<p>Those kids who have a grandparent co sign an outside loan because parents are not credit worthy, have a better chance of not involving someone else on the loan if the elderly folk die, than those whose parents remain on the hook for the rest of their lives. I have a friend who foolishly signed for two of her kids loans,hefty ones and she is now broke, divorced and those loans are a terrible burden. No way the kids or she are going to be paying them anytime soon. If her mother had signed them, she wouldn’t be on the hook because the elderly lady died two years ago. It would just be the kids being hit with the bad credit rap. But now she is involved and it may be her ruin. She’s lost job opportunities because of this at crucial times. Not fair at all when sometimes it’s a matter of luck that someone gets some break in a system.</p>
<p>Northeastmom: my kid has yet to ‘pay’ for a plane ticket as I always use frequent flyer miles to fly him back/forth. That is not considered income. As I wrote above, my retirement funding is done by my corporation that I own, and that is not considered income. My point is that this system of ‘need based’ aid is flawed at best and expecting it to be fair and logical is illogical. Just the variation between the schools in what they do and don’t consider in their determination makes no sense in the aggregate. Disclosure: my kid not get any need based aid last year.</p>
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<p>KKmama: That would be me who mentioned that number but that is not what I said. Regardless, I would like to say that even people who live in houses that cost 350K or more, and have higher incomes, are also real people too. Not sure why only people of modest means qualify to live in the real world. And BTW, I grew up on a very modest house on East Hill in Ithaca and had 3 homemade outfits that comprised my entire school clothes in 7th grade. I didn’t like that so I made a different life for myself and my kids. I also worked >80 hr/week for several years to get here. Please don’t tell me I don’t live in the real world.</p>
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<p>This is not true. We do not make anywhere near 7 figures and we are paying all college costs (closer to 60K than to 50K) out of current income. </p>
<p>For the sake of argument, lets assume we make 300K.</p>
<p>Let us take off about 100K for taxes, that leaves 200K of after-tax income.</p>
<p>Suppose we are financing a loan of 800K on a 1 Million house. At current rates that is at most 40K/yr. Real estate taxes (in the high tax states) could add up to about 20K/yr. That accounts for about 60K/yr for housing, much of which is tax deductible. Let us disregard the tax benefits, we still have 240K/yr of after-tax, after-housing expenses income.</p>
<p>Lets say we pay 60K in college expenses and put away 40K/yr <em>after tax</em> into retirement and investments. That takes away about 100K, still leaves 140K. </p>
<p>Lets assume another kid with private school and expenses of about 20K/yr. That leaves around 120K.</p>
<p>I don’t know about you, but I think about 10K/month after taxes for living expenses is still a pretty comfortable living. </p>
<p>Now imagine instead of 300K we make 400K. Or maybe 500K. Plenty of families make that kind of money. And plenty of them do send their kids to college and pay out of current income. </p>
<p>And unfortunately too many of <em>those</em> families also whine about college expenses. Same people also whine about taxes.</p>
<p>Me, I don’t whine about money. I am grateful I have the money. I am happy to pay taxes, tuition, and happy to subsidize the education of talented kids whose parents happen to be less wealthy.</p>
<p>And we don’t even make 7 figures. Unless you count the figures after the decimals in which case we make 8 figures!</p>
<p>The gift loophole is one thing…you cannot count on a gift that keeps on giving. The uncle may decide to stop his generosity at any time.</p>
<p>But the collectibles loophole is another. If you decide to take money out of the bank and buy gold or diamond jewelry your EFC is lowered.</p>
<p>And I know families who have more money on their ring fingers than they have in the bank.</p>
<p>^^ Perhaps the grandmother would not sign for a private loan. We would not, and I know my kids’ grandparent would not either! This is not necessarily bad fortune, but a foolish decision to take on private loans.</p>
<p>As far as the other post cpt, I agree with it. Still, it does not mean we can’t vent. I do see these loopholes as taking away from those who really do not have “financial gifts” on the side. It seems like the doctor you described was playing by the rules (and his kids could not attend Profile schools, or schools with additional FA questions).</p>
<p>Tatin, I agree, but one cannot count on a job either. If the uncle stops giving, one can call the FA office and say, I no longer get these funds just like one can call and say that they lost their job.</p>
<p>True. </p>
<p>But what do you think about the non-cash assets ‘racket’?</p>
<p>Oh, I agree. I was the one that brought that up in one of my first posts on this thread. I can have a $300,000 antique in my living room (I don’t, lol) and $100,000 in artwork in my home (I don’t), and a few gems in my sitting in a safety deposit box (I don’t) and I can still get FA grants!</p>
