Don't be scared away by the sticker price...

Paying for College
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@twoinanddone - I love your story, which does speak to the point of the thread, and I am glad it worked out that your daughter could attend the school that made her eyes light up!

But no one wants to have to say no to their kid when this happens, so that is why some decide not to risk an application in case the amount of aid given does not match what the family feels they can pay.

But playing with the net price calculator at least gives an estimate that can guide a family’s decision. I think any family should run the NPC on any colleges that seem right for their child before ruling them out, because, as this article makes clear, the cost may be much less than they think!!!

But if the estimate seems too high, I can see walking away early in the process without visiting, so the child does not end up wanting what you can’t give.

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I totally agree with the news article. I guess we are middle class - and we were very surprised that MIT turned out to be way cheaper than UMich, in fact it was half of what we would have paid at Umich in-State! On top of that, my daughter chose a dorm with no meal plan and didn’t have to buy a single book in two years, plus MIT cut the student contribution to 3400 last year. Looks like my daughter will not have any student loans.

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Awesome, @anitram!

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For some it works out. For others who are upper middle and KNOW they will be footing the ENTIRE bill it might be a different calculation. The family and student have to decide together how much is available and what the menu option looks like. If I have four kids and a high income my calculation might be different than if I have one kid and a high income. Other factors include how much already in retirement savings, home ownership and most importantly what the family assesses the value to be.

I have seen many CCers who think in state honors programs with no debt are superior to other options. Some other families might decide to take on a lot of debt to fund a school.
As prices increase and online options change, the formula may eventually change. People are still willing to pay 65-70K for amazing schools but will they pay 75K, 100K, 150K? At some point the model breaks. IMO, it’s pretty close to breaking for middle class and high income folks (esp. for those whom MIT and Ivies are out of reach with their deep pockets).

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@hopedaisy Agree. With high stats and high income, it’s a tough choice. With high stats and low income, it’s based on what aid looks like. For me, college was decided on the best package I received. For my kids, it will be based on a combination of things.

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My son has good stats, and high test scores, but we won’t allow our kids to apply to schools if the NPC is outside of the range we want to pay. If they use their own money and apply anyway, and get in to some dream school, they will be told they can’t go. We have been abundantly clear to our kids from the get go. The sticker price should send icy chills into their blood as far as I am concerned.

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^The NPC result is what is important, not the sticker price. For example, 69% of students admitted to the Williams College Class of 2022 were offered financial aid and would not be paying the sticker price!

It is important to pay attention to the EFC. It is bound to lead to the child’s disappointment if the family sees the EFC is out of their range and the child applies anyway.

But the Estimated Family Contribution at the meet-full-demonstrated-need colleges is below the sticker price for most American families.

It is great that the net price calculators are available on the colleges’ websites. Families can be informed of THEIR likely expense before deciding whether or not to apply to a college.

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This is very good advice. When my D was looking at colleges we ran a good number of NPCs and our projected aid ran from zero to $800 to over $25K depending on the college, all of which had pretty much the same starting tuition. Of course YMMV, but still it’s important to not assume that every school on your list will see your finances the same way. The “meets full need” schools were by far the most generous in our case and it absolutely helped in putting together a good list of colleges.

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“I very much believe in a progressive tax system, so I feel the same way about aid.”

But note that the college system is progressive only up to a certain point. Then it becomes regressive. So folks making $250k (28% of income), $500k (14% of income) and $1,000k (7% of income) all pay the same $70k. Seems like the numbers in the article are quite a bit straw-manned (over optimistic) too.

I’m skeptical that many families (dubbed “highly affluent”) with college age kids making $246k a year have $1.1 million of investments (exclusive of/in addition to retirement assets, cash in the bank, home equity). That’s basically fully funded 529s for four kids at full private pay. Of course they can full pay no problem! But if those families exist, they certainly don’t participate much in CC forums. Instead, you see endless threads from $200k families on where they can find merit aid deals.

Let’s change those numbers to, say, $200k income, $1 million in retirement plans and $100k in a 529. Quite different economic situation, but you still full pay the whole $70k. 35% of annual income.

FYI, while this article calls $246k “highly affluent”, that income level is solidly middle class at these schools – just slightly above the median/average family income.

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@northwesty- We are the very family you are describing- right around $200K, without giant assets. And, yes, we can afford full pay. It isn’t as easy for me as for someone earning two or three times what we do. Yes, it will be 34% of our income. The biggest expense of our lives! But it is not even close to unaffordable— i.e., endangering our retirement, home, or car!

And I don’t begrudge a penny spent to send my son to one of the nation’s best colleges where I think he will have a great experience.

