Did you folks not do ANY saving?
![[Post New]](/jforum/templates/default/images/icon_minipost_new.gif){kind=icon}
Anonymous
My kid is at another state's flagship with an engineering program ranked between VT and UVA (neither of which would have taken him as described above). He got some merit aid and is paying less than we'd be paying at UVA or W&M - about the same once we throw in air fare. We are happy with the choice, and he is happy, too. He came in under budget, which means he can study abroad anywhere he wants. |
Anonymous
Total cost of attendance at UF (tuition, fees, r&b, transportation, personal expenses) is about 21K, which is also cheaper than total cost of attendance at JMU, GMU, VT (27-30K depending on majors) though not by the same magnitude as UVA/W&M. |
Anonymous
Colleges don't do that. Private elementary and secondary schools do, but I've never heard of a college assigning income to a SAHP and adjusting financial aid based on that. |
Anonymous
I think there's an arithmetic mistake. If a child were to attend a $65k/year college, then in Year 1 the added cost is $15k. In year 2, however, the penalty goes down to $11.75k since $65k will be spent. Year 3 is $8.5k, and year 4 is $5.25k, for a total penalty of "only" $40.5k. Is this better than not having saved? That depends on where the money is coming from you'll use to pay. You'll have to look at loan options, calculate the amount you need to borrow, terms of the loan, and then adjust for inflation. At today's rate, you can borrow a fair amount for $40.5k in interest. |
Anonymous
Yes I thought of that but was too lazy to do the math. Thanks! My main point, which I think is even more valid after your adjustment, is that nearly everyone would be way worse off if they had not saved. It's kinda like saying you want to make less money so your top marginal rate is less. It makes no sense, but is often claimed by people. |
Anonymous
|
I worked full-time for 13 years until child 1 was born, then part-time for 5 years until child 3 was born. Then I became a full-time SAHM. In those years before kids, I saved up quite a bit. I'm not patting myself on the back - my parents fully paid for my college and bought me a (used) car at graduation, so I didn't have any debt coming out of college. Having said that, I am also a good saver and not a frivolous or big spender.
Our income ranged between $100K and $160K most of the last 20 years. In that time, we put away $2K per kid per year for college. Our rising senior now has $55K for college from that money. In addition, we sold our house and bought a new house several years ago, and we put $35K of the equity into of our children's college funds. That is worth $45K now. We also had a relative leave us some money a few years ago, so we put $25K from that towards each kid's college fund. That is now worth about $30K. So our oldest has a total of $130K going into his senior year of high school. We'll also cash flow $4K per year to take advantage of the American Opportunities Credit (we'll get back $2500 per year as a credit on our taxes). We've told him that we are looking for colleges that cost no more than $35K per year total based on what we have saved. It's certainly not enough for an expensive private (unless there's merit aid), but I'm okay with the number of options we have at that price range. Our younger two kids will have a similar amount. We were lucky not to have too many major financial emergencies along the way, but we also don't have lavish tastes (we do modest vacations, smaller home, cheaper camps, etc.). |
Anonymous
It's not like that at all. In the tax realm, you get a monotonic return/reward. Even if you make more, you pay more in taxes, but your net remains more (ignoring historic anomalies where this wasn't true.) Here, with the combined consideration of assets and income, the curve is not monotonic. Specifically, I don't ask if I'm worse off than my alter ego who didn't save. I ask if it's fair that colleges charge me more because I was frugal than if I hadn't been. To keep things in perspective, in my case ($180k HHI) it probably won't matter since by income and home equity ($425k) alone I'm maxed out at full tuition, so any additional assets won't increase EFC further (at least that's what I assume - someone correct if I'm wrong). So, let's compare to the person who makes only $90k HHI, scrimped the last 18 years to accumulate $200k. Their tuition would not have been maxed out had it not been for their frugality. They might even have qualified for actual discounts rather than loans. You don't have to be a SJW to recognize this as unfair. Now mind you, any algorithm that wouldn't take assets into account can be gamed by hedge fund type people who routinely report zero income. But I don't see how the current formula is fair for anyone in the top-50% income bracket. There are, btw, very few instances in American society where pricing is based on perceived ability to pay, and they are usually treated with contempt (for instance, if your mortgage broker sells you a mortgage at a higher rate because they think you can afford it). |
Anonymous
Everything you are saying is wrong -- starting with your perspective. You are viewing as and comparing a college admissions transaction to a commodity. That's not what's going on here. Colleges are not "charging you more" -- they are offering a discount to a student because if they don't, they can't get him, and they want him. You are saying "I should pay the same as those less fortunate, and if the less fortunate can't attend the college, then so be it." The good news is the colleges get to decide what they do. If you don't like they way they do it, don't attend. There are plenty of colleges that offer no or little financial aid. Attend one of those if you insist everyone pay the same. |
Anonymous
That's just silly. College provide a service, and admissions is a transaction to buy this service. Nothing more. (What more do you think it is in your imagination? A summary judgment about people's saving behavior over the last couple of decade before their children attend college?) "Discount to get a student?" That would be merit aid, which this discussion is not about. EFC is not related to merit aid. The fact that colleges get to decide is actually the bad news. Fortunately, this is less the case for state schools, at least inasmuch as the ceiling they can charge is concerned, but private colleges could probably benefit from more regulation. For instance, mortgages are regulated because otherwise one group of people would be constantly overcharged. Address the problem raised by PP, which is the inequity induced by counting assets, which penalizes saving for college, particularly for certain income groups. Why should the scrimping $90k family be worse off than the $90k who couldn't or chose not to save? Answer this. |
Anonymous
|
Here is the answer to your question, OP.
