The financial status of the “girl next door” is actually very different than yours. Let’s say both of your houses are worth $1mm, and the next door neighbor carries a mortgage of $800K and your father only has $100K in mortgage left, your father’s net worth is $700K higher than your neighbor’s. Looking at it from a cashflow perspective, your neighbor has about a $3,800 monthly mortgage payment vs your dad’s less than $500 monthly payment, assuming he refinances his remaining debt to the same term as the neighbor’s. The ability of the 2 families to pay is very different.
With a $25k/year budget, there are still great alternatives for you. Maybe the budget can be expanded a bit if your dad is willing to “lend” you the money since your interest is in a field where it is likely you’ll make decent money. He might put in conditions that you have to maintain a minimum GPA in college and that you have to begin paying back the loan as soon as you graduate. In that situation, he has to be prepared to write off the loan, which he might not be prepared to do. Also intra-family loans create their own potentially troubling dynamics. It all really depends on the amount of money, amount of money relative to total wealth, family relationships and attitudes towards money. You have to understand it will be his call since it is his money and he is trying to budget for himself, you and your siblings.
Not true. Colleges calculate need based aid based on the family income…and if one parent doesn’t work…that isn’t a factor…at all. The colleges don’t care if one parent works or both parents work.
NOW having said that…in the Thumper family, both parents worked…and that second income went to college costs. Like the OP, we didn’t qualify for need based aid…and both parents working opened up a lot of college options.
But frankly, I think this OP needs to open their minds to other more affordable options. There are plenty of places that offer computer science degrees where the net cost to this family could be within their budget.
lancer; I have a 17 yr old. I’m impressed you are learning about this all and trying to understand; you are asking good questions.
** First: ** very few schools give grant money to cover between your EFC, and the cost to attend. Those schools are elite, and hard to get into. They are rare. So, your neighbor would have to get into a school that gives those grants. (it’s called a "meets need school).
** Second: ** most schools use FAFSA and this process does not look at house equity. So equity in a house or no equity means nothing to a FAFSA school.
**Third: ** probably hundreds of thousands of kids are in your same spot of not having enough to pay for their top choice. My own kid included. He wants to go to University of Colorado, but would get not free grants or aid. He’d get a lot of aid at Rice University, but 27,000 kids applied there last year; so its a lottery ticket basically. We do not want to take out huge loans because we have 4 kids, and will let our kids take out subsidized loans at this point if needed. We value low debt.
Price is a precondition before you even start applying to school and money is a simple fact of life. If you can’t afford it, then you can’t go to a private school. It’s that simple. The reason why there’s so much student debt is because kids HAVE to go to their “dream” school, so parents co-sign large amounts of private student loans to their kids. These young adults end up graduating 100k in the hole and get a $40k entry level job. That’s a set-up for failure. Student loans can’t be eliminated through bankruptcy either.
If you’re going into computers, DON’T go to a private school. In the tech world, your worth is measured entirely on what you know. Prestige is completely meaningless, because the degree is ridiculously employable.
What you need to do is let the private school go and gather a list of good in-state schools you can afford. Graduating debt-free is worth its weight in gold in the long term. Most college students don’t get that option.
Thank you for providing an example scenario and not being critical by wrongly accusing me as complaining about my dad and/or me being careless or over ambitious. I am just trying to understand why the system of CFC is so unfair. Anyway, I am settling for a college that my dad can afford. However, I would like to bring to your and others’ kind attention why I think that system is unfair by citing your example above but with a small twist.
Let’s say both my dad and neighbor own a house worth over a million dollar. My dad didn’t like debt and he started paying more towards the principal to keep the debt low as quickly as he can. However, in this hypothetical scenario, my neighbor borrowed additional mortgages and took several vacations to Vegas and other exotic places. So he did not build any equity. That’s his choice and I am not complaining about it. In addition, my dad and he are paying the same mortgage payments. mortgage payments are not based on what is left to pay off but on the original loan amount.
However, when it comes to CFC, they look at what is the equity but not what the house is valued for. Since all other parameters remain the same (i.e. salary, other savings, etc.), we both should be treated equal. However, my neighbor’s daughter can go to this school by paying $15K per year as CFC (within my dad’s budget too) despite his family being extravagant in spending but I have to settle for less for my dad’s saving behavior. I think I am being penalized for my dad’s good intention of having a saving mentality for his retirement. I cannot expect him to sell his dream home nor ask him to change his debt-free mentality to fulfill my dream by taking additional loans.
What’s your dream school? I’d be concerned about a Net Price Calculator that showed $30k of aid without asking for your GPA. If they aren’t asking for stats they may only offer need based aid. Colleges that don’t offer merit generally require very high test scores and unweighted GPAs to get in. The first hurdle at schools like that is getting accepted.
