What is a "donut hole family"?

[Anonymous]

Anonymous wrote:

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!

Isn't it a great country?

[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.

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?

No but there were tons and tons of options all over the place for under $500k when we were looking. I’m sure it’s a little tighter now.

[Anonymous]

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.

[Anonymous]

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.

[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.

In other words, you don't live anywhere near here and have no idea that people making $250K here live in tiny expensive houses or condos and drive 15 year old cars.

[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.

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.

Once upon a time, private college was not expensive. Everyone knows that. I'm not arguing that college costs are reasonable now, I'm saying that the posters complaining about being in a "donut hole" because they cannot comfortably pay for the most expensive option are not adding anything to the discussion. The nature of an option being the most expensive is that . . . it's expensive and everyone can't afford it! And unless you're very rich, it's going to sting to write that check. If you can still afford it, just "uncomfortably"; if you can still handle tuition, just not "reasonably" - that's not sympathetic, and it's not a donut hole. And there are literally thousands of other options at lower price points. But they've convinced themselves they're uniquely challenged because the best of the best isn't a given for their kid.

If you want to talk about spiraling tuition costs, let's talk about the tax breaks that were funded by gutting state budgets for higher ed. It's not a donut hole discussion it's a political discussion. But the same people moaning that they're stuck in a donut hole are voting for the "drown it in a bathtub" people, and can't tell they did it to themselves.

[Anonymous]

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

[Anonymous]

Anonymous wrote:Do you have to qualify financially for merit aid?

You typically need to submit the FAFSA to be able to receive merit aid. But merit aid isn't based on your financial need, it's based on your academic record, or an essay you submitted, or some other thing you did to qualify for it.

[Anonymous]

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.

You are right. There is no such thing as a donut hole family. There are only families who refuse to liquidate their retirement funds, forgo their annual week at the beach, sell or remortgage their family homes, work until they are 80. These people are selfish and stingy when they choose not to pay $320K per child and rising for their kids' undergraduate degrees, because if they only tried a little harder, they could pull it off. Cheapskates.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Do you have to qualify financially for merit aid?

You typically need to submit the FAFSA to be able to receive merit aid. But merit aid isn't based on your financial need, it's based on your academic record, or an essay you submitted, or some other thing you did to qualify for it.

That is absolutely not true. It is the exception, not the norm for FAFSA to be required for a student to be considered for merit aid.

[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

If they had stayed in the home they could afford at 26 they would have the ability to save. I mean that’s literally me (admittedly we married at 27 not 26 but otherwise). No upgraded house. 10 yr old cars. Modest house with no guest bedroom.

[Anonymous]

Anonymous wrote:

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.

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.

Once upon a time, private college was not expensive. Everyone knows that. I'm not arguing that college costs are reasonable now, I'm saying that the posters complaining about being in a "donut hole" because they cannot comfortably pay for the most expensive option are not adding anything to the discussion. The nature of an option being the most expensive is that . . . it's expensive and everyone can't afford it! And unless you're very rich, it's going to sting to write that check. If you can still afford it, just "uncomfortably"; if you can still handle tuition, just not "reasonably" - that's not sympathetic, and it's not a donut hole. And there are literally thousands of other options at lower price points. But they've convinced themselves they're uniquely challenged because the best of the best isn't a given for their kid.

If you want to talk about spiraling tuition costs, let's talk about the tax breaks that were funded by gutting state budgets for higher ed. It's not a donut hole discussion it's a political discussion. But the same people moaning that they're stuck in a donut hole are voting for the "drown it in a bathtub" people, and can't tell they did it to themselves.

Right, but again: Most everyone COULD afford the EXACT SAME THING a generation or two ago, with a little effort.

It hurts to tell a super high-performer that he can't even apply to elite schools because you can't pay for them. Is it a tragedy? No. But when you have a MEMORY of those schools being in fact, affordable when you were his age, it hurts.

That's it.

P.S. I agree re: gutting state budgets for higher ed.

[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.

You are right. There is no such thing as a donut hole family. There are only families who refuse to liquidate their retirement funds, forgo their annual week at the beach, sell or remortgage their family homes, work until they are 80. These people are selfish and stingy when they choose not to pay $320K per child and rising for their kids' undergraduate degrees, because if they only tried a little harder, they could pull it off. Cheapskates.

Are you so blind to reality that you don't realize there are options between $320k/kid and "your kids can't go to college"? If you can't try a little harder to save, then try a little harder to master a cost/benefit analysis. If your vacation is an annual week at the beach, then expensive private schools are not for you! Send Larlo to Whatever State Tech and stop feeling sorry for yourself.

[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.

You are right. There is no such thing as a donut hole family. There are only families who refuse to liquidate their retirement funds, forgo their annual week at the beach, sell or remortgage their family homes, work until they are 80. These people are selfish and stingy when they choose not to pay $320K per child and rising for their kids' undergraduate degrees, because if they only tried a little harder, they could pull it off. Cheapskates.

That’s right. If they wanted Carnegie Mellon that bad (no idea why, but okay) they could find the money. They don’t want to do that. I wouldn’t in their shoes either. Thank God for America’s fantastic public flagships. People literally travel around the world to attend them.

But if Carnegie Mellon is that important, you have the resources. Have at it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Do you have to qualify financially for merit aid?

You typically need to submit the FAFSA to be able to receive merit aid. But merit aid isn't based on your financial need, it's based on your academic record, or an essay you submitted, or some other thing you did to qualify for it.

That is absolutely not true. It is the exception, not the norm for FAFSA to be required for a student to be considered for merit aid.

Some do, some don't.

My child had to fill out FASFA for his athletic scholarship.