Christian Science Monitor: "America's indentured graduates"

Parents Forum
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<p>Personally, I don't get the whole "go to a state school, save money!" argument. I applied to 3 oos state universities and 2 privates, and the state schools pretty much didn't give me any money. If we ignore for a minute the fact that none of the schools in my state even offered my major, and assume that I might've gone to one of them...I just did some quick calculations about it and it looks like I'd have saved a whopping $1,000 on tuition going to a state school. And that's only using average percentage of need met (incidentally that percentage matches at my current school so I figure it's semi-likely it'd match at other schools)...don't state schools usually tend to not give a lot of aid, based on the fact that they think they don't need to because they're the 'cheap' option?</p>

<p>I have about $23,000 in loans which should be manageable I think. I keep thinking that maybe I'd have wanted to go to grad school, and people keep assuming I'm going to for some reason, but how on earth am I supposed to be able to pay for that? And I don't particularly like the idea going back to live at home after I graduate, because in order to find a decent job I'm probably looking at a 1.5-2 hour commute. I'm thinking about moving to the south even though I really don't want to live there, just because it's going to be so expensive to find someone to rent you an apartment that's not falling apart in this area.</p>

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<p>State schools are a godsend to those middle-class families who don't qualify for aid, but can't pay outright for college out of savings or cash flow. Going to Berkeley instead of HYP can shave off half of the cost.</p>

<p>You are right, though, that if a family can qualify for aid (whether merit or need based), the private college can be as cheap as, or even cheaper, than a state schools which have a rep for not being as generous with financial and/or merit aid than some privates. Each situation would have to be considered individually.</p>

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<p>This article in yesterday's Sacramento Bee, while focusing on the UC system, deals with the issues of the "middle income squeeze" and the rising COA of private and public IHEs:</p>

<p>
[quote]
Angie Platt of El Dorado Hills has two children, ages 2 and 4. By the time they go to college, it will likely cost more than $600,000 combined for both children to get a four-year education at private schools, according to the investment firm managing the state's college-savings program.</p>

<p>She figures she and her husband better start saving as much as they can.</p>

<p>"We've got a while, but you know it's always good to be well prepared when college tuition is going to go up year after year," said Platt, 35, who recently started a "529" college-savings fund. "I do not want my kids to walk away from school with loans."</p>

<p>For middle-class families like the Platts, that's becoming increasingly difficult. Not only are more students taking out loans, the number of parents taking on extra loans has doubled in the last 10 years -- and that's just for a California public university, once known for its low cost.</p>

<p>"If you make more than $60,000, you're probably not going to get any need-based aid," said Murray Haberman, executive director of the California Postsecondary Education Commission, which advises lawmakers on higher education issues.</p>

<p>The annual cost today of attending a University of California school tops $20,000, after expenses are added for dorms, meals and $100-plus textbooks. It's about $16,000 at the California State University. Private schools like Stanford University run about $47,000.</p>

<p>Over the next 20 years, those costs could easily double, according to the College Board, which analyzes college pricing.</p>

<p>Several private, elite schools have been ramping up financial aid packages to moderate-income families. There's free Stanford tuition for families earning less than $45,000. Harvard is waiving the total cost of attendance for families earning less than $60,000.</p>

<p>The state's college systems, with rising fees and housing costs, aren't keeping up, Haberman said. He said families are taking on too much debt to cover the gap. The average student who borrows is taking out about $18,000 in loans.</p>

<p>The Postsecondary Education Commission is meeting next week as part of an ongoing effort to draw more attention to the problem of rising college costs and what Haberman calls the "middle-income squeeze."</p>

<p>The commission's panel of business leaders, community members and representatives from the state's college systems have been advocating a five-year freeze on public-university fees, a new low-cost loan program subsidized by the state, and tax credits to lessen the impact of college costs.</p>

<p>An affordable college education was once considered an entitlement in California; now it's a privilege, Haberman said.</p>

<p>"It's so contrary to California," he said. "We can keep saying we have that commitment. ... To middle-income families and even lower-income families, it's not affordable and accessible. In fact, it's expensive."</p>

<p>Many families face "sticker shock" when they learn the true costs of college, Haberman said.</p>

<p>Others are bracing for it.</p>

<p>Platt, who graduated from Whitworth College, a private liberal-arts school in Washington, wants to give her children the same opportunity she had, even if the college they choose is expensive.</p>

