This is more of a profound question but i haven’t been able to find much on it on the internet. Will it be worth it for me to dish out the money for a Top-Rated Ivy like Penn. I have good chances of getting into this university but I am wondering whether or not it will be worth the money. Why do people desire to got to Top schools like Penn, they cost so much money. I will most likely be in a lot of college debt if I attend U-Penn because I am not rich. Does it payoff in the long term? I would like some reasons for/against going to a top notch school so i could gain some more insight.
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Top-notch private schools such as Penn offer the most generous financial aid in the world
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Job opportunities. For some professions (doctors, most engineers, etc.), Penn would not help. But for others, it definitely does. Penn has the best undergraduate business school (Wharton) in the world, and graduating with a decent GPA essentially guarantees you a job on Wall Street.
You will not know whether “dishing out the money” for a school like Penn or any other expensive elite school was “worth it monetarily” till you are 10-15 years out of college. For some it will be worth it. For others it will not be. If you are going to be in debt after attending Penn, then for it to be worth it, you would have to go into very specific industries and very specific jobs. Even then the payoff may not be there, since you can always get there by going well at a state school and then going to a prestigious graduate school. And by payoff, I mean monetary payoff. Other kinds of payoff are all very subjective and you cannot really put a price on the “intellectual stimulation” and “college experience” at some of these schools
ok thanks guys for the insight. I’m just worried I wont get enough aid because of my parents’ unique financial situation
I used the Penn net price calculator and it came out to $47, 000 a year. I cannot afford that. Is there any other way to get a more accurate estimation? Can you go to Penn, sit down, and calculate a realistic estimate?
Penn financial aid is VERY generous. However, you will need to be very thorough and provide ample evidence that $47,000/year is not viable for your family. They are willing to listen.
@actprep34 “Does it payoff in the long term?”
What are you thinking of studying?
Computer Science- I know its not U-Penn’s Specialty but I’ve seen their SEAS (School of Engineering and Applied Science) get decent ratings
@Much2learn i’m mostly worried about the aid. I cant afford 47k a year, like my family lives off of less than that
CS is the most popular major in SEAS. Penn’s program may not get a lot of press, but it is excellent and student get very good jobs.
Penn has good financial aid, so you may be able to get a lower cost. If your income is low enough, it is free.
My family’s situation is kind of strange. My parents are both retired and very old and our only source of income is an IRA that has to last my parents until they die (spread over 10-15 years is less than 20k a year) we also get social security which is about 15k a year. My dad owns his house which is worth around 180k. How do you think this specific sitiutation would play out with financial aid? @Much2learn
P.S. I’m only providing specific numbers becuase i want an accurate idea of how much aid i can get.
They might think my family is rich because of the untaxed IRA but it really is barely enough to support us. That’s the main thing I’m worried about.
I have not seen this situation before, but other posters will know.
My guess is that you would get a solid financial aid package, though.
Have you tried Penn’s “net price calculator” It should be found on its Fin Aid webpages. All US colleges are required to have this tool for applicants. You input your specifics and it gives an estimate of what a fin aid package might appear. Your parents’ being retired and living on a fixed income is a unique thing. See what the NPC says for Penn and all the schools you’re considering… Good luck.
I just used the net price calculatorand it said 61,000 a year is how much i should pay :-S . That’s terrifying!
I think what happened is that when i put in the amount for the IRA it thought that was the amount my dad contributed annually, not his entire pension put into an IRA that has to last him 10-15 years.
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I found the answer to my own question
“The full amount of the distribution is reported, whether it was a
lump sum or annual distribution, and it will count as taxable or
untaxed income, as appropriate. An exception to reporting pension
distributions is when they are rolled over into another retirement plan
in the same tax year”
-FAFSA Application and Verification Guide 2015–2016
Choosing a university is a huge gamble, no matter what you end up deciding. CS majors from Penn typically wind up with excellent jobs after four years, but the same can be said about many other schools. From what I understand, the program Penn offers is great but no better than any of the other great CS programs around the country.
Paying for Penn can be a challenge if you are not getting help from parents and if your parents are relatively well off (FYI: retirement accounts shouldn’t be counted for financial aid eligibility… check out some websites that tell you how EFC is calculated based on FAFSA for the real details). But it all depends. Let’s say you live in California and get into Berkeley or UCLA - chances are, you would be paying far less at either of those schools than you would at Penn, and your mid-career earnings probably wouldn’t justify the added cost. However, if you apply only to private schools with high price tags, you might be best off going to Penn.
If you want to get a sense of what your break-even point would be, let’s try some back-of-the-napkin math.
Let’s say that your EFC is $45,000 and doesn’t change over four years.
Penn costs more than $45k, so if you go to Penn, that is what it will cost. Now, that $45k is based on your total expected cost of attendance, which includes some generous allowances for books and personal expenses. If we say you can save an extra $2,000 a year on those personal expenses, and if we say you can work throughout the year to pay an additional $5,000, that means you will be left with $37,000 per year to pay for four years. In this example, we’ll simplify and say that your loans don’t start accruing interest until you graduate.
