What is a "donut hole family"?

[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.

It is people in the 25%-10% percentile in family income distribution in the USA, or especially in the major metropolitan areas. Those families can afford 1-2 kids going to in-state universities at full pay, but would not be able to pay (without selling chunks of their house value etc...) the private pay tuition/board at $80K/year for 1-2 kids, but whose family income is too high for any need-based aid from financial aid programs (either federal or from the university) but who are by definition solidly upper middle class and so aspire to the same colleges as the 10%-1% families and whose previous generations WERE able to afford to be full pay and private colleges in the USA but are now priced out due to the over-inflation of tuition compared to income growth over the last 30-40 years.

What further complicates it is that FAFSA doesn't care whether you live in the DMV or Mississippi. Your housing and other costs are irrelevant.

In high COL areas, it's even difficult for people in the 95th percentile in family income to pay multiple tuitions of $80K/year and rising.

[Anonymous]

Ah yes, the mythical 400k house in the DMV

[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.

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.

A house that costs $500k is a luxury? We couldn’t find anything that fit what we needed for anywhere close to that. And we were looking outside the beltway.

[Anonymous]

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.

I'm 60 years old and graduated from a NESCAC school in 1983. The year I started, it cost about $8K for tuition, room, and board. I paid about $2000-$2500 of that from summer and part-time job (during the school year) earnings and my parents paid the rest. They did the same for my three siblings. It was not "comfortable" meaning "cushy," but it was completely doable. Some of my friends at similar schools and at Ivy League schools needed loans, and they took them out (usually around $6K-$8K total) and paid them off fairly quickly. My friends at public universities were able to work their way through college earning minimum wage.

Fast-forward, that private school now costs $80K all-in. Very few families with four children could pay for it "comfortably" no matter how hard the kids worked during summers.

That is what people are angry about.

[Anonymous]

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

My question for you is, why do you feel like your choices, that led you to the income and resources that you have (or lack), entitle your child to a free education regardless of the price tag?

[Anonymous]

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.

[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?

OP posed her subject for the thread as a question, but it is not a question at all. It's OP's opinion.

[Anonymous]

Most donut hole scenarios is that you marry around 30 and your HHI is about $100-$130K.

Mortgage, loans and daycare... no ability to save.

With a 5% increase in salary over the next few years you get to ~$150K.

Kids are 10 and maybe you can save $1000/month if you are lucky. After 8 years you have $80000 in college funds, divided by 2 kids, divided by 4 years, $10000/year to help pay college.

You now make $200K, no way, no how you are getting aid, college costs $40K-$80K/year.

You kid will only qualify for $5K, you can pay $10K out of earnings, $10K from saving and you are $15K - $55K/year in the hole... donut hole.

A parent plus loan is a 4% fee just to get the loan, the interest rates are 7%.

So you borrow against your retirement since that is cheaper, but not really because you are losing earnings.

At 75 you can finally retire to make up for your kids college.

[Anonymous]

Anonymous wrote:

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.

Nope. This was before Ivies had generous grants. I wasn’t willing to take out loans, so I didn’t. It’s no tragedy. The wonderful thing is I had a state flagship to give me a top notch education. Sorta like kids today.

[Anonymous]

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.

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.

Actually sounds like you want a fight. Meh, have at it. I didn't throw the first punch. Since when is asking honestly for clarification of someone's/many ones whines about their perceived oppression "angling for a fight"? I've never heard the term donut hole family, except here. If you want sympathy for your donut hole-ness coming out swinging at someone who doesn't agree with you, really isn't the way to do it.

[Anonymous]

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.

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.

A house that costs $500k is a luxury? We couldn’t find anything that fit what we needed for anywhere close to that. And we were looking outside the beltway.

Really? I paid less than $500k for my 3BR house in Anne Arundel a couple years ago. What was it that you “needed”?

[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.

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.

Actually sounds like you want a fight. Meh, have at it. I didn't throw the first punch. Since when is asking honestly for clarification of someone's/many ones whines about their perceived oppression "angling for a fight"? I've never heard the term donut hole family, except here. If you want sympathy for your donut hole-ness coming out swinging at someone who doesn't agree with you, really isn't the way to do it.

Did you not read what I said in my prior post?: "I'll also disclose that our kids' 529s are way more than enough for college, so I have no personal dog in this fight."

[Anonymous]

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.

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.

A house that costs $500k is a luxury? We couldn’t find anything that fit what we needed for anywhere close to that. And we were looking outside the beltway.

Really? I paid less than $500k for my 3BR house in Anne Arundel a couple years ago. What was it that you “needed”?

Glen Burnie?

[Anonymous]

Anonymous wrote:Most donut hole scenarios is that you marry around 30 and your HHI is about $100-$130K.

Mortgage, loans and daycare... no ability to save.

With a 5% increase in salary over the next few years you get to ~$150K.

Kids are 10 and maybe you can save $1000/month if you are lucky. After 8 years you have $80000 in college funds, divided by 2 kids, divided by 4 years, $10000/year to help pay college.

You now make $200K, no way, no how you are getting aid, college costs $40K-$80K/year.

You kid will only qualify for $5K, you can pay $10K out of earnings, $10K from saving and you are $15K - $55K/year in the hole... donut hole.

A parent plus loan is a 4% fee just to get the loan, the interest rates are 7%.

So you borrow against your retirement since that is cheaper, but not really because you are losing earnings.

At 75 you can finally retire to make up for your kids college.

All harsh truths that people need to hear!

[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.

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.

Actually sounds like you want a fight. Meh, have at it. I didn't throw the first punch. Since when is asking honestly for clarification of someone's/many ones whines about their perceived oppression "angling for a fight"? I've never heard the term donut hole family, except here. If you want sympathy for your donut hole-ness coming out swinging at someone who doesn't agree with you, really isn't the way to do it.

OP threw the first punch.

The term "donut hole" or "doughnut hole" to refer to families too rich to get need-based aid and too poor to pay full freight is in common usage:

https://www.marketplace.org/2021/01/27/finding-affordable-college-merit-scholarship-need-based-aid-fafsa-full-tuition-ron-lieber/

And it’s grown increasingly tricky for middle-class families who fall into the so-called “doughnut hole” of financial aid. That’s when you earn too much money to qualify for significant need-based aid through the Free Application for Federal Student Aid (FAFSA) but too little to pay the full price out of pocket.

https://www.washingtonpost.com/news/get-there/wp/2015/01/29/middle-class-families-are-fed-up-with-their-financial-aid-options/

It’s also important to remember, though, that colleges and states are setting aside more money for students whose families earn as much as $150,000, if not more in some cases. Schools have been using a portion of the money they once earmarked for the neediest kids to attract students in the “donut hole” of financial aid.

https://hathawaycollegefunding.com/financial-aid-donut-hole/

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