What is a "donut hole family"?

[Anonymous]

Being able to save for college is an absolute luxury. One of the only reasons we didn't drown in our 30s financially was because my DH and I were able to pay off our own college costs with some help from family.

If you are still paying you own student loans, it is tough to find cash to sock away for your kids. Especially since college savings should never come before retirement savings. How many Americans do you think have $1M in retirement savings? I'll answer that: VERY FEW.

Are college costs insane? Yes. If you are rich (making over $200k is RICH) does anyone feel bad for you? NO.

[Anonymous]

Anonymous wrote:Being able to save for college is an absolute luxury. One of the only reasons we didn't drown in our 30s financially was because my DH and I were able to pay off our own college costs with some help from family.

If you are still paying you own student loans, it is tough to find cash to sock away for your kids. Especially since college savings should never come before retirement savings. How many Americans do you think have $1M in retirement savings? I'll answer that: VERY FEW.

Are college costs insane? Yes. If you are rich (making over $200k is RICH) does anyone feel bad for you? NO.

This exactly. Most people I know were still paying off their own student loans when they had kids, so we had late starts saving for our own kids. You obviously try to catch up but it is what it is. I also don't think people are as mad about this as some of you seem to think.

[Anonymous]

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.

Funny the hole is much larger than the donut.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm in NW DC and almost all of my friends here went to elite universities and had undergrad paid for by family.

I grew up near Reading, PA. My mother was a nurse and my father worked for the state of PA.
I had loans for undergrad, as did my entire cohort of friends. Many of us only paid off our own loans by age 30 or 35. Those who went on to professional school were still paying at age 35. My brother went
to medical school and didn't finish residency until age 32 and only then could he start aggressively paying off a huge debt and his salary as a physician is still not impressive by DCUM standards.

I think people on DCUM forget that many people are paying for their own education well into adulthood. It's a whole different life if you start off your adult life with giant loans.
The person who gives the example "well, just keep living in the house you bought at age 27!" is so out of touch. You know that many of us had NO ability to buy a house at age 27?!!! We had 100K in loans at that point and were living with 3 roommates trying to pay them off.

Do your kids a favor and have them graduate with minimum debt/loans. You know how limiting loans can be on your upward mobility. Send them to your state universities! Why is this so difficult?

How much do I need to save per year to afford a state university with room and board? It seems they have gotten expensive too.

30K per year seems pretty standard. When safety schools offer merit aid, that seems to be the number they're looking to compete with. Know that most schools don't guarantee housing all four years, and rents can be very high even in college towns, so that can be an added expense.

Add at least 10k a year for UVA, W&M or VT instate

[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.

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.

So your kid attends a school you can afford. It's what 99% of people have to do. Yes, it would be stupid to cash in your retirement. There are great schools that you can afford, so you find those, search out merit and attend college with minimal debt.

[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.

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

Most people…do not save for college for 18 years. Because they are supporting their families, paying off their own student debt, and trying to save for retirement.

+1. For a large percentage of Americans, prioritizing college savings would come at the expense of other things we consider to be necessities, or retirement savings. Which is not always wise because you'll be a burden to your kids in retirement too. I remember being pretty upset at 18 realizing my parents had nothing for me for college. But in retrospect I don't know where they would have found the money to save- we weren't taking fancy vacations, no travel sports or dance lessons, my mom cut coupons, etc. They still probably don't have enough for retirement but better off than many. We did get financial aid but a lot of that "aid" was loans.

Our HHI is up to $200k and I feel extremely fortunate that we can stash away a few hundred per kid per month. But it's crazy that you have to save 18 years for even an IN STATE university. This did not used to be the case. The only real affordable option for the middle class now is community college.

Our priority was retirement and college. We saved for a down payment in one year by going very frugal.

If you can save for a down payment in 1 year by being frugal, you probably aren't what most people consider a donut hole family

[Anonymous]

Anonymous wrote:

Anonymous wrote:Being able to save for college is an absolute luxury. One of the only reasons we didn't drown in our 30s financially was because my DH and I were able to pay off our own college costs with some help from family.

