45K and growing $$$$

Parents Forum
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<p>30 years ago, upper middle income family made $24,000 and sent child to 7- sister school for about $6,000 (room, board and tuition).</p>

<p>That would likely have been around 1971 (when I graduated). There were few upper middle income students at that time. Lots of top 3%ers, and in the early 70s, need-based aid was at its highest. In 1972, Princeton (for example) had the highest percentage of African-American students it would ever have, and virtually all of them were on close to full scholarship. Now there are far, far fewer African-American students receiving need-based aid at Princeton than were doing so then. </p>

<p>By 1982, this had changed massively. Costs had tripled, need-based aid hadn't kept pace at most of the prestige privates. (I have to look it up, but I think there were downturns in endowments as well). The percentage of full-freighters remained the same, but the income needed to support a full-freight student was substantially higher in both relative and absolute terms. In other words, the income gap between the full-freighters and everyone else began to widen. </p>

<p>"So...if family is going to spend 1/4 of income on kids college, they need to earn $200,000....which is quite a bit more than "upper middle income" these days!"</p>

<p>Exactly. Actually it works out to a minimum of around $165k (depending on assets), with the median (as was already pointed out) being substantially higher However, what is forgotten here is that assets among the top 3%ers ($165k and more) are 4x-6x times the assets of those at middle income ($43k-$65k). As the asset gap has widened (aren't too many $55k families that can buy a house as an appreciating asset in many places anymore, or who have any signficant assets), prestige colleges have become more affordable for the top 3%ers, and less affordable for middle-income folks. Now, for top quintile, non-top 3%ers, things like the new no-loan policies have benefitted them disproportionately. At the majority of prestige privates, for all the talk, there are fewer Pell Grant students than in 1993-1994 (according to Tom Mortenson, College Opportunties, who tracks these things); and middle to upper middle income folks ($43k- $95k) are a vanishing breed at many of the prestige privates. Folks in the top quintile are scrambling uncomfortably to afford things (helped along by policies like the "no-loan" thing), or are sending their kids to state u's - where most of them would have ended up 40 years ago.</p>

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<p>Mini is always fond of pointing out that private tuition is a bargain for the rich. I don't know about the top 1% or top 3%. I do know there are lots of families who live in high cost areas who have nice 6 figure incomes but cannot afford private colleges. When I grew up, I lived in a high cost area, Bethesda, MD, and my father was a well-paid civil servant. I went to out of state universities and my sister went to an expensive private college. The total 4 year costs for both of us were less than his annual salary, probably about the same as his takehome pay. I worked summer jobs and that income alone would have paid for my tuition. Progressive taxes and the inflation in college costs have changed that. I live in an expensive area and have an income status roughly equivalent to that of my father. Now the cost for one kid at a private college is going to be well over 3 years worth of takehome pay. In relative terms that is 6 or more times the cost my father incurred. This year my D has a really good summer job even so she would need to work summers for more than 7 years just to pay one year's worth of tuition.</p>

43

<p>The "parents should have been saving for 18 years" argument is lost on me. 18 years ago we weren't even halfway close to making the same annual income we make now. Although we have been saving for college since our boys were born, the amount we were able to put away at that time was miniscule. There is no way that we could haved saved even half of what it costs to send a child to a private school now.</p>

<p>Here's who I see sending their kids to 45K a year colleges: </p>

<p>People who have made very good money for quite a long time and have accumulated a nest egg.
People who have come into money at some point in their lives (inheritance, windfall) and have accumulated a nest egg.
People who are making a great deal more than 150-200K, so that the 45-50K a year outlay does not matter.
People whose kids are taking out big loans.</p>

<p>In other words, I don't see too many people who were making in the 50K range 20 years ago, and have worked their way up to the 150K range today, having the resources to send their kids to an expensive private, any way you look at it.</p>

44

<p>Or people who remortgage their highly appreciated homes for 30 years at fixed interest rates, benefit from a second set of huge tax deductions, and have their homes appreciate faster than the loans. </p>

<p>"In other words, I don't see too many people who were making in the 50K range 20 years ago, and have worked their way up to the 150K range today, having the resources to send their kids to an expensive private, any way you look at it."</p>

<p>True. 30 years ago they wouldn't have even considered sending their kids to an expensive private, so it would have been a total non-issue. In the meantime, the quality gap between the state u's and the prestige privates has narrowed considerable, and the largest percentage of students who go to college major in business, which most of the prestige privates don't even have, making them - for the student - decidedly inferior. </p>