<p>The family probably won't qualify for financial aid. She works in public relations and her husband is chief financial officer for a chain of Jiffy Lube shops. They hope to save up to half the cost of sending their children to college.</p>

<p>The Platts recently opened a 529 college-savings account. The 529 plans -- named after a section of the federal tax code -- allow parents, grandparents or other family members to set up investment funds to help pay for college.</p>

<p>The earnings in the state's 529 program, the ScholarShare College Savings Plan, are not taxed, as long as the money is withdrawn for college expenses.</p>

<p>"We just found that this was the best and smartest way to do it," Platt said. "We want to really focus on keeping this for the kids and for their schooling."...</p>

<p>State Treasurer Phil Angelides, whose office oversees the 529 program, said there's an increasing awareness among families to start saving early for college - and avoid loans as much as possible later on.</p>

<p>"We want to make it clear, of all the things parents face, there's nothing more important then making the sacrifice of investing in their kids' education," he said.

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<p><a href="http://www.sacbee.com/101/story/88386.html%5B/url%5D"&gt;http://www.sacbee.com/101/story/88386.html&lt;/a&gt;&lt;/p>

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<p>IMO, income between 45-60,000 is not a moderate income in our area. We live in a middle class community in NJ and you would be hard pressed to find a home that you can afford on that income (this includes smaller fix me up situations). Property taxes alone can be close to 10,000 on a small middle income home (public education k-12 is funded by property taxes).</p>

<p>Bottom line is that something needs to change, or 4 year colleges (public and private) will be for the wealthy, athletes, and academically excetional only, and certainly not for the masses.</p>

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<p>If we are talking about student loans and families ability to pay, I have a question. Most families with college age children have not saved up enough money to finance their children's education, but many have large amouts of equity in the home they purchased a number of years ago. And if I am not mistaken(and maybe I am), equity in the primary residence is not included in the EFC calculation.</p>

<p>Wouldn't it be far perferrable to use some of that home equity to finance a portion of the EFC vs saddling our child with a student loan? That home equity loan can be paid off over a much longer period of time and is tax deductible at our income bracket. And in most instances, we parents are in a far better position to pay off a $30,000 home equity loan than our son or daughter in that entry level job.</p>

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<p>
[quote]
Many families face "sticker shock" when they learn the true costs of college, Haberman said.

[/quote]
Yup, that's what brought me to CC.</p>

<p>As northeastmom states, an income of less than $60K would not possibly allow for home ownership here in middle-class NJ. Our property taxes on a modest, 100+ year old house are over $12K. Car insurance is the nation's highest. (Public transportation to anywhere other than Manhattan is pretty awful.) Add state & federal taxes, mortgage, insurance, and just the bare necessities, & nothing would be left over on a $60K income. Even renting a rather shabby apartment will run over $1000 per month. Those lucky enough to have built up nice home equity are expected to borrow against it. But if your income is fairly low, how do you afford the payments? </p>

<p>When H & I graduated around 25 years ago, only he had any debt. Not a great deal, he had just borrowed for commuting expenses and such. We had both received full rides to state U & gladly took advantage of that. Between the two of us, we didn't have two nickles to rub together. We were engaged a LONG time trying to get financially sound before marrying. I can't imagine how challenging our lives would have been with excessive college debt stacked on top of graduating during the 25% interest on car loans -- 18% home mortgage years.</p>

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<p>stickershock, Do you live next door to me? :D
We definitely have the same bills!</p>

<p>
[quote]
And if I am not mistaken(and maybe I am), equity in the primary residence is not included in the EFC calculation.

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<p>It is for the profile schools. Also, the problem is how much can parents borrow? Many are maxed out on loans already. Some are willing to tap a small amount of home equity, but many are counting on this for retirement years. Also, if you have more than one kid, how much would one feel comfortable borrowing? Borrow 15,000 per kid x 3=45,000 with perhaps few to no more years left to work and earn. Still others prefer to give that money to help on with their kid's downpayment on a first home. Some need that money b/c there is no pension, perhaps no social security, and they don't want to begin living on dog food (probably not cheap either) at age 70. I know that many profile schools feel entitled to tap it.</p>