<p>The reason it’s not ‘counted’ for financial aid is the impossibility of auditing. But I’ve heard that in some cultures it’s just considered safer to have your wealth in valuable and easily transportable jewelry, (cultures in which in past generations family members have had to flee corrupt all-controlling governments and leave their bank accounts behind).</p>
<p>Gold jewelry is more easily sold than a rental property, for example, yet the latter is counted and the former is not.</p>
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<p>I have heard this too.</p>
<p>I agree that auditing these non-cash assets would be impossible to achieve. It is another unfair loophole, IMO.</p>
<p>There are loopholes in everything and if you are lucky enough to fall into one, good for you. You can work towards some of them, but you can also lose out on opportunities doing so and risk not even getting what you want. If anyone is lucky enough to have a relative or friend fund their college, good fortune to them. The more it costs to monitor and check out financial aid info, the less money there is available for the aid. That’s why a lot of things are kept to what is most easily verifiable. Chasing down non nuclear relatives and non relatives for their stories can be futile. It’s tough enough eliminating simple fraud. I know a situation where someone simply didn’t report a large asset for years and it never got caught. Their kids got a nice though not huge piece of the financial aid pie. Wasn’t even on purpose It’s not like the schools can catch every financial situation. </p>
<p>Yes, there are people who can pay for college out of current earnings and some who have saved for every bit of their kids’ colleges. As you go up the income/asset ladder, you’ll run into more such families. But from what I have read, most working folks, those who have to continue working at current level to maintain current standard of living, at even high incomes are not able to pay private college costs from current income. A lot of it has to do with the fact that most of us do tend to spend up to our incomes or within a certain ring of it, and that ring is not far enough down to pay $60K a year. For those who can do it, good for you. Wonderful. Bravo. Wish I were there too. But I’m not. I also have known families squeezed in unhealthy, dangerous living situations, with both parents working jobs that are going to shorten their lives, not spending the time on their kids and families to pay for college. Sometimes it works out and they do get their Holy Grail. I don’t admire their sacrifice one minute. </p>
<p>The rules are out there and are really a mixture of accommodations, are capitalist system, and some government intervention plus a sense of social justice. A lot of flaws in the system, and, yes, I have some ideas as to how some could be fixed, but they don’t tend to affect the way expensive private school aid is distributed.</p>
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<p>Better check your math, vicarious. You double-counted the $100K that the government took off for taxes. </p>
<p>You got to $200K net of taxes; that seems about right. But then when you take off $60K for housing, you’re left with $140K, not the $240K you posited. Then when you pay $60K in college costs and put $40K into retirement savings, you’re left with $40K, not $140K. Pay $20K for the second kid (including private school tuition) and that leaves a grand total of $20K, or $1,667 per month (roughly $55/day) for everything else—car(s), gas, car insurance, health insurance premiums, life insurance, homeowners insurance, utilities, food, clothing for your hypothetical family of 4, home maintenance and repairs, and on and on. That’s pretty tight. And that’s on a gross income of $300K.</p>
<p>Many full-pays are closer to $200K. Now most households earning $200K don’t live in million-dollar houses, so there’s a little savings there, but even so, I think it’s pretty much impossible to pay full freight out of current income if you’re at that level. You either need to have substantial savings, or borrow heavily, or both.</p>
<p>I don’t know - my husband and I have an AGI of about $75,000 and our EFC was almost $15,000. Someone else has an AGI of $250,000 and probably does has an EFC of about $50,000. However, I live in a small house in an “ok” neighborhood (no wealth - just no drive-bys either) and my husband and I have worked all of our lives, sometimes holding two jobs - just to get by. I’m not sure my $15,000 EFC hurts less than your $50,000 EFC.</p>
<p>bclintonk: oops! big fail for me!</p>
<p>I better let the accountant do my taxes this year :)</p>
<p>I was wondering why it was getting to be so easy…this hypothetical family was living in a million dollar house paying a lot in real estate taxes, paying for college <em>and</em> putting away a lot of money into their retirement. I was getting jealous :)</p>
<p>I still do think that people with 300K gross can manage to pay out of current income. Just live like you make 200K and you have 60K in after-tax income that you can apply to college expenses.</p>
<p>At around 200K definitely it gets to be tight if you are trying to pay out of current income.</p>
<p>Kleibo, I am sure that your 15,000 hurts every bit as much as someone with an EFC of 50,000 earning 200-250,000. If your family is gapped, as most families are, your family could be hurting more than the guy paying the full boat.</p>