<p>"Mini is always fond of pointing out that private tuition is a bargain for the rich. I don't know about the top 1% or top 3%."</p>

<p>The asset gap between someone earning $100k and someone earning $200k is far more than 2x.</p>

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<p>Mini, do you have data to prove your point that 30 years ago people didn't consider sending their children to private?</p>

<p>I find exactly the opposite. My siblings and I all went to private college (and my parents were middle class). Most everyone we knew went to private college. That is so not the case any longer.</p>

<p>I would just like to see your data points for such a claim.</p>

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<p>I've grabbed these #'s from college board and gov't sites:</p>

<p>!n 1976-1977 average private school tuition was $2534
Minimum wage was $2.30 an hour
It took 1101 hrs of pre tax work for a kid to pay off one yrs. tuition or 137 eight hr days.</p>

<p>In 2006 the average private school tuition was $22,218
Minimum wage was $6.25 an hour
It takes 3554 hrs. off pre tax work to pay off one yrs. tuition. Or 444 eight hr days.</p>

<p>It is no longer possible for a student to work his way through private school</p>

47

<p>

You left out PARENTS who are taking out large PLUS loans, and gambling that health issues and/or employment are not a show-stopper in the future.</p>

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<p>I doubt I understand half of what Mini is saying, but I agree that home equity is a major factor. Of course, that means losing pretty much the only asset that we have accrued. In my case, the payments would have ended at about a normal retirement age. With refinancing, I will need to work for many years beyond the normal retirement age in order to continue to make the payments and to regain some of the equity so that I can sell and move to a less expensive area of the country.</p>

49

<p>Mini in post 3…what great information and insight….thank you</p>

50

<p>I like what edad wrote, comparing himself to his own dad.
I think that today, like 30 years ago, only people of certain status were/are thinking about sending their kids to an elite/private school. There is more of those kind of people now, hence the crowding.
Secondly, I very srongly believe that the fact our world has become considerably smaller is allowing us to make balder choices when it comes to college decisions. Cells phones, internet, access to planes - you name it. This way Harvard is not only for well to do people from the east coast.</p>

51

<p>I think the crowding is largely due to population growth and due to the understanding of the importance of education. Clearly, college education has become relatively much more costly and actually a smaller percentage of the population can afford expensive private tuition costs.</p>

<p>I also think a lot of the popularity of the super elites also involves costs. The COA for many private colleges has compressed around $50k/year. At list price, it is no more expensive to send your kid to HYP or an equivalent elite than it is to send them to 2nd, 3rd or lower tier schools. Of course there are other factors. The elites will cover need; some of the lower tier privates must lower tuition and play games with discounting.</p>

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<p>There is one other type of kid attending the privates - the ones whose parents have a low enough EFC that they get virtually a free ride through FA.</p>

53

<p>A big part of the problem for families with children approaching college age is that they are only now seriously beginning to consider how they will pay for it when they should have been DOING something about it 18 years ago.</p>

<p>Lets face it, we are a nation of spenders not savers. Most families fritter away thousands of dollars on morning coffee, bottled water, new car purchases, convenience foods, dining out, ipods, cell phones, elaborate CTV packages, hi-speed internet, elaborate vacations, walkin closets full of designer clothing, and we indulge our children with the same.</p>

<p>Eighteen years later we have no college savings for Johnnie, our only tangible asset is a heavily mortgaged house and we complain about the high cost of college. Well folks it too late! </p>

<p>College is very affordable for most families IF they are willing to make some minor sacrifices and begin saving early. Maybe not Vassar but Berkeley, UVa or many other fine in-state publics.</p>

54

<p>COA for Berkeley (in-state) is now about $25K/year -- hardly "very affordable"</p>

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<p>Post #43 hit it right on the head. You may think you're doing well making 150k per year but the bottom line is unless your kid garners merit, which about only 3% of the applicants do, you can forget sending your kid to a top 20 LAC. Let's face it (I'm guessing) half the kids at HYP have parents who are multi-millionaires, another 30% have parents who are mortgaging the house a second time with a pay-off date when the parernts are aged 75 or older,. The remaining 20% are NMF's, URM's, and helmeted athletes who had the pot sweetened. More than one kid in the family.. forget it.</p>

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<p>It has already been pointed out that the costs of college or the FAFSA EFC are not tied to your salary from 18 years ago. Many of us were struggling to break even then and aren't that much better now. </p>

