What is a "donut hole family"?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Typically a family that makes more than what qualifies for need-based aid but not enough *income* to pay tuition out of pocket without it having a huge impact on their lifestyle. Usually they don’t want to liquidate assets to make up the gap.

Right, because it makes no sense to sell your house to send a kid to Harvard undergrad, when a mid-rank college is giving your kid a full ride merit scholarship.

If it’s so obvious what they should choose, why are they so mad about choosing it?

Really? You have to ask why it hurts to turn down Carnegie Mellon?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Typically a family that makes more than what qualifies for need-based aid but not enough *income* to pay tuition out of pocket without it having a huge impact on their lifestyle. Usually they don’t want to liquidate assets to make up the gap.

Right, because it makes no sense to sell your house to send a kid to Harvard undergrad, when a mid-rank college is giving your kid a full ride merit scholarship.

If it’s so obvious what they should choose, why are they so mad about choosing it?

Really? You have to ask why it hurts to turn down Carnegie Mellon?

Yes, really. I had fantastic stats and softs. But I only applied to state flagships (just like everyone else in my high school, in my grade, and the grade above me, and the grade below me, except for people who went to local religious schools). That’s the completely normal thing for almost everywhere in America. No idea why someone who already knows they can’t afford a fancy school would apply.

[Anonymous]

Anonymous wrote:Could someone please explain, because it sounds like people with nice resources feeling entitled to more than they can afford.

Sounds like you've defined it for yourself and are angling for a fight.

[Anonymous]

Anonymous wrote:The problem is this describes a bunch of different families. And their situations may be sympathetic or not depending on your viewpoint.

Some people windup in the donut hole because they have more kids. If you have one or two kids, it's easier to sacrifice to get those kids through school than if you have three or four. People with more kids also struggle to save as much for college and feel frustrated when schools won't make up the difference. Personal bias here: I have little sympathy for these parents because I don't understand how you keep having kids without considering how you will pay for their college. But I have a lot of sympathy for these kids because it puts them in a really crappy situation where their existence is itself the thing keeping them from going to a school they got into but can't afford. Parents who have 3+ kids and then complain about how much college costs makes me angry.

But one I have more sympathy for is when one or both parents own a business and financial aid expects them to be willing to borrow against or liquidate business assets in order to pay for school. That seems like such a terrible choice. I know people who have done it and respect how much they are willing to put on the line for their kids education, but I'm not sure if I'd be able to make the same choice. That's a really tough one.

Another one is people who had kids late and are nearing retirement, and get caught two ways. First, they don't save as much for college because they are also saving for retirement (sometimes they are also caring for elderly parents and it's a squeeze). Second, they may have more liquid assets specifically because they are looking to retire soon, and financial aid will lay claim to those. I feel bad for these folks because often being late to parenting is not a choice. However, as someone who had kids late, I also just assumed that meant I'd have to work a little longer to get my kid through school. So again, this is something you can anticipate and should be able to if having kids late because you are old enough to understand how this works.

I also think people who come from modest backgrounds and who went to schools on scholarships sometimes don't understand how to save for college and then are surprised when their income pushes them into the "no aid" position. I have sympathy for this one because it's a knowledge gap -- their parents didn't save for college either and they just didn't know better. Though I do think if you are going to have kids you have to educate yourself. This was my DH and I had to work on him because he was convinced our kid would just qualify for aid. Now he gets that even though we aren't wealthy, we have more resource than our parents and we have to dedicate some of them to college savings if we want to ensure our kid can go to school. If I hadn't worked on him, though, we'd have zero saved.

There are probably others I'm unaware of. But these are the ones I hear the most. I think it's hardest for people who are outliers in their school or social community in terms of money. If everyone else you know can afford to pay out of pocket, and you can't because of the number of kids or your age, you might feel like it's unfair. And likewise, if everyone you know qualifies for aid because you are in a lower-income community, and you don't because you run a business with assets and therefore are actually in a higher bracket, it could feel unfair.