If you are still paying you own student loans, it is tough to find cash to sock away for your kids. Especially since college savings should never come before retirement savings. How many Americans do you think have $1M in retirement savings? I'll answer that: VERY FEW.

Are college costs insane? Yes. If you are rich (making over $200k is RICH) does anyone feel bad for you? NO.

This exactly. Most people I know were still paying off their own student loans when they had kids, so we had late starts saving for our own kids. You obviously try to catch up but it is what it is. I also don't think people are as mad about this as some of you seem to think.

For sure. I was lucky in that I married someone who came out of school with no loans, so he was saving for our house downpayment while I aggressively paid mine off so that they were out of the way before we had kids. My sister married someone else who did have student loans as well and their financial situation is so different because of that. Slower to save for a down payment, less $ going to their kids 529s.

[Anonymous]

Anonymous wrote:

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.

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

Most people…do not save for college for 18 years. Because they are supporting their families, paying off their own student debt, and trying to save for retirement.

+1. For a large percentage of Americans, prioritizing college savings would come at the expense of other things we consider to be necessities, or retirement savings. Which is not always wise because you'll be a burden to your kids in retirement too. I remember being pretty upset at 18 realizing my parents had nothing for me for college. But in retrospect I don't know where they would have found the money to save- we weren't taking fancy vacations, no travel sports or dance lessons, my mom cut coupons, etc. They still probably don't have enough for retirement but better off than many. We did get financial aid but a lot of that "aid" was loans.

Our HHI is up to $200k and I feel extremely fortunate that we can stash away a few hundred per kid per month. But it's crazy that you have to save 18 years for even an IN STATE university. This did not used to be the case. The only real affordable option for the middle class now is community college.

Our priority was retirement and college. We saved for a down payment in one year by going very frugal.

If you can save for a down payment in 1 year by being frugal, you probably aren't what most people consider a donut hole family

If you give up daily Starbucks that’s an extra $1509 per year.

[Anonymous]

An objectively rich family that didn’t save enough for college.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Nobody in their right mind thinks college cost increases over the past 25 years are not exorbitant.

and congress wants to put a cap on nurses pay, come on let's put some regulations around college costs.

I don’t disagree with you, at all. But I still don’t believe there’s any such thing as a donut hole family.

ok. How does a couple married at 26 with student loans and earning 200k by the time their oldest is in college, but whose earnings were closer to 100k combined for most of the kid's life (i.e. reasonable salaries outside of high COL cities) afford an expensive college? The family never would have earned sufficiently to save enough, but they don't qualify for aid. There is nothing right or wrong/moral or amoral about it, it's just a financial status

And in the same manner that that couple doesn't spend $50K on a luxury car (or they shouldn't), they don't plan to send their kid to the elite private universities. It's not like there are not great choices for college---there are literally tons of great universities that can be affordable to them---but it wont be the elite universities. So do what majority of people do, you seek out merit at the next tier(s) of universities, and graduate with minimal debt.

If attending an elite university is important to you, when your income went from $100k to 200K, you could have taken $20-30K each year and put it into savings/529. Because you were living on the 100K, according to your scenario. But you made choices to do otherwise and those may have been smarter choices for your family. It's all about choices. IMO I agree that saving for elite univ is probably not the best use of money---so save to have $20-25K/year and cash flow the rest. If HYP is what you really want for your kid, then save

[Anonymous]

Anonymous wrote:

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.

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

Most people…do not save for college for 18 years. Because they are supporting their families, paying off their own student debt, and trying to save for retirement.

+1. For a large percentage of Americans, prioritizing college savings would come at the expense of other things we consider to be necessities, or retirement savings. Which is not always wise because you'll be a burden to your kids in retirement too. I remember being pretty upset at 18 realizing my parents had nothing for me for college. But in retrospect I don't know where they would have found the money to save- we weren't taking fancy vacations, no travel sports or dance lessons, my mom cut coupons, etc. They still probably don't have enough for retirement but better off than many. We did get financial aid but a lot of that "aid" was loans.

