common good to a luxury good.

Some of us still believe this and that is why the comparison of a degree to a BMW or a Honda is so wrong.

You believe you are entitled to "higher education at an elite college" or just higher education. I believe in the 2nd. But not the first. Nobody is entitled to an elite education. Smart people know that you can go far in life, you just need AN education. You can get that at your state U or a private U, what you do while attending matters much much much more than where you go. So yes, I believe everyone should be able to get a college degree, if they want. And that is possible and affordable for most. It just might not be Harvard. Fact is you most likely are not getting into Harvard anyhow, so why the concerns.

People say that, but for certain majors it absolutely matters whether the college is elite or not. The connections my kid made and the interships while in college propelled him up the social ladder. I was your typical MC state school kid with a good Fed job--but as my spouse and I made more $ and vaulted into the UMC it exposes you to so much more and you see the advantages to kids ---ones my spouse and I never had (he grew up poor). People like us lived it so we see what benefits our kids have from their private education and the neighbors we have and the connections they have made. Now--STEM majors it's a different thing completely. An engineer does just as well, if not better, at a public state school. But--if we are talking govt/politics/international relations and business, etc---unfortunately it does matter.

[Anonymous]

Anonymous wrote:

Anonymous wrote:A universal cutoff number for need based aid is ridiculous when it does not take into account cost of living. $150k in Oklahoma is much different than San Fran or DC.

The latest findings:

Here's a look how much income a family of four needs to live comfortably in the 20 most expensive U.S. cities: 
San Francisco: $339,123
San Jose, California: $334,547
Boston: $319,738
Arlington, Virginia: $318,573
New York City: $318,406
Oakland, California: $316,243
Urban Honolulu, Hawaii: $299,520
Irvine, California: $291,450
Santa Ana, California: $291,450
Portland, Oregon: $289,786
San Diego: $289,453
Chula Vista, California: $289,453
Newark, New Jersey: $285,043
Jersey City, New Jersey: $285,043
Seattle: $283,712
Aurora, Colorado: $280,467
Long Beach, California: $280,218
Anaheim, California: $280,218
Los Angeles: $276,557
Washington, D.C.: $275,642

If you can’t afford to live there, then don’t live there. I can’t afford a Bentley, so I drive a no-frills Escape.

And that is the average of Arlington which includes the areas zoned to poor public schools. If we are talking about zipcodes to the better public schools--it is much more than $318k to live comfortably, afford a SFH that most of America would think is a hovel.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:There used to be a belief that higher education was a societal goods that we all had a vested interest in supporting. We believed in social mobility and having an educated populace that could compete with any nation in the world. It is why there was a GI bill, Pell Grants, etc.

You can save a lot, but tuition has been going up at a rate much greater than average income. It is more out of reach than it used to be. So people are understandably frustrated. They can’t keep up and they’ve seen higher ed shift from a common good to a luxury good.

Some of us still believe this and that is why the comparison of a degree to a BMW or a Honda is so wrong.

You believe you are entitled to "higher education at an elite college" or just higher education. I believe in the 2nd. But not the first. Nobody is entitled to an elite education. Smart people know that you can go far in life, you just need AN education. You can get that at your state U or a private U, what you do while attending matters much much much more than where you go. So yes, I believe everyone should be able to get a college degree, if they want. And that is possible and affordable for most. It just might not be Harvard. Fact is you most likely are not getting into Harvard anyhow, so why the concerns.

People say that, but for certain majors it absolutely matters whether the college is elite or not. The connections my kid made and the interships while in college propelled him up the social ladder. I was your typical MC state school kid with a good Fed job--but as my spouse and I made more $ and vaulted into the UMC it exposes you to so much more and you see the advantages to kids ---ones my spouse and I never had (he grew up poor). People like us lived it so we see what benefits our kids have from their private education and the neighbors we have and the connections they have made. Now--STEM majors it's a different thing completely. An engineer does just as well, if not better, at a public state school. But--if we are talking govt/politics/international relations and business, etc---unfortunately it does matter.

And just like you, who started in a MC state school and married a poor husband, the kid at a non-elite school can find themselves in a neighborhood where they make connections, etc.

[Anonymous]

Everyone I know had all their loans forgiven. Do you all just not know how to do that?

[Anonymous]

Anonymous wrote:Everyone I know had all their loans forgiven. Do you all just not know how to do that?

Doesn't this just apply to certain public service professions (i.e. social work)? So if your major is comp sci, I am not sure how this would work.

[Anonymous]

Anonymous wrote:Everyone I know had all their loans forgiven. Do you all just not know how to do that?

We must run in social circles with different tax brackets because I don’t know a soul who benefited from that.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Everyone I know had all their loans forgiven. Do you all just not know how to do that?

Doesn't this just apply to certain public service professions (i.e. social work)? So if your major is comp sci, I am not sure how this would work.

I am a social worker who had loans forgiven (and work with many who did as well.) We have all been working 10-20 years in low paying and high stress jobs (CPS, community mental health, etc) while making all 120 payments to qualify for forgiveness. It isn't as easy as just having them forgiven.