But usually it's not unfair. The actual unfair thing is that money is such a barrier to higher education in general in this country and having kids pretty much requires you to save for college, while also saving for retirement, while also paying your health insurance premiums. And yet we still have fairly high taxes! It's hard, but if it's "unfair" it's unfair to everyone except the very rich who inherited their wealth. And that's by design.

This really is the crux of the matter.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Could someone please explain, because it sounds like people with nice resources feeling entitled to more than they can afford.

No. It is a family that won’t qualify for FA but that doesn’t have the resources to reasonably handle tuition at the priciest/most elite colleges. I don’t know about families feeling entitled, but from the colleges’ standpoint it is a real problem that they are concerned about. They don’t want their student populations to come from two stratified socioeconomic groups.

This most closely describes the issue in an unbiased way. While I don’t expect massive FA, we also can’t comfortably pay for expensive private college. The colleges take into account all assets, which is great. No one should get to hide their wealth in a boat purchase. At the same time, we can’t liquidate our retirement savings. We would have to pay penalties. The government has penalties to discourage using your retirement money for non-retirement. So, we find ourselves in a spot where savings that we can’t use without expensive penalties is used to indicate we have “too much” money.

Meanwhile, our cash flow is not high, so it’s hard to swing the full cost.

Before people call me a whiner or tell me how lucky I am, I know I am lucky. I’m not complaining. We could empty our retirement accounts, but it would then lead us into poverty and that doesn’t help society or ourselves.

I don't know anyone who thinks paying for "expensive private college" is comfortable. This is the problem with donut hole discussions - of course it's expensive! It's expensive for everyone! If you think you're hard done by because you can't just instruct your household manager to write a check and forget about it moments later, you have skewed expectations in life. "Not outrageously wealthy" is not a protected class.

Williams is a lot less painful on a 500k hhi than a 200 hhi, likewise, it’s free on a 100k hhi

I will bet you one million dollars there are people on this very board calling themselves "donut hole families" making $500k.

In fact, I remember the law firm partner who made seven figures and had a 20 page thread about how unfair it was he was "stuck in the donut hole."

[Anonymous]

Anonymous wrote:

Anonymous wrote:Could someone please explain, because it sounds like people with nice resources feeling entitled to more than they can afford.

Sounds like you've defined it for yourself and are angling for a fight.

It sounds like you disagree with someone's opinion. Does it hit a little too close?

[Anonymous]

Anonymous wrote:Could someone please explain, because it sounds like people with nice resources feeling entitled to more than they can afford.

That is exactly what it is. Ivies will almost always meet enough need to make it affordable, even for the upper middle class. So “Donut Hole Families” are just status-obsessed whiners who think BU is better than UMD.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:new poster here

Wow. I thought we were a "donut hole" family but I guess not.

What is a step below "donut hole" called? We make too much to qualify for aid, but paying for an expensive school would involve far more than "liquidating assets." It would be more like taking on a second full time job, skipping at least one meal a day, absolutely zero entertainment budget (not even cable tv or netflix) etc.

No Netflix?? Surely you are kidding. You are basically describing what lower income families sometimes do to afford even state schools.

Yes, that's exactly my point. Some "lower income" can't afford these things yet still "make too much" to get financial aid. I thought that was "donut hole" but apparently I was wrong, because it's been posted here that Donut hole families still have assets to liquidate.
I'm asking what it's called if you don't have those assets yet still make too much for financial aid.

Not following. Are you saying you can't afford your state school without financial aid? Because it sounds like you are saying you can't afford an elite school without financial aid, which does sound kind of entitled.

+1 but if you really really want that fancy school for your kid you can move into a condo, cancel Netflix, get a second job, and get it done. But it’s not worth it so it’s not worth it.

The “entitlement” is feeling entitled to send your kid to the very best school they get into, because you think that’s what meritocracy means. And it’s a rude awakening to find out that’s not true.

Yeah, cancel Netflix and pay a realtor a huge chunk of your home equity and start paying monthly rent instead, and also get a second job even though that is going to get you fired from your first job which disallows moonlighting; that will cover the 80K per year for your kids. Not.