Our HHI is up to $200k and I feel extremely fortunate that we can stash away a few hundred per kid per month. But it's crazy that you have to save 18 years for even an IN STATE university. This did not used to be the case. The only real affordable option for the middle class now is community college.

Our priority was retirement and college. We saved for a down payment in one year by going very frugal.

If you can save for a down payment in 1 year by being frugal, you probably aren't what most people consider a donut hole family

+1

Of the donut hole families I know, they don't have any excuses, an any outs, loopholes, family members, or sob stories to help for financial aid. I know one family who makes claims about covid taking away their income - but they didn't really put in many hours, anyway, so covid is just a convenient and timely excuse. I know another family whose parent was paid a generous and steady income, under the table, for about a decade - no taxes, great benefits like health insurance completely paid, but they do not claim or pay taxes on any of that income, and make the excuse that they were "unemployed" during that entire decade. Some would call that behavior entitled and brazen.

I think more people should be making legitimate appeals to financial aid, as there are many with legitimate stories being unserved and underserved by financial aid. Usually a donut hole family is one that just barely does not make enough to qualify for financial aid, in spite of actually having at least one full time job, and putting in the hours, that they pay taxes on. There is no harm in appealing and asking your financial aid department what they can do for your situation.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

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

Most people…do not save for college for 18 years. Because they are supporting their families, paying off their own student debt, and trying to save for retirement.

+1. For a large percentage of Americans, prioritizing college savings would come at the expense of other things we consider to be necessities, or retirement savings. Which is not always wise because you'll be a burden to your kids in retirement too. I remember being pretty upset at 18 realizing my parents had nothing for me for college. But in retrospect I don't know where they would have found the money to save- we weren't taking fancy vacations, no travel sports or dance lessons, my mom cut coupons, etc. They still probably don't have enough for retirement but better off than many. We did get financial aid but a lot of that "aid" was loans.

Our HHI is up to $200k and I feel extremely fortunate that we can stash away a few hundred per kid per month. But it's crazy that you have to save 18 years for even an IN STATE university. This did not used to be the case. The only real affordable option for the middle class now is community college.

Our priority was retirement and college. We saved for a down payment in one year by going very frugal.

If you can save for a down payment in 1 year by being frugal, you probably aren't what most people consider a donut hole family

If you give up daily Starbucks that’s an extra $1509 per year.

only 95k to got for 20% on a 500k house

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

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

Most people…do not save for college for 18 years. Because they are supporting their families, paying off their own student debt, and trying to save for retirement.

+1. For a large percentage of Americans, prioritizing college savings would come at the expense of other things we consider to be necessities, or retirement savings. Which is not always wise because you'll be a burden to your kids in retirement too. I remember being pretty upset at 18 realizing my parents had nothing for me for college. But in retrospect I don't know where they would have found the money to save- we weren't taking fancy vacations, no travel sports or dance lessons, my mom cut coupons, etc. They still probably don't have enough for retirement but better off than many. We did get financial aid but a lot of that "aid" was loans.

Our HHI is up to $200k and I feel extremely fortunate that we can stash away a few hundred per kid per month. But it's crazy that you have to save 18 years for even an IN STATE university. This did not used to be the case. The only real affordable option for the middle class now is community college.

Our priority was retirement and college. We saved for a down payment in one year by going very frugal.

If you can save for a down payment in 1 year by being frugal, you probably aren't what most people consider a donut hole family

+1

Of the donut hole families I know, they don't have any excuses, an any outs, loopholes, family members, or sob stories to help for financial aid. I know one family who makes claims about covid taking away their income - but they didn't really put in many hours, anyway, so covid is just a convenient and timely excuse. I know another family whose parent was paid a generous and steady income, under the table, for about a decade - no taxes, great benefits like health insurance completely paid, but they do not claim or pay taxes on any of that income, and make the excuse that they were "unemployed" during that entire decade. Some would call that behavior entitled and brazen.