69% of the students admitted with him were granted financial aid, so he will enjoy going to school with classmates at all wealth levels and from many diverse backgrounds, which I love.

We planned and saved for this. Since the moment we got married.

If one of us were to lose our job, we are confident he would get generous need-based aid from his college.

In fact, we even appear to qualify for some need-based aid sophomore year as it is, with our current salary. That is how generous his college is!

Need based aid is very important for those who truly need it—in order to pay the essential bills at home. The point of the article is that you might get enough aid to make this possible, so do not balk at a crazy sticker price you might not have to pay.

And as people whose EFC is borderline for aid/ no aid— We did not ask our son to seek merit, though if he had gotten rejected from all his top choices, substantial merit at one of his safeties would have helped him feel good about going to that college.

To us, it was about setting priorities. We didn’t need fancy cars or airplane-travel vacations. We needed to save money for college.

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That’s a cutoff, not a regression. I mean, if you compare it to the tax system, there are all sorts of spots where some tax credit or deduction cuts off and the benefit is no longer available. So it’s not about: what percentage of one’s income should be paid for college? — but rather, at what point is the family deemed to have enough assets that they are no longer in need of financial assistance.

$246K is affluent in terms of income distribution in our society – see https://www.statista.com/statistics/203183/percentage-distribution-of-household-income-in-the-us/ for a chart – and https://dqydj.com/household-income-percentile-calculator-2016/ for a calculator.

I understand it’s not all that much money in relative terms today — but it puts that family within the top 5% — and that family is also in a better position to borrow, as well as having been in a better position to save over the years.

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@TheGreyKing “We are the very family you are describing- right around $200K, without giant assets. And, yes, we can afford full pay. It isn’t as easy for me as for someone earning two or three times what we do. Yes, it will be 34% of our income. The biggest expense of our lives! But it is not even close to unaffordable— i.e., endangering our retirement, home, or car!”

Income wise, we are similar. We do not have much in the way of college savings, as 17 years ago, our income was much, much lower. We were paying so much money for the daycare for the kids that there wasn’t enough left over to fund retirement savings at the time. As the kids got older, and daycare got cheaper, the first thing we did was ramp up the retirement savings. Our oldest is 17 now. This is the last year of daycare costs for us (youngest is 12). over the years we have put nearly all of our salary increases into 401k savings to catch up for the lack of savings earlier. Unfortunately it was either save for retirement or college.

We drive 10 year old cars, live in a modest home, but live in an insanely high tax state where our in state tuition with room and board is $36k per year. We were unable to save $432k to fund our kids in state tuition, even with decent salaries. We make good money now, but had many extremely lean years in between. We are mindful of the fact that we have to educate 3 kids, and also not stop the 401K funding. We cannot afford to dedicate 30% of our gross income to one kid. Especially when after taxes, health insurance deductions, and 401k, we take home 55% of our gross pay.

We have money available for each kid, but way less than our supposed EFC.

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@elodyCOH - Hopefully, the colleges’ financial aid offices will consider the number of children you have, how many of them are in college at the same time, and your circumstances, as they determine the amount of aid.
Another thing that might work for you is a home equity line of credit.
Good luck!

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Obviously, what’s affordable varies family to family. Our budget was so low, we needed to look for full tuition or full tuition plus scholarships.

Several universities gave us packages that were well below sticker price, but even 50% off was still unaffordable.

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Keep in mind that those of us in the “middle” (median) range were given financial aid packages that still required borrowing to make it work. If you go back to the NY Times chart at the example families — I personally would have fit somewhere around “middle”. So looking at the chart, that “middle” income ($75K) family is paying $20K to send their kid to Hamilton. $75K earners also have big chunks of money coming out of their paychecks, and daycare expenses for younger kids, etc. They might also live in regions where housing costs are high. So does that $75K family have a spare $20K to spend on college tuition every year? Probably not – if you converted it to a simple subtraction problem, $75K- $20K leaves $55K to pay for everything else (including taxes, rent/mortgage, insurance, etc) --whereas $200K-$70K leaves $130K to pay for everything else.

So yes – my daughter got generous financial aid from Barnard, for which we are grateful. She could not have attended otherwise. But I paid down almost all of my savings; I took a PLUS loan; my daughter took student loans; and she worked. I also drove an old car which I despised, and while I didn’t withdraw money from retirement funds, I definitely was NOT able to contribute anything to retirement during the college years. So it is not easy at any level.

I think the point that the NYT article misses is that $6000 is not “cheap” for a “poor” family (“At elite colleges, poor families pay $6,000 per year on average.”) If you are “poor” (with a $20K household income)… $6000 can seem like a fortune. So “cheaper than you think” still is a relative term.