Your state land-grant university has a total cost of attendance (after scrimping and saving) of $30,000 per year, so you are on the hook for all of it. You put $5,000 toward it by working every year, so you are responsible for $25,000 per year.
When you start paying loans, based on this example, Penn will have a balance of $148,000 while your state school will have a balance of $100,000. Your monthly payment for Penn will be $1,703.19 and for State will be $1,150.80. Over the course of the ten-year repayment period, Penn will cost $238,006.03 (adjusted for inflation), and State will cost $160,814.89. That doesn’t tell us anything yet, though. We need to figure out what the total cost of Penn vs. State will be over the course of a career - in other words, because you had to pay that extra $550 a month for ten years, how much less do you have at age 62 than if you took the lower cost option? If we assume 3% inflation, the total cost of Penn by age 62 is $584,743.27, and the total cost of State is $395,096.80 - Penn will have cost $189,646.46 more than State.
Before you freak out about a huge number like that, remember that it is a big number but over the course of a lifetime. The average CS major starts out at roughly $62,000 a year (based on USA Today’s analysis); if we take an anonymous State university, we can assume you will make roughly the national average. Penn’s 2015 CS graduates reported an average of $98,000/year for starting salary; now, there is a little selection bias there, so let’s say that if you include the people who didn’t respond to the survey, let’s assume the average is $90,000.
USA Today reported that CS folks basically get a 2% average annual raise over the course of their careers, so the average CS major will earn a total of $3.6 million in their 40-year careers; using that same math, the average Penn CS major will earn a total of $5.4 million in their careers. This means that the average Penn CS grad will earn $1.8 million more than the average State U CS grad. Based on this math, it will take 6 years for Penn to pay off against your average state university. In other words, by the time you are 28 - before your loans are even due to be paid off, Penn will have been a better choice for you.
Now, there are a lot of assumptions there, not the least of which is the assumption that you will go directly into a CS-related field after college. If we change the calculus and say that you will only make $10,000 more out of Penn than you would at a State U, and if we say you live in a state where your land-grant university is free for in-state students, then you would essentially break even over the course of a career. Further, it’s a dangerous game to think about lifetime earnings. Your student loan payment is incredibly meaningful when you are in your 20s - your investment may pay off handsomely, but if it requires you to live in fear of job-loss (think: a $90k salary with $1,700 a month in debt service means you are paying almost 40% of your post-tax income; bump that salary up to $120k and the debt becomes a more manageable 28%), it may not be worthwhile to you.
This is a major exercise in risk/reward and cost-benefit analysis. Only you can decide what debt load is appropriate, and you won’t know the details of your debt until you have gotten into the schools and gotten your financial aid awards.
@chrisw Thanks for the advice! There are a lot of things to consider when deciding between these colleges. For me it all depends on how much aid I will get from Penn. If the retirement account is not reported (Which it doesn’t have to be; as much as I’m aware from reading the FAFSA verification guide) I will be paying around 5-10k a year for Penn because the only other money my parents make is from Social Security (which isn’t very much). Also the reason why I’m set on Penn instead of Berkeley or UCLA is location. Location is key because I can’t afford to live In California as much as I love the state. Penn is in my home state so it would be more practical. I agree with your analysis; even if I got an inferior aid package from Penn it would still pay off after 5-6 years assuming I land a job around the real average (90k a year salary). So far it looks like Penn is a no brainer if I can go there for 5-10k, but I will have to wait for regular decision because I can’t take that kind of gamble with financials. Because I will face tougher admissions chances, I am trying to get my ACT up to a 34+ which should be a huge admissions boost. (I won’t go over my other stats but combined with the 34 they would make a strong application).
One other thing to consider, @actprep34, is that colleges’ career surveys reflect their students’ abilities more than the school itself, so though it is easy to use those surveys and school averages as starting points, you shouldn’t take them as gospel.
Consider: at State U, the average starting salary may be $60,000, but the top 10% of students start at $85,000; you may be “average” at Penn but in the top 10% at State U. That would mean that your hypothetical starting salary difference is only about $5,000, which is pretty darn small in the grand scheme of things. Then consider that pay increases are not linear (my example assumed they were, for simplicity, but the reality is that they are not). If you are talented enough, the pay disparity you might encounter when you start could essentially disappear within two or three years as your company recognizes your work.
If you are only on the hook for $5-10k a year in EFC, then a top tier, high-endowment, private school may actually be more affordable than a public school - where those top tier private schools have policies that you only pay what you can afford, with the rest covered by grants, some public schools won’t offer that kind of aid except through merit scholarships. It is, therefore, possible for Penn State to cost more than Penn. And, realistically, if you are taking $15,000 or less in loans every year, you won’t be strapped financially when you finish anyway. If you have to take out $50,000 in loans every year, then it’s thinkin’ time.