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<p>I understand the situation and when I complain here, I am well aware that there are so many higher priorities for educational dollars than providing them to families like ours who do have choices. If we were not as informed and not surrounded by those who have those choices unshackled from financial constraints, it may not be an issue. And I fully know that there are famiies far, far worse off than we are. We are, in fact, priviligeds. It does hurt me, however, knowing that the ideal environments for my son is just financially out of range for us unless we come up with some solutions that we don't yet have. Yes, we can sell our house and move into cheaper digs. We can deplete our pension. There is fat yet left on the financial steer. BUt there are other family issues that take some precendence as well. Especially with younger kids, old, need parents in the picture. It's more looking at the the new car the neighbor is driving while you have to deal with the inevitable unreliability of your old heap, knowing that you will be calling AAA this winter, the stats are there. I don't think it is to the point of craving that mercedes over a honda.</p>

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<p>That was one sloppy post. Sorry.</p>

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<p>"Bottom line is that something needs to change, or 4 year colleges (public and private) will be for the wealthy, athletes, and academically excetional only, and certainly not for the masses."</p>

<p>When have prestige private colleges been different than that?</p>

<p>Public colleges and universities are another matter, and it is simple to deal with if the state has the political will. Higher taxes. I said it was "simple", not "easy".</p>

<p>The bottom line is, however, that no college - public or private - expects one to pay for college out of current income, but either out of past savings (including home equity) or future income (in depreciated dollars).</p>

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<p>Mini Posted: "The bottom line is, however, that no college - public or private - expects one to pay for college out of current income, but either out of past savings (including home equity) or future income (in depreciated dollars)."</p>

<p>Mini, I don't mean to be obtuse here and maybe I'm missing a distinction because I'm not as informed as some, but is there a reason not to pay out of current income? We planned to take a bit out of savings but mostly pay per month. Zoosergirl's high school tuition and STUFF ends up at about $14k per year (which we pay monthly), so we figured to use about $6k in savings to make the $20k that we feel we can pay per year. Is there some danger in this that I should know about?</p>

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<p>Zoos, we have done the same for our D's private school tuition, which is close to $20K; paid monthly out of current earnings. We do have money earmarked for college for the kids, but saw no reason to touch that for private school if we didn't have to.</p>

<p>I also look forward to Mini's response.</p>

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<p>Mini Posted: "The bottom line is, however, that no college - public or private - expects one to pay for college out of current income, but either out of past savings (including home equity) or future income (in depreciated dollars)."</p>

<p>This doesn't make sense to me- if you cant afford to take the money out of current income, without interest- how are you going to afford to take the money of out future income ( usually not much into the future- because parent loans begin to be paid back immediately * with* interest) & with "depreciated" dollars at a time when you may even have * reduced* income.</p>

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<p>"Mini, I don't mean to be obtuse here and maybe I'm missing a distinction because I'm not as informed as some, but is there a reason not to pay out of current income?"</p>

<p>There is absolutely no reason not to, but no college (and no methodology - institutional or FASFA) assumes that you will, or should.</p>

<p>"This doesn't make sense to me- if you cant afford to take the money out of current income, without interest- how are you going to afford to take the money of out future income."</p>

<p>For many people ages 40-55, both income and, especially, assets rise with age until retirement. If income rises at the rate of college interest rates, and assets increase faster than that (traditionally, both stocks and real estate have), there is surplus income out of which to pay off loans. Doesn't work for all, though. If you are close to retirement, or without substantial assets, or in a dead-end career, it can be pretty tough.</p>

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<p>You are assuming that there is sufficient current income to cover the college costs. If current and past income has included repaying loans for other situations and stuff, and those commitments are still there, you either cut your standard of living down, sell off whatever assets you have and if you are still short, you borrow. By taking a PLUS for example, you essentially spread 4 years of costs into 14. More manageable for most of us. We are paying current costs all out of pocket and not incurring debt at the time, but we have had some situations arise that require a lot of our income. We see some future situations that will take up our income. These situations have consequences that are more far reaching than sending our kids to expensive colleges, but are not covered under any financial aid scenario. That is what has to go, in our case. Not to say there aren't other cuts to be made, as well, and that there aren't other places I would like to spend our money. I wish to God I could supplement our son so he has his own place. I always have my eyes open for option, believe me, as had he, but the right combinations have not arisen. A problem that would be solved as many of our neighbors solved with $$$s. Some do have kids living away with their supplemental income. And many of their successful older kids started that way. I don't think that my peers whose parents gave them start up funds are any less motivated, or have any disadvantage over my husband and me because we had to pay our own way. In fact there are some very painful years that we could have done without because we were without suffient funds. Yes, there is a chance we would be spoiling our son putting him into an apartment that is in a safe area and we would be paying forever, but I kind of doubt that. I think in a few years he will be at that point, but we are having to deal with him, (and he with us) in an overall detrimental picture right now that doesn't have any positive pointers in my book. </p>

