Donut hole families: Did you scrimp/save/take out loans to go to Ivies/Top privates?

[Anonymous]

Anonymous wrote:"Earn too much for need based aid, but not so much they can pay for college out of their checking account."

Not sure that is a good definition. DS and I are regular paycheck earners making about $250k each. We can't pay for college out of our checking accounts, but that doesn't mean that we can't afford it relatively easily. It's because no one should keep $300k in their checking account. In fact, we will probably just tighten the belt a little so we can pay for college out of current income, just as we've paid for private school for 12 years. But we wouldn't need to scrimp at all if we just dipped into savings or sold some investment assets.

[Anonymous]

Anonymous wrote:

Anonymous wrote:"Earn too much for need based aid, but not so much they can pay for college out of their checking account."

Not sure that is a good definition. DS and I are regular paycheck earners making about $250k each. We can't pay for college out of our checking accounts, but that doesn't mean that we can't afford it relatively easily. It's because no one should keep $300k in their checking account. In fact, we will probably just tighten the belt a little so we can pay for college out of current income, just as we've paid for private school for 12 years. But we wouldn't need to scrimp at all if we just dipped into savings or sold some investment assets.

OK, let's be a bit too literal. You get the point.

As for current income - that's the point. Ours goes right into our checking account (and then we move it or spend it). No one writes a $300k check in one go. With $500k coming in, and at least 8 payments (or more if you wish), it probably is close to being what shows up in your checking account.

[Anonymous]

Anonymous wrote:

Anonymous wrote:"Earn too much for need based aid, but not so much they can pay for college out of their checking account."

Not sure that is a good definition. DS and I are regular paycheck earners making about $250k each. We can't pay for college out of our checking accounts, but that doesn't mean that we can't afford it relatively easily. It's because no one should keep $300k in their checking account. In fact, we will probably just tighten the belt a little so we can pay for college out of current income, just as we've paid for private school for 12 years. But we wouldn't need to scrimp at all if we just dipped into savings or sold some investment assets.

I think most people would agree that $500K annual HHI is not in the donut hole. I know you’re reacting to the abstract definition which, I agree, is off. But I do think there’s a “lower upper middle class” income range where these kinds of tuitions are out of reach and so is FA. And, of course, age (are the parents student loans paid off, how many years ago did HHI hit a range where significant savings were possible), number/spacing of kids, and regional cost of living are important factors too. Elite colleges grossly overrepresent the 1% for a variety of reasons but astronomical tuition/fees/R&B is one of them.

Harvard cost $8-12K a year when I went there and it was within reach for families like mine (young parents, 4 kids, just starting to earn UMC salaries, no room for saving beyond down payment for a house prior to that) in those days. It wouldn’t be today. OTOH, I’m glad to see more outreach/resources allorated to first gen and lower income kids.

[Anonymous]

Anonymous wrote:

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Anonymous wrote:The whole concept of a donut hole is bullshit. All it means is that you don't want to pay for a private college when you can afford it. People making less can't afford it and get aid. People making more can afford it but don't bitch as loudly. There is no "hole."

There is, actually. There are plenty of data on this. And you are indeed a ‘hole.

I don't really understand the "donut hole" thing either.

I been playing with the Harvard calculator for my family size (2 people, 1 in college) and assets.

The curve is smooth. The idea that people paying 70K on 255K income are somehow suffering because they're in a "hole", but people paying 68.5K on 250K are living large because of aid is absurd. The reality is that the first family still has more left, and they'll still have far more than my family who would pay 8.2K on 90K HHI.

They will have more because they earn more than two times what your family does. It's not about what a given family has "left." It is about whether the EFC for a given family is realistic. For our family, it is not, and despite having saved almost $400K to put two kids through college, the gap between the EFC and what we can actually pay is just too large to bridge.

How on earth can $400K not be enough to put two kids through college? Even if both of your kids go to the most expensive colleges in America (examples: Vassar and U Chicago), their tuition will be almost covered by what you've saved, and you can clearly cover the excess plus room and board out of your current salaries if you've been able to sock away an astonishing $400K in savings JUST for college.

You are definitely not a donut-hole family. Good for you!

Sorry, typo. Almost $300K.

