Why do donut hole families

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Maybe I missed someone else posting this, but it is about to get WORSE for donut hole families who have two kids close in age! Quietly how financial aid is calculated for people who have two kids in college has changed. Instead of factoring in having to pay tuition for multiple kids now financial aid is no calculating this.

By this it used to be that let's say you earn 150000 and the EFC says you can contribute 60,000. It used to be that if you had two kids then you paid 30K per kid. Or if you had three kids in college you were expected to contribute 20K per year. Now you are expected to contribute 60K no matter how many other college tuitions you are paying. So if you have two kids you would pay 120,000 which is ridiculous for a family making 150,000.

You should consider that when you decide the number of kids you have. Life is about choices. Saving is a choice, the house and expenses you have are choices, and the number of kids you have are choices.

Thanks for this. I’ll remember that when I have twins again, then discover when they start college together that the FAFSA EFC is $103K while our take-home pay less our mortgage is $101K. Because that advice would so clearly help in our situation. And before you say it, no, we don’t have a million dollar home and we don’t have millions in retirement. But we do have a fair amount of college savings and apparently we get penalized for that.

How much is your mortgage? Sounds like kids should go to a state school.

PP here. It's about $500K and PITI nets out to around $53K/yr. We're paying for one kid at a good private college that offered some aid, but the reality is that we have a few hundred $K saved for college and this increased our EFC for both of them. Maybe we shouldn't have saved so much?

Before you blame the savings, run the numbers without and see if you'd actually be in better shape at that EFC and no savings. They only get hit at 6%, income is what drives the calculation for most people. Plus EFC is just a number, nothing saying you can find a school that matches it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The donut hole is a myth that poor savers tell themselves. Decisions have consequences. Buying a larger house or nicer car - spending more for vacations and fancy summer camps are all decisions.

College costs are not unexpected. You have nearly two decades to save.

Plus, you don’t have to save for the most expensive college. All of you who consider yourselves middle class- that means kids stay at home and go to college or they go to an instate college. That is what middle class parents have done for generations. Paying the full amount for high end tuitions for private schools are for rich families not yours.

I actually agree with you. So background, we have $250k HHI, $3M investment portfolio, house paid off.

Yeah, we can afford any college. Probably. For three kids though??

And is private or out of state worth it? No, I don't think so.

If we made $600k, that would be a different story. If we had $6M in stocks instead of $3M, that would also be different.

So I think we've made decent choices along the way about cars and houses and whatnot. But I consider us donut hole because we're too wealthy for financial aid, but not wealthy enough for a $350k undergraduate degree to be a drop in the bucket.

Having 3 kids is also a financial choice. I wouldn't have 3 for this very reason. We had kids we knew we could afford to send to college. For us that was 2.

Fair enough, but also another sign of how things have changed. I wouldn’t have 3 now either, but it would never have occurred to my parents or grandparents to not have more than 1-2 kids because of college costs.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The donut hole is a myth that poor savers tell themselves. Decisions have consequences. Buying a larger house or nicer car - spending more for vacations and fancy summer camps are all decisions.

College costs are not unexpected. You have nearly two decades to save.

Plus, you don’t have to save for the most expensive college. All of you who consider yourselves middle class- that means kids stay at home and go to college or they go to an instate college. That is what middle class parents have done for generations. Paying the full amount for high end tuitions for private schools are for rich families not yours.

I actually agree with you. So background, we have $250k HHI, $3M investment portfolio, house paid off.

Yeah, we can afford any college. Probably. For three kids though??

And is private or out of state worth it? No, I don't think so.

If we made $600k, that would be a different story. If we had $6M in stocks instead of $3M, that would also be different.

So I think we've made decent choices along the way about cars and houses and whatnot. But I consider us donut hole because we're too wealthy for financial aid, but not wealthy enough for a $350k undergraduate degree to be a drop in the bucket.

Having 3 kids is also a financial choice. I wouldn't have 3 for this very reason. We had kids we knew we could afford to send to college. For us that was 2.

Fair enough, but also another sign of how things have changed. I wouldn’t have 3 now either, but it would never have occurred to my parents or grandparents to not have more than 1-2 kids because of college costs.

This.

[Anonymous]

This is why we have strategically planned. All of us with professional white collar jobs and kids have quite likely been working for 20 years. That’s been plenty of time to plan properly. That’s plenty of time to drive down to a low mortgage. We are now sitting on a $1900/mo PITI and have modest college savings. We have quite enough cash flow to affford whatever college our kids want to go to based on solid financial choices and not saddling ourselves with a mortgage that morphs into an albatross. Even if my kid wanted to go to NYU, we have 90k saved and would simply need to come up with $5,416/mo which isn’t a big deal considering our mortgage is our only debt. Are we going to fund an 85k/yr school without significant aid just because “we can”? Helllll no. That’s just dumb. I don’t care if he gets in Stanford. If he can get in Stanford he can get in UVA which is just as good.