<p>Progressive taxes are great. For example someone with a $50k income might pay $20k in taxes and have $30k left to live on. Someone who makes $100k not only pays the 20k + 20k but they pay an additional 20k and are left with $40k to live on. The extra $10k they use for jet setter vacations, a big house and a fancy German SUV. If the family with the high income lives in an expensive area, the extra $10k and a lot more might just get sucked up in extra costs for basic expenses. When it comes to FAFSA, the 100k family can lose bigtime.</p>

<p>Clearly my example is just overstated. No one with a $50k income pays $20k in taxes and no one with a $100k income pays $60k in taxes, right? Start adding what you pay in taxes and you might be surprised by the total. Be sure to include Federal and State income taxes, those special Medicare and Medicaid taxes, real estate and personal property taxes, direct and hidden sales taxes. The totals may not be as high as my examples, but they might be scary close.</p>

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<p>I am wondering what are the advantages of private colleges over public ones, which justify substantial difference in tuition cost? For our family, there were two essential advantages of elite privates: access to the best professional education and real job skills from most reputable professional schools and exposure to most challenging educational environment including both instruction level and peer pressure. While I understand that both criteria can also be met by several public colleges, the private ones provide broader choices and more opportunities (at least in the area we researched – this may not be true for all occupations). However, it seems that our family priorities are different and both factors are not so important for the others (my apologies if I made a wrong presumption). So, what is your motivation for making financial sacrifices to pay for private education?</p>

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<p>I know my situation is very personal and not universally applicable, but I would like to add another group of parents to the discussion. I did plan to send my kids to privates froom the day they were born. My plan was to pay off my house with a 15 year mortgage and re-finance as mini suggested. I did not resent this; nor did I resent the fact that I might have to work 15 more years to send my kids to a private -- I looked at it as my choice. However, 9/11 basically destroyed my husband's business as well as certain unforeseen technological advances that really hurt business. I chose to use equity in the house (mine by the way) to bail out H's business, not for financial reasons but because his business has been his life and I didn't want to see him psychologically destroyed. However, I had always promised kids they could go to a private, and we live in an area in which a lot of their friends are. Additionally, I am not impressed with the options at NYS publics -- only Binghamton even offers Classics, which both kids are interested in. Binghamton is certainly a reputable school, but neither child was at all excited to attend.</p>

<p>We are getting some financial aid, and I am adding work to my full-time job. My H is getting his business back on track. We have had no real luxuries, and certainly no vacations. And yes, it is a choice, but I don't think our options were that good here. Perhaps if we had a UVA, Chapel Hill, Cal, Ann Arbor, UF Gainesville or UW Madison I'd feel dikfferently.</p>

<p>I guess I'm reacting to judgemental accusations of those who didn't have "foresight" to save for college. There are often other factors involved.</p>

<p>On a less gloomy note, Barnard and NYC and Williams and Williamstown are like dreams come true for my kids. I am so happy for them!</p>

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<p>I know my situation is very personal and not universally applicable, but I would like to add another group of parents to the discussion. I did plan to send my kids to privates froom the day they were born. My plan was to pay off my house with a 15 year mortgage and re-finance as mini suggested. I did not resent this; nor did I resent the fact that I might have to work 15 more years to send my kids to a private -- I looked at it as my choice. However, 9/11 basically destroyed my husband's business as well as certain unforeseen technological advances that really hurt business. I chose to use equity in the house (mine by the way) to bail out H's business, not for financial reasons but because his business has been his life and I didn't want to see him psychologically destroyed. However, I had always promised kids they could go to a private, and we live in an area in which a lot of their friends are. Additionally, I am not impressed with the options at NYS publics -- only Binghamton even offers Classics, which both kids are interested in. Binghamton is certainly a reputable school, but neither child was at all excited to attend.</p>

<p>We are getting some financial aid, and I am adding work to my full-time job. My H is getting his business back on track. We have had no real luxuries, and certainly no vacations. And yes, it is a choice, but I don't think our options were that good here. Perhaps if we had a UVA, Chapel Hill, Cal, Ann Arbor, UF Gainesville or UW Madison I'd feel dikfferently.</p>

<p>I guess I'm reacting to judgemental accusations of those who didn't have "foresight" to save for college. There are often other factors involved.</p>

<p>On a less gloomy note, Barnard and NYC and Williams and Williamstown are like dreams come true for my kids. I am so happy for them!</p>

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<p>oops! Sorry for double post. Technical problems.</p>