You are so clueless to suggest it is that easy. The donut hole is not about people making bad financial choices -- it's about the real middle ground between the extremely wealthy and the groups that get financial aid (including loans). Just because people are in fact in the donut hole does not mean they have excess money or that they feel entitled to expensive colleges. The whole point of the moniker is that they are stuck in the middle ground of those two extremes.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Typically a family that makes more than what qualifies for need-based aid but not enough *income* to pay tuition out of pocket without it having a huge impact on their lifestyle. Usually they don’t want to liquidate assets to make up the gap.

Right, because it makes no sense to sell your house to send a kid to Harvard undergrad, when a mid-rank college is giving your kid a full ride merit scholarship.

If it’s so obvious what they should choose, why are they so mad about choosing it?

They are angry that college tuition has increased at a pace in extreme excess of inflation. They are angry that the school that cost $8K in 1980 costs $80K today, instead of $30K (which is what it would cost had tuition increases kept pace with rather than exceeded inflation).

They want the best education possible for their kids because relative to their generation, their kids' generation is more likely to be shut out of purchasing a decent house, affording healthcare, having children, as the costs of those things have skyrocketed relative to everything else. They want their kids to be ok and it's much much harder to position the kids now for that than it was a generation or two ago.

That's why.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The problem is this describes a bunch of different families. And their situations may be sympathetic or not depending on your viewpoint.

Some people windup in the donut hole because they have more kids. If you have one or two kids, it's easier to sacrifice to get those kids through school than if you have three or four. People with more kids also struggle to save as much for college and feel frustrated when schools won't make up the difference. Personal bias here: I have little sympathy for these parents because I don't understand how you keep having kids without considering how you will pay for their college. But I have a lot of sympathy for these kids because it puts them in a really crappy situation where their existence is itself the thing keeping them from going to a school they got into but can't afford. Parents who have 3+ kids and then complain about how much college costs makes me angry.

But one I have more sympathy for is when one or both parents own a business and financial aid expects them to be willing to borrow against or liquidate business assets in order to pay for school. That seems like such a terrible choice. I know people who have done it and respect how much they are willing to put on the line for their kids education, but I'm not sure if I'd be able to make the same choice. That's a really tough one.

Another one is people who had kids late and are nearing retirement, and get caught two ways. First, they don't save as much for college because they are also saving for retirement (sometimes they are also caring for elderly parents and it's a squeeze). Second, they may have more liquid assets specifically because they are looking to retire soon, and financial aid will lay claim to those. I feel bad for these folks because often being late to parenting is not a choice. However, as someone who had kids late, I also just assumed that meant I'd have to work a little longer to get my kid through school. So again, this is something you can anticipate and should be able to if having kids late because you are old enough to understand how this works.

I also think people who come from modest backgrounds and who went to schools on scholarships sometimes don't understand how to save for college and then are surprised when their income pushes them into the "no aid" position. I have sympathy for this one because it's a knowledge gap -- their parents didn't save for college either and they just didn't know better. Though I do think if you are going to have kids you have to educate yourself. This was my DH and I had to work on him because he was convinced our kid would just qualify for aid. Now he gets that even though we aren't wealthy, we have more resource than our parents and we have to dedicate some of them to college savings if we want to ensure our kid can go to school. If I hadn't worked on him, though, we'd have zero saved.

There are probably others I'm unaware of. But these are the ones I hear the most. I think it's hardest for people who are outliers in their school or social community in terms of money. If everyone else you know can afford to pay out of pocket, and you can't because of the number of kids or your age, you might feel like it's unfair. And likewise, if everyone you know qualifies for aid because you are in a lower-income community, and you don't because you run a business with assets and therefore are actually in a higher bracket, it could feel unfair.

But usually it's not unfair. The actual unfair thing is that money is such a barrier to higher education in general in this country and having kids pretty much requires you to save for college, while also saving for retirement, while also paying your health insurance premiums. And yet we still have fairly high taxes! It's hard, but if it's "unfair" it's unfair to everyone except the very rich who inherited their wealth. And that's by design.

This really is the crux of the matter.

+1 (also thank you for the long explanation PP!)