Are you sure you filled everything out correctly? Maybe you should ask your parents to look at a couple NPCs with you.
Is your mom willing/able to get a job to help cover a more expensive school? Her income would add to your EFC, but if you’re pretty much full pay anyway that wouldn’t really matter.
It is true, at least for some schools. I have seen NPCs provide different results dependeing on whether one parent or both had income, even if the total income was the same in both situations. In other words, in two parent families where only one parent had income, the NPC EFC result was higher because it was assumed that the non-working parent could get a job and contribute to the EFC.
Yes that is a common complaint that the system penalizes the frugal family for saving for college, saving in general and increasing net worth. Some colleges make allowances for that by excluding home equity value and retirement assets , but the fact is that colleges have FA to support families who cannot pay full freight, and asset wealth has to be part of that equation. On the home equity/mortgage calculation, of course your dad is making payments based on when he took the original loan out, but the assumption is he could easily 1) refinance the loan and borrow more money (money that your neighbor cannot get if his house is already fully levered), or 2) refinance the existing principal to a new term to lower his monthly payment.
Are your parents helping you with your search? Sometimes parents put a limit on college because that’s what they think college should cost. It sounds like you are the oldest so they may not realize all the costs.
I think in the end your parents will find the local private school will be too much, but they may realize it will cost you more than $15k to go to UIUC and up the budget a little (I don’t think it will rise to $35k).
You can’t worry about other people and how much they will be charged for college. You can only worry about yourself. Schools won’t be comparing your financial situation to the girl next door whose father also makes $140k per year but the kid from Chicago who makes $40k, or the kid from Kansas whose family makes $50k. That’s just how it is.
You are correct about big ticket loans for undergraduates. You are automatically eligible for $5500 your freshman year with increases as you become an upperclassman with a maximum of $7500 as a senior. Depending upon the school, that’s it, without involving a co signer. Which puts your parents ‘ credit and financial responsibility on the line for the rest of both your lives and that of the loan. They might as well borrow themselves rather than do that.
Please try to get past the fact that it’s not fair. Life is not fair. Believe me, I know (I am living it right now in a very real way). Don’t think of going to an affordable school as “settling.” It is not settling. It is making a decision based on your personal set of circumstances.
As others have pointed out, keeping undergraduate debt low is really important. You have no idea how other families are paying for college - but as a financial aid director, I can tell you that many of them are borrowing huge amounts (students and parents). If you can keep from doing that, you will be way ahead in life when you graduate.
Any school can be a good school if you work hard, take advantage of all that is offered, and make the best of it. I worked at an urban school that is not typically first choice for students in our area - but for students who were highly motivated, there were so many opportunities for them. No matter where you end up, you can make it a great experience if you open yourself up to what is there for you.
You are incredibly mature to start thinking about this now! Most kids don’t, and end up having an awkward conversation around decision day senior year.
Let me throw out another option: military service.
Plenty of ways that the military will pay for college: ROTC, service academy, or enlistment. The latter will entail a delay in your college plans, but will allow you to utilize the GI Bill, which in general will cover most of your college costs for a 4 year school. If you don’t want to make a career out of the military, its not such a good option because you’ll have to commit your time (5-8 years I believe).
thanks, that is where lies the issue. System is pushing my dad to borrow more, which he tried to avoid throughout his life to have an independent life once he reaches (is reaching) retirement. On the other hand, system is rewarding the other family for extravagant life style by giving a grant of 35K. (In the hypothetical scenario, two families loan started around same time). Thanks.
Bottom line is it doesn’t matter if you like the system or if you think it is fair. What you need to do is focus in on colleges that appear affordable (likely state schools) as well as private schools where you can expect to qualify for substantial merit aid. Keep in mind that most applicants to colleges do have financial constraints so your situation is not at all unusual.
The system isn’t pushing your dad to borrow at all. There are a lot of great colleges in the US. Some apparently think families should tap into home equity. Families who can’t/don’t want to do this, and there are a lot of us, look elsewhere. You have one school whose formula doesn’t benefit you. That’s one school, not the system. You can do better.
If the other family has multiple mortgages on their home and they spend all their income how are they paying the mortgage and property taxes? Once you max out your credit cards you can’t borrow more, so where’s this family, whose income is only $140k, getting the $15k/year to pay for college, plus the money for a double mortgage, property taxes, and credit card bills?
They may be paying their mortgages and taxes. When it comes to savings (i.e. what is left after each month’s spend) they make a choice of ‘enjoying it now’ by cashing it every 3-4 months versus my dad kind of people making a choice of ‘reduce debt’. Also, after three or 4 years, when they build enough equity, they take second mortgage on that equity for a much bigger vacation. The monthly payment should not change much in that situation, I think.