[Anonymous]

Anonymous wrote:This is why we have strategically planned. All of us with professional white collar jobs and kids have quite likely been working for 20 years. That’s been plenty of time to plan properly. That’s plenty of time to drive down to a low mortgage. We are now sitting on a $1900/mo PITI and have modest college savings. We have quite enough cash flow to affford whatever college our kids want to go to based on solid financial choices and not saddling ourselves with a mortgage that morphs into an albatross. Even if my kid wanted to go to NYU, we have 90k saved and would simply need to come up with $5,416/mo which isn’t a big deal considering our mortgage is our only debt. Are we going to fund an 85k/yr school without significant aid just because “we can”? Helllll no. That’s just dumb. I don’t care if he gets in Stanford. If he can get in Stanford he can get in UVA which is just as good.

Choices. It's all about choices. You have strategically planned to be able to save some and cash flow the rest.

I agree, I would not pay $80K for most schools if I didn't have it already saved for my kids (we do so it's available for undergrad and/or grad depending upon what they choose).

[Anonymous]

Anonymous wrote:This is why we have strategically planned. All of us with professional white collar jobs and kids have quite likely been working for 20 years. That’s been plenty of time to plan properly. That’s plenty of time to drive down to a low mortgage. We are now sitting on a $1900/mo PITI and have modest college savings. We have quite enough cash flow to affford whatever college our kids want to go to based on solid financial choices and not saddling ourselves with a mortgage that morphs into an albatross. Even if my kid wanted to go to NYU, we have 90k saved and would simply need to come up with $5,416/mo which isn’t a big deal considering our mortgage is our only debt. Are we going to fund an 85k/yr school without significant aid just because “we can”? Helllll no. That’s just dumb. I don’t care if he gets in Stanford. If he can get in Stanford he can get in UVA which is just as good.

Congratulation, by definition you aren't donut hole if you can cashflow any college

[Anonymous]

Anonymous wrote:

Anonymous wrote:This is why we have strategically planned. All of us with professional white collar jobs and kids have quite likely been working for 20 years. That’s been plenty of time to plan properly. That’s plenty of time to drive down to a low mortgage. We are now sitting on a $1900/mo PITI and have modest college savings. We have quite enough cash flow to affford whatever college our kids want to go to based on solid financial choices and not saddling ourselves with a mortgage that morphs into an albatross. Even if my kid wanted to go to NYU, we have 90k saved and would simply need to come up with $5,416/mo which isn’t a big deal considering our mortgage is our only debt. Are we going to fund an 85k/yr school without significant aid just because “we can”? Helllll no. That’s just dumb. I don’t care if he gets in Stanford. If he can get in Stanford he can get in UVA which is just as good.

Congratulation, by definition you aren't donut hole if you can cashflow any college

As PP demonstrates, most the people who say they can't cash flow college on their income, have let their spending get out of hand. That's why the term is so obnoxious. How can someone making 200K tell someone making 100K that the extra income makes paying for college a hardship?

[Anonymous]

Anonymous wrote:

Anonymous wrote:This is why we have strategically planned. All of us with professional white collar jobs and kids have quite likely been working for 20 years. That’s been plenty of time to plan properly. That’s plenty of time to drive down to a low mortgage. We are now sitting on a $1900/mo PITI and have modest college savings. We have quite enough cash flow to affford whatever college our kids want to go to based on solid financial choices and not saddling ourselves with a mortgage that morphs into an albatross. Even if my kid wanted to go to NYU, we have 90k saved and would simply need to come up with $5,416/mo which isn’t a big deal considering our mortgage is our only debt. Are we going to fund an 85k/yr school without significant aid just because “we can”? Helllll no. That’s just dumb. I don’t care if he gets in Stanford. If he can get in Stanford he can get in UVA which is just as good.

Congratulation, by definition you aren't donut hole if you can cashflow any college

technically, however the reason many are able to cash flow is due to Choices. They worked to pay off mortgage and have a lower PITI. However they could have purchased a home with PITI of $5000 or kept refinancing to get their PITI to $5k while pulling out cash. Point is people with similar incomes often do different things

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is why we have strategically planned. All of us with professional white collar jobs and kids have quite likely been working for 20 years. That’s been plenty of time to plan properly. That’s plenty of time to drive down to a low mortgage. We are now sitting on a $1900/mo PITI and have modest college savings. We have quite enough cash flow to affford whatever college our kids want to go to based on solid financial choices and not saddling ourselves with a mortgage that morphs into an albatross. Even if my kid wanted to go to NYU, we have 90k saved and would simply need to come up with $5,416/mo which isn’t a big deal considering our mortgage is our only debt. Are we going to fund an 85k/yr school without significant aid just because “we can”? Helllll no. That’s just dumb. I don’t care if he gets in Stanford. If he can get in Stanford he can get in UVA which is just as good.