Our combined household income is near 200K, but this is a recent development since I finished a degree. Prior, between reduced job hours and paying tuition, we made under 150. My husband's job is tenured, and mine is not. I see no reason to assume that I will always be employed when my child attends college. My husband's job, if it is our only income, would get us close to a free ride in a top private college since we have two children. I make less after taxes than the HYPSM tuition, so if a child gets into a top school, my salary will add absolutely nothing to the table. My salary is 90K, but remove taxes and do your math. We never saved a penny for college, instead paying down our mortgage and our rental property mortgage instead. Older child is an excellent student, and may opt to convert her smarts into a free ride in college. If she gets into a tippy top private college with minimal financial aid, we'll open a line of credit from the house and borrow cheaply. If I lose my job or something else arises, we'll get financial aid. Whatever happens, I recommend that the child ONLY applies to colleges that commit to meet the financial aid requirements with grants, not loans. Why would I EVER want to open a 529 account committing us to paying college tuition when so many factors can change overnight? I view 529 accounts as a option once all other reasonable investment avenues have been exhausted. Prepayment of UMD tuition is more sensible, honestly. The 4 years my older child is in college may be great for going back to school myself for a PhD (reduce our income / expected family contribution), or perhaps joining a volunteer overseas organization as a resume builder / income reducer. Worst case scenario, the child knows that we'll pay the equivalent of UMD tuition, and she takes out loans for the rest. Two years in consulting of some kind, while living with a roommate and us paying for her utilities and food, and she'll pay it off. |
Anonymous
As I said, if you think that, attend colleges that don't give financial aid.
This sentence makes no sense. All financial aid, whether need based or merit based, is given by a college to a student that they want with the idea that the student could not or would not otherwise attend.
Whoa. You are saying colleges should not get to give their money to the students they want to have in the class? Sounds pretty socialist to me.
Most in-state schools are awesome, so if this is not a problem there, attend those and be happy.
This is the problem. This is where you are 100% wrong. The family who saved is way better off, and the family that didn't probably can't attend the school. Repeat: This is the gigantic, Texas-sized hole in your logic. |
Anonymous
Many top private colleges use the CSS profile for financial aid calculations, not EFC. CSS looks at more factors well beyond your income - such as equity in your home, amount in retirement accounts, etc. I would not count on a full ride to any school (full ride is tuition + room and board + books, etc.), let alone a top private one, which is very hard to get into. It is actually quite rare to get a full ride. Full tuition is more common and is usually given to students who go to a school that is a tier below their capabilities. Room, board, and books still need to be paid for. |
Anonymous
Trigger warning upfront: I'll be using math. First, let's define "better off" and "worse off." I define it in units of quality-of-life dollar years. Here's an example. If you have $100 during one year and you can spend it to buy, say ice cream, you've benefited from 100 QoL dollar years. At the end of their lives, those who had more QoL dollar years over their lifetime are said to be better off. (If you took calculus, the concept may be familiar to you - if not, just think of having ice cream...) Second, let's look at a tale of 2 families, the Misers and the Spenders. They both have one child, and let's assume that by happenstance their children are identical in how well they do in school. The Misers and the Spenders also have the same income, year after year. Now let's track the families from when their children are born to when they turn 18. The Misers save let's say $500/month, the Spenders use the $500 as QoL dollars. By the time their kids turn 18, the Spenders are $108k QoL ahead of the Misers. Now both kids decide to go to college. The Misers, having accrued substantial assets, are charged more tuition than the Spenders, significantly more. The Spenders have to take out a loan, but since they don't have to pay as much in tuition as the Misers, they'll stay comfortably ahead of the Misers when QoL dollar years are considered even after repaying the loan (especially when the Spender's lower tuition comes from reduction or subsidized loans which the Spenders are likely to get since they don't have a very high income). This effect is exacerbated by inflation - the Misers saved dollars that were worth more than the dollars the Spenders use to repay their loans. After 22 years, both kids have a college education. After 28 years, both families are debt-free. The Spenders have enjoyed a larger number of QoL dollar years, even taking the hit from having to take out loans into account, because of their much lower EFC resulting from their lower assets. What's even better, they've enjoyed them while their kids were young. Now who's made the smarter choice under the system you apparently defend? What do you think about the alternative to charge the Spenders the same tuition as the Misers, given that they lived under identical circumstances and differed only by their choices? |
Anonymous
1. Subsidized loans are very small compared to the price of college tuition. 2. With the same income, the EFC won't be drastically different for the two families, as assets don't count as much as income, therefore their tuition shouldn't be drastically different. This will be less true for schools that use the CSS profile. 3. Unless their income is extremely low, neither family will likely get much financial aid at all other than loans. Student loans come with a fairly high interest rate beyond the federal loans which total $27K for four years. |
Anonymous
| Your poor children. I hope they have somehow grown up with more responsible attitudes than you. |