[Anonymous]

Anonymous wrote:new poster here

Wow. I thought we were a "donut hole" family but I guess not.

What is a step below "donut hole" called? We make too much to qualify for aid, but paying for an expensive school would involve far more than "liquidating assets." It would be more like taking on a second full time job, skipping at least one meal a day, absolutely zero entertainment budget (not even cable tv or netflix) etc.

Really?

I have trouble believing this unless you are paying for luxuries (e.g. a house that costs more than $500K, or new cars) that you think are necessities, or you are just bad at budgeting.

For me, as a MC parent, financial aid at a need blind/full need school would get us into a place where we could afford tuition, with some student loans and continuing to live a modest middle class lifestyle (e.g. house worth $400K, no vacations, scaled back retirement plans, one ten year old car etc . . . ). In my experience when families who complain that they are in some unique "donut hole" and say they "can't afford" tuition, what they actually mean is that they don't want to live like me, and that unlike a MC/LMC kid they have other options because for them there are cheaper options (e.g. instate tuition, merit aid), whereas for us the full need option is the cheapest.

[Anonymous]

You people sound like the same ones who are telling young people that the reason why they can't afford to buy a house is that they're buying too much avocado toast.

It is unlucky if you just miss a cut-off point. Like, if aid is available to families making less that $200k and you make $215k. Of course, it is frustrating when you're treated the same as a family that makes $2 million. No amount of belt-tightening or savings will change that. And god forbid, life intervened and you had a medical emergency or layoff at any point over the years that set you back. People lead real lives and the crazy tuition inflation is really unforgiving, even when you've tried your best.

I think it is unfortunate that a lot of middle-class families are shut out of private universities in this country. And I feel for these families who have kids who can't dream as big as your kid can.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Typically a family that makes more than what qualifies for need-based aid but not enough *income* to pay tuition out of pocket without it having a huge impact on their lifestyle. Usually they don’t want to liquidate assets to make up the gap.

Right, because it makes no sense to sell your house to send a kid to Harvard undergrad, when a mid-rank college is giving your kid a full ride merit scholarship.

If it’s so obvious what they should choose, why are they so mad about choosing it?

Really? You have to ask why it hurts to turn down Carnegie Mellon?

Yes, really. I had fantastic stats and softs. But I only applied to state flagships (just like everyone else in my high school, in my grade, and the grade above me, and the grade below me, except for people who went to local religious schools). That’s the completely normal thing for almost everywhere in America. No idea why someone who already knows they can’t afford a fancy school would apply.

You are simply admitting that you too are in the donut hole. Its a financial situation, not an attitude.

[Anonymous]

Anonymous wrote:

Anonymous wrote:new poster here

Wow. I thought we were a "donut hole" family but I guess not.

What is a step below "donut hole" called? We make too much to qualify for aid, but paying for an expensive school would involve far more than "liquidating assets." It would be more like taking on a second full time job, skipping at least one meal a day, absolutely zero entertainment budget (not even cable tv or netflix) etc.

Well, there is this thing that you had 18 years to save for college. Which is what most people do.

GTFO

It is impossible for middle class (true MC families here in MoCo) families to save. My HHI is 106k. My EFC is 28k. How was I supposed to save 100k during that time?

Zero financial aide. I’ve just recently upped my income and am lucky I get to pay as I go.

I really hate the people who just scream “you should have saved”. It’s such an elitist attitude and it’s out of touch with reality.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Could someone please explain, because it sounds like people with nice resources feeling entitled to more than they can afford.

Sounds like you've defined it for yourself and are angling for a fight.

It sounds like you disagree with someone's opinion. Does it hit a little too close?

I'm not pp, but allow me to chime in here. I'll also disclose that our kids' 529s are way more than enough for college, so I have no personal dog in this fight.

Here are my comments: why do you have to be confrontational and nasty about a substantive discussion? Who cares if pp defines themself as a donut hole family; what's the point of your "does it hit a little too close?" jibe? You're just being a jerk. And for what it's worth I agree with pp that the OP was angling for a fight in "asking a question" while putting forth a definition that was value-laden and judgmental.