Congratulation, by definition you aren't donut hole if you can cashflow any college

technically, however the reason many are able to cash flow is due to Choices. They worked to pay off mortgage and have a lower PITI. However they could have purchased a home with PITI of $5000 or kept refinancing to get their PITI to $5k while pulling out cash. Point is people with similar incomes often do different things

If the income is that high, you have choices. For other donut hole families, the only way to cashflow would be to not pay the IRS

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is why we have strategically planned. All of us with professional white collar jobs and kids have quite likely been working for 20 years. That’s been plenty of time to plan properly. That’s plenty of time to drive down to a low mortgage. We are now sitting on a $1900/mo PITI and have modest college savings. We have quite enough cash flow to affford whatever college our kids want to go to based on solid financial choices and not saddling ourselves with a mortgage that morphs into an albatross. Even if my kid wanted to go to NYU, we have 90k saved and would simply need to come up with $5,416/mo which isn’t a big deal considering our mortgage is our only debt. Are we going to fund an 85k/yr school without significant aid just because “we can”? Helllll no. That’s just dumb. I don’t care if he gets in Stanford. If he can get in Stanford he can get in UVA which is just as good.

Congratulation, by definition you aren't donut hole if you can cashflow any college

As PP demonstrates, most the people who say they can't cash flow college on their income, have let their spending get out of hand. That's why the term is so obnoxious. How can someone making 200K tell someone making 100K that the extra income makes paying for college a hardship?

+1000

People just feel entitled to spend all the extra they make, without putting a budget in place. responsible people plan for college before having kids/when kids are very young. And if they can't save enough, they own it and find a school affordable to their family.

[Anonymous]

My kids are young and DH and I got through all our education without debt, so I apologize if this sounds ignorant:
Would a family that has a mortgage-free house (say it is worth $2m) and well-funded retirement accounts (say $3m between them) but little money in 529 plans, a brokerage account or any other liquid accounts get aid if their HHI isn't very high (say one of the two parents retired early 5 years prior to their oldest starting college, bringing their HHI down to $150k)?

[Anonymous]

Anonymous wrote:My kids are young and DH and I got through all our education without debt, so I apologize if this sounds ignorant:
Would a family that has a mortgage-free house (say it is worth $2m) and well-funded retirement accounts (say $3m between them) but little money in 529 plans, a brokerage account or any other liquid accounts get aid if their HHI isn't very high (say one of the two parents retired early 5 years prior to their oldest starting college, bringing their HHI down to $150k)?

No---you own a $2M home and have retirement funded. Not likely to get much or any aid. And really you should not get any. You can save for your kids education if you can have a mortgage free $2M home.

[Anonymous]

Anonymous wrote:My kids are young and DH and I got through all our education without debt, so I apologize if this sounds ignorant:
Would a family that has a mortgage-free house (say it is worth $2m) and well-funded retirement accounts (say $3m between them) but little money in 529 plans, a brokerage account or any other liquid accounts get aid if their HHI isn't very high (say one of the two parents retired early 5 years prior to their oldest starting college, bringing their HHI down to $150k)?

Nope. Certainly not at CSS schools who will be looking at the worth of that "mortgage-free house".

[Anonymous]

Anonymous wrote:

Anonymous wrote:My kids are young and DH and I got through all our education without debt, so I apologize if this sounds ignorant:
Would a family that has a mortgage-free house (say it is worth $2m) and well-funded retirement accounts (say $3m between them) but little money in 529 plans, a brokerage account or any other liquid accounts get aid if their HHI isn't very high (say one of the two parents retired early 5 years prior to their oldest starting college, bringing their HHI down to $150k)?

No---you own a $2M home and have retirement funded. Not likely to get much or any aid. And really you should not get any. You can save for your kids education if you can have a mortgage free $2M home.

So equity in a primary residence and retirement account balances are considered in need-based aid determinations?

[Anonymous]

Anonymous wrote:My kids are young and DH and I got through all our education without debt, so I apologize if this sounds ignorant:
Would a family that has a mortgage-free house (say it is worth $2m) and well-funded retirement accounts (say $3m between them) but little money in 529 plans, a brokerage account or any other liquid accounts get aid if their HHI isn't very high (say one of the two parents retired early 5 years prior to their oldest starting college, bringing their HHI down to $150k)?

You'd get a ton of FAFSA aid and no CSS aid