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@calmom You are so very right about that $6K number. We are not poor, but definitely lower income and I wouldn’t consider $6K a year as “cheap” at all!

I expect our outlay to be about $3K per year per kid. Oldest is out of college now, youngest is just starting. They will also have the federal student loans, but I think they will manage them easily w/ their degrees. They all had to take different paths, not necessarily what they would have preferred, but they won’t have huge student loans to pay back, and neither will we.

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These FA conversations should NOT lead to students with FA needs not applying to private universities:
1. Do not assume they will not receive FA;
2. Have a quality alternative plan, never “bank” on it;
3. On the assumption you may go there, look carefully at all the colleges you put on your list;
4. Don’t apply to privates you cannot afford UNLESS you really believe you are motivated to study there.

“TheGreyKing” noted: “And it is not only the tippy-tops that are now devoting money to bringing low income students onto their campus; lots of colleges are making this effort now.”

My Alma Mata spent, from their own funds, $54,746,490 last year to meet NEED BASED FA for the entering class. This does not include the continuing FA granted to the remaining three classes. None of this money includes “merit” awards. It is misleading to conclude that this private institution is shaking down parents and students. This University’s endowment is in excess of $460,000,000. This does not included the $18,000,000 recently donated by an anonymous graduate (not me!) The university does not have unlimited resources.

What does their education earn them? For the class of 2017 the median starting salary was $66,983.

Understandably, many parents are hard pressed to meet the ever increasing cost of higher education. It does not seem to help the conversation when asked how much they paid for their last car. People seem to feel that someone else should pay the cost of their child’s education. In many countries the cost is born by the taxpayers for the selected winners. If you think college admissions is competitive in at HYP, check out India or China.

Looking at the same data set for the class of 2021, the total of Federal and State aid to these same students was $3,518,215 or a little over 6% of the universities own contribution. Kiwanis et al private sources added an additional $3,878,431 (7% of university contribution).

Do I hear the cheers from the crowd for this remarkable contribution to American education through private funding?!

What would the state universities do if all the privates went out of business?

We are a team working to meet a very real need! Try competing for a job without the skill set. Now add to it a richer personal life!

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Yes, @calmom!

That is the point that is being missed by the people who say that it is the full pay families who are suffering in the current system. Generous aid to families who have lower incomes does not mean that these families suddenly can afford to live a grand lifestyle! It just means that their financial situation does not deteriorate to the point that they are unable to make their other essential payments.

Colleges pretty much figure how much money they can ask a family to pay without the family’s either balking/going elsewhere or “going under” and failing to make their payments for rent/mortgage, transportation, health care, etc.

. So true, calmom!

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@TheGreyKing “Colleges pretty much figure how much money they can ask a family to pay without the family’s either balking/going elsewhere or “going under” and failing to make their payments for rent/mortgage, transportation, health care, etc.”

I think many of them depend on the federal government’s interpretation on need, or their own calculations which may or may not accurately represent differences between families. All things being equal - someone earning $200K per year who will receive a pension from their company is in an entirely different financial position than someone else earning the same salary who must rely on 401K contributions to fund life after their work careers are over. Nowhere does the FAFSA or Profile take this into account. If we did not have to add our 401K contributions back in to the mix, our EFC is much different.

I know people say just stop contributing while the kids are in college, but we cannot afford to do that. Not only do you lose what you put in, but you lose your employer’s contribution, and then there’s the extra taxes you pay on it. Even if you add it back in, the full amount wouldn’t even be available for college, only perhaps 65 percent would be, once you figure in state and federal taxes.

I know the government is trying to stop people from hiding money - but for many people, their 401K or IRAs are the sole source of income for retirement, period. Perhaps they need to change the rules to only add it back in for people who have pensions where the 401K is only supplemental.

I know a lot of dual income families in the same boat as us. Crippling daycare costs early on cause many dual income earners to have little left for savings, either for college or retirement. I know it’s hard to look at people with good salaries and wonder why they don’t have anything saved for college, but unless you’ve paid for daycare in the last decade, you have no idea just how brutal it can be. My state is one of the most expensive there is.

https://wgntv.com/2016/04/18/the-cost-of-child-care-in-every-state/

Don’t get me wrong - I consider us very fortunate. Our kids will find a way to get an education.

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Profile doesn’t take anything “into account;” it is simply a mechanism for reporting various information. And whether or not a reporting parent has a pension is one of the pieces of information that Profile collects. The proprietary formula used by each Profile school is what will determine the institutional EFC, and for each school it’s not generally known what, and how, information reported on Profile will be used. So it’s entirely possible that a parent with a pension might have an impact on institutional EFC that a parent without a pension would not have, all other things being equal.