Cannot bridge the gap without loans. Cannot stomach taking out the gap amount in loans. Do not qualify for FA.

Here's what I don't understand (I'm the PP above).

Your post, and the whole donut hole concept seems to rest on the assumption that this is some unique problem you face. That the world is unfair to "donut hole" families because they and they alone have to scrimp and save, while everyone else rests on easy street because of financial aid.

Harvard would ask me to come up about $1K a month on my 90K income. To make that happen would involve significant sacrifice and possibly loans. They'd ask you to pay $2K a month (after you apply that 300K to 8 years of tuition). I not convinced that that 2K will hurt you more than it would hurt me. In fact I'm guessing you'd have options like taking out a second mortgage (I have no equity), giving up vacations (what are those?), or adding a second job (I already have one to get to 90K).

So, no, I don't see your circumstances as specifically unfair to you.

Where our circumstances do vary is in our other options. If your kid doesn't go to Harvard, he can go public and probably stay completely within your savings. He can go to a lower ranked private where merit aid will probably bring the tuition down to around $40K. So Harvard seems expensive because that's what compare it to. For my kid, public and private would both cost more, because neither guarantees to meet need.

[Anonymous]

I scrimped, and saved 250 k, which still won't cover all costs at a private. I pay for food/travel/books from current income. DC gets a small merit scholarship. It just boggles the mind that a quarter million won't put a child through undergrad...DC needs to be done in 4 years, no summer school is budgeted, no 5th year
How did I save? Public school, cheaper activities, taking on side jobs
I'm in a teeny brick home, 35 year old kitchen, 60 yr old bathroom (or looks like it) east of the park
My situation: I'm divorced, and self employed. My ex is remarried, with young kids, and not bound to pay a cent
I ran the calculators, and the CSS formula wanted me to add back my retirement savings to the pot. Basically, my kids won't get aid, and I can't save for retirement without a penalty. If I worked for a company, I'd still get to save for old age. The formula also counts my ex's salary, and the new spouse's salary

[Anonymous]

Anonymous wrote:The whole concept of a donut hole is bullshit. All it means is that you don't want to pay for a private college when you can afford it. People making less can't afford it and get aid. People making more can afford it but don't bitch as loudly. There is no "hole."

tpbp (3rd post best post)

[Anonymous]

Anonymous wrote:Going back to the original question....

I honestly think there's more of a difference in social life based on family economics at public universities than at many top private colleges. If you go to a school like Yale or Harvard or UChicago, dorm assignments aren't based on income, few people live off campus, Greek life isn't that important and very few people have cars at school. Admission to sporting events is usually free with a college ID. At some colleges, e.g., Swarthmore, there's no charge for any on campus events--concerts, plays, movies, sporting events, etc. on campus are "free."

Go to a school like UVa or UTexas@A and Greek life becomes more important. People live in Greek frats/sororities and for many of these there is an unofficial requirement that you be of a certain economic class to be admitted. Sometimes there's even a wealth hierarchy with some houses being for the ultrawealthy and others for more middle income folks.(This is partly the result of varying costs to belong to different frats/sororities.) There can be great variations in the cost of student housing so kids from richer families having nicer places to live. That process often accelerates after the first year, as students move off campus. Lots of kids have cars on campus, and parking lots are filled with BMWs. If you want to go to a sporting event, you pay for it--a season pass can be very expensive. At some schools, the Greek houses get the best seats because they buy big blocks of tickets.

Some public Us raise money by attracting truly wealthy out of state students at inflated prices. (Read "Paying for the Party," a sociological study of a dorm at a poorly disguised Indiana U.) At some public Us, international students are ineligible for any financial aid, and these kids are often from megawealthy families.

So, don't assume that a kid from a "donut" family--assuming there is such a thing--is automatically going to fit in better at a public U. It really does vary by school, so check out each one.

Thanks, PP, for answering the posted question. I appreciate your response.

[Anonymous]

What in the world is a doughnut hole family?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The whole concept of a donut hole is bullshit. All it means is that you don't want to pay for a private college when you can afford it. People making less can't afford it and get aid. People making more can afford it but don't bitch as loudly. There is no "hole."

There is, actually. There are plenty of data on this. And you are indeed a ‘hole.

I don't really understand the "donut hole" thing either.