<p>I don't have any idea how to solve the college issues. It's just one of those things that if you can't afford it, you don't get it. Yes, there is financial aid, work to the bone, loans, merit awards, lower current standard of living, options. But when they are not the best way to go for most of the family involved, the college choices have to go.</p>

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<p>"You are assuming that there is sufficient current income to cover the college costs. If current and past income has included repaying loans for other situations and stuff, and those commitments are still there, you either cut your standard of living down, sell off whatever assets you have and if you are still short, you borrow."</p>

<p>No, I assume (as the colleges and FASFA do) exactly the opposite, that there ISN'T sufficient current income to cover the college costs, and shouldn't necessarily be. (Most folks choose to borrow before cutting standard of living - that would have been a better strategy BEFORE college, or selling assets. Nice to have borrowing power, a standard of living that can be significantly cut, or assets to sell. Most folks don't.)</p>

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<p>
[quote]
When have prestige private colleges been different than that?

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<p>I don't have a chart showing cost, ave. income for various years. I do know from my family, and friends my age, that private college was expensive in the 70s, but not nearly as expensive (relatively) as it is today. My middle class parents were able to do things for their children that we cannot dupicate financially for our children. Oh, and they did not need to take equity out of their home to send us to college. They also did not need parent plus loans. You don't need to take my word for it, you can see from postings that parents are very concerned about the financing of college. In time, private schools will be out of reach for the middle class (with or without college savings plans). Income has not kept up with COA, IMO. In my mind, this is clear as day, unless change occurs.</p>

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<p>Oh, I know that. Prestige private college costs have risen over the past three decades at virtually exactly the same rate (or a little less) than the income/assets of the top 3% of the U.S. population. (In fact, the President of Williams says that is precisely how they figure out tuition increases.) In other words, they are cheaper for wealthy families than they have ever been, and the subsidies for wealthy families have grown larger. But not for anyone else.</p>

<p>It used to be (four decades ago) that prestige private colleges could ensure that half the student body would be paying full freight because few lower and middle income students even applied. Now they can do the same through "enrollment management" strategies. But the impact is the same, with half the student bodies coming from the top 3% of the population. What has changed are aspirations of middle-income families to purchase Mercedes-type educations.</p>

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<p>Nice to have borrowing power, a standard of living that can be significantly cut, or assets to sell. Most folks don't.</p>

<p>So assuming that colleges expect applicants families to have borrowing power/standard of living that can be significantly cut or assets to sell, yet most folks don't have that- which I agree with, it sounds that most folks are SOL & are in the same position that we were in.</p>

<p>Which was finding out that she would only get a small merit award if she attended an instate public school, and we would have to pay for the rest out of pocket ( which we would have had to have taken out a loan for)
or she could attend a private school which met EFC, ( although EFC was covered by a loan)</p>

<p>there were ways that I realize you can further reduce costs- attending community college- the Americorp education voucher program, the military- working at a company that has tuition assistance , and we took advantage of some of those programs- I still think we need to do much more to open up higher ed.</p>

<p>I was also wondering,( for mini) as I look at instate rates for other states,why Washington seems to have higher instate tuition compared to say California-
I know that I have heard talk about raising tuition and giving more aid, but haven't seen the more aid part.
Western Wa is over $5,000 for tuition for example & Cal State Pomona is $3,000?
HUmboldt is only $3172 and since it is part of the WUE and washington students only pay 50% more tuition than instate CA students, they could attend for the same price that they could stay instate-
( sorry I don't mean to get off track- but I dont understand how states fund public universities)</p>

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<p>Well, our middle class family, as well as other middle class families we knew were paying full freight at private colleges 25-30 years ago. My parents never even completed a fafsa or profile. They were able to swing it, and pay without taking out loans on their homes, or plus loans. They were simply able to pay, and it was for private college. This is not the case for the offspring of my parents, or for the offspring of the middle class families that I am referring to.</p>