I think more people should be making legitimate appeals to financial aid, as there are many with legitimate stories being unserved and underserved by financial aid. Usually a donut hole family is one that just barely does not make enough to qualify for financial aid, in spite of actually having at least one full time job, and putting in the hours, that they pay taxes on. There is no harm in appealing and asking your financial aid department what they can do for your situation.

I consider us donut. We're at about 200k a year with two kids. The salary is recent, and ever since, we've been putting 2k a month away towards college. We'll be able to cover most of instate, but an OOS flagship or a top private isn't happening. The three years they overlap will be 80k a year combined for a good instate which probably means parent plus loans. We're comfortable and not complaining.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

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

Most people…do not save for college for 18 years. Because they are supporting their families, paying off their own student debt, and trying to save for retirement.

+1. For a large percentage of Americans, prioritizing college savings would come at the expense of other things we consider to be necessities, or retirement savings. Which is not always wise because you'll be a burden to your kids in retirement too. I remember being pretty upset at 18 realizing my parents had nothing for me for college. But in retrospect I don't know where they would have found the money to save- we weren't taking fancy vacations, no travel sports or dance lessons, my mom cut coupons, etc. They still probably don't have enough for retirement but better off than many. We did get financial aid but a lot of that "aid" was loans.

Our HHI is up to $200k and I feel extremely fortunate that we can stash away a few hundred per kid per month. But it's crazy that you have to save 18 years for even an IN STATE university. This did not used to be the case. The only real affordable option for the middle class now is community college.

Our priority was retirement and college. We saved for a down payment in one year by going very frugal.

If you can save for a down payment in 1 year by being frugal, you probably aren't what most people consider a donut hole family

+1

Of the donut hole families I know, they don't have any excuses, an any outs, loopholes, family members, or sob stories to help for financial aid. I know one family who makes claims about covid taking away their income - but they didn't really put in many hours, anyway, so covid is just a convenient and timely excuse. I know another family whose parent was paid a generous and steady income, under the table, for about a decade - no taxes, great benefits like health insurance completely paid, but they do not claim or pay taxes on any of that income, and make the excuse that they were "unemployed" during that entire decade. Some would call that behavior entitled and brazen.

I think more people should be making legitimate appeals to financial aid, as there are many with legitimate stories being unserved and underserved by financial aid. Usually a donut hole family is one that just barely does not make enough to qualify for financial aid, in spite of actually having at least one full time job, and putting in the hours, that they pay taxes on. There is no harm in appealing and asking your financial aid department what they can do for your situation.

*and illegal

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:People who do not qualify for financial aid, but whose real economic situation means they can't afford expensive colleges even if their kids are admitted. They are the families whose kids turn down Carnegie Mellon and take the merit award at Pitt.

So why is this a problem? Statistically, it seems highly likely their resources are what enabled their kids to become high achievers in the first place. If they can't afford the tippy top status colleges, what is wrong with being "the best" at what they can afford?

Like PP said, some of the colleges are worried about their student bodies getting barbelled and resembling private schools more than the traditional mix that the colleges had. We'll happily pay instate or equivalent OOS, but we're not willing to give up on retirement to send out kids to Haverford. That's fine with us and our kids. Whether or not these schools want a mix of LMC and Poor and very upper middles class and upper class with nothing in between is another question.

Same. Yes, we could stretch for it by compromising our retirement or pulling out home equity but I just don't see the value of these $70K+ colleges no matter what name is on the diploma. One kid happy at VT and the other is looking at mostly LACs that give merit or would like W&M in-state. Totally fine with those options. I had to make the same trade off when I went to college in the early 90s.

Agree! I can afford 80k per year but I can’t let myself pay that much for a college degree. I posted about this here and was harassed by most posters regarding my lack of understanding about the college experience and how much better options and life an 80k college can guarantee versus a state school. So thank you for your post. I have friends who are donut hole families but somehow took out loans to send both kids to 80k /year schools (not Ivies). I know posters will tell me to MYOB etc. but its still shocking what people will do for so called prestige.

Their kids will be complaining in 15 years that they still have $150K in student loans to go for an undergrad degree and can't save for their own kids. Really bad idea (imo). No undergrad is worth $200K in loans.