I been playing with the Harvard calculator for my family size (2 people, 1 in college) and assets.

The curve is smooth. The idea that people paying 70K on 255K income are somehow suffering because they're in a "hole", but people paying 68.5K on 250K are living large because of aid is absurd. The reality is that the first family still has more left, and they'll still have far more than my family who would pay 8.2K on 90K HHI.

There are incomes where you earn more, but because of tax deduction thresholds, the AMT, etc. you take home the same or less than than lower gross incomes. Not to mention that there is no allowance for where people live, so not necessarily true.

[Anonymous]

Anonymous wrote:What in the world is a doughnut hole family?

It's a metaphor - means you fall in a gap between financial aid eligibility and ability to pay.

https://challenges.openideo.com/challenge/higher-ed/research/hunting-for-merit-scholarships-as-a-doughnut-hole-kid

[Anonymous]

Anonymous wrote:What in the world is a doughnut hole family?

Whiney upper-middle class spendthrifts b*tching about college costs, basically.

[Anonymous]

Anonymous wrote:I scrimped, and saved 250 k, which still won't cover all costs at a private. I pay for food/travel/books from current income. DC gets a small merit scholarship. It just boggles the mind that a quarter million won't put a child through undergrad...DC needs to be done in 4 years, no summer school is budgeted, no 5th year
How did I save? Public school, cheaper activities, taking on side jobs
I'm in a teeny brick home, 35 year old kitchen, 60 yr old bathroom (or looks like it) east of the park
My situation: I'm divorced, and self employed. My ex is remarried, with young kids, and not bound to pay a cent
I ran the calculators, and the CSS formula wanted me to add back my retirement savings to the pot. Basically, my kids won't get aid, and I can't save for retirement without a penalty. If I worked for a company, I'd still get to save for old age. The formula also counts my ex's salary, and the new spouse's salary

This is your problem. Unfortunately, your divorce agreement didn't stipulate that he had to pay for college.

[Anonymous]

Not whining about it but the middle class is disappearing from campuses. Considering that the middle class has a historical record of driving our economy forward, the fact that they perceive they increasingly can't access elite education under some of the greatest minds in our nation is disturbing. And yes, many institutions do a fine job below that level but the reality is that the branding a top 20 school conveys assists in bringing top minds to attention.

[Anonymous]

Anonymous wrote:Not whining about it but the middle class is disappearing from campuses. Considering that the middle class has a historical record of driving our economy forward, the fact that they perceive they increasingly can't access elite education under some of the greatest minds in our nation is disturbing. And yes, many institutions do a fine job below that level but the reality is that the branding a top 20 school conveys assists in bringing top minds to attention.

The middle class is shrinking in the US, not just campuses. From the Pew Research Center:

"Among American adults overall, including those from outside the 229 [metropolitan statistical] areas examined in depth, the share living in middle-income households fell from 55% in 2000 to 51% in 2014. Reflecting the accumulation of changes at the metropolitan level, the nationwide share of adults in lower-income households increased from 28% to 29% and the share in upper-income households rose from 17% to 20% during the period."

http://www.pewsocialtrends.org/2016/05/11/americas-shrinking-middle-class-a-close-look-at-changes-within-metropolitan-areas/

[Anonymous]

Anonymous wrote:

Anonymous wrote:I scrimped, and saved 250 k, which still won't cover all costs at a private. I pay for food/travel/books from current income. DC gets a small merit scholarship. It just boggles the mind that a quarter million won't put a child through undergrad...DC needs to be done in 4 years, no summer school is budgeted, no 5th year
How did I save? Public school, cheaper activities, taking on side jobs
I'm in a teeny brick home, 35 year old kitchen, 60 yr old bathroom (or looks like it) east of the park
My situation: I'm divorced, and self employed. My ex is remarried, with young kids, and not bound to pay a cent
I ran the calculators, and the CSS formula wanted me to add back my retirement savings to the pot. Basically, my kids won't get aid, and I can't save for retirement without a penalty. If I worked for a company, I'd still get to save for old age. The formula also counts my ex's salary, and the new spouse's salary

This is your problem. Unfortunately, your divorce agreement didn't stipulate that he had to pay for college.

Even if it had, such a clause is not likely to be enforceable.