<p>Agreed with the above poster who indicated that full costs of a private school can be paid with current earnings. In our family, both parents worked full time. ONE complete (read that…COMPLETE) salary paid only for college costs. Both kids went to expensive private universities with some scholarship/grant aid, but the bulk of the bills were on the parents.</p>
<p>It’s a matter of discipline living at any income level lower than the one you are. If we all did it, our savings would be a whole other story in this country. I live in an area where a lot of folks make $300k a year, but the homes run about a million dollars if you want something with more than 1/3 of an acre and bigger than a split level. Taxes are among the highest in the country, and goods and food are a good 15-20% higher as a rule. I see coupon deals for Krogers and Alby’s and they don’t exist around here. Fresh vegetables are a big part of my food budget. Most of the families at that income level end up borrowing, having grandparents help and have to go into savings to pay colleges… I don’t know too many that can just write that check. Ironically, it is probably the more wasteful ones who can do it. If you don’t have the luxurious vacations, designer clothes, dinners out, shopping sprees to cut out of the budget, if you are spent up, it’s on things that are not easily cut, like a house in a good location, school district, a commitment to other kids’ education or talents, help for family members in trouble, health issues, prior debts. I’d love to sell my house, but wouldn’t get what I put into it and would have problems accommodating two old grandmoms we have taken in. We have a kid to whom we made a commitment to private school for pre college, and health issues along with some special issues with DH’s job that we need to have reserves for. Also some past bills for mistakes, mishaps and plain bad luck. It really depends on where your commitments have been made as to what you can cut and if other family members health and well being depend on them. College is not the most important thing in family life.</p>
<p>Ironically, sending our kids to private high school was a form of savings in that we could not spend up or commit those monies. That is $15K right off the bat that will be going for my college kid. If he had gone to public school, I doubt we would have banked that amount, given how we have operated.</p>
<p>I don’t think our misspending and lack of discipline is something that should get sympathy, by the way, to make myself clear. It’s just the way it is in our society. And it is of relevance because of the prevalence and is something that colleges need to take into account. I think that is in part why all of these easy to get loans exist for college students that people could in no way get for any other purposes. Right now, It can be easier to qualify for a $50K loan for college ($200K over 4 years ) than for a mortgage secured with a real house and property.</p>
<p>The problem is that student loans can’t be discharged in bankruptcy, so lenders have zero motivation to be selective, rational and responsible about who they offer six-figure loans to. Irresponsible borrowing wouldn’t happen without irresponsible lending.</p>
<p>I get that some people are making 300K after a career change and two decades of earning much less. But c’mon- you have an 8 year old kid. Does it not occur to you that in 10 years that kid will be ready for college?</p>
<p>I am tired of the high income bellyaching about having to pay college costs out of current income. Yes, it hurts. But it hurts a lot less if you’ve taken advantage of the 18 year head- start to save. I live in a pretty diverse neighborhood in terms of income, ethnicity, professions, etc and it seems that only the immigrant families understand that children grow up and go to college- and if it means your teenagers take the bus and don’t get their own cars, and that you mow your own lawn instead of “outsourcing”- hey, every penny they don’t spend goes for college savings. Everyone else whines about getting short-changed in the financial aid department as the kid speeds down the driveway in the brand new jeep.</p>
<p>And although educational debt is a current bugaboo (plenty of people in my office look at me like I’m a zombie when the discussion turns to loans), it is a little funny that people who think nothing of buying a big screen TV on credit, or taking out a home equity loan to put in a nice kitchen, or driving a brand new lexus off the lot after signing the loan papers, or even buying a fancy watch on credit… think that educational loans are things that evil parents do to evil children. Newsflash- your car starts to depreciate the second you drive it off the lot. Nobody who buys your house is going to want your green granite counter tops (they scream McMansion circa 2005). Your TV will be obsolete next year when Best Buy sells an even bigger, big screen TV. And if you think your watch is going to appreciate- take a look at how many are being cranked out right now.</p>
<p>I know people who are anti credit and that’s fine. They finance nothing, they pay with cash or they don’t want the item. But for people who are out there financing every toy and vacation and home improvement but who all of a sudden get holy when it comes to college? I don’t buy it. </p>
<p>The system was not designed to have you pay the whole thing out of current income. past- savings. Current-salary. Future- loans. If you choose not to pay out of any of these pockets- that’s your right. But colleges don’t owe you extra money because you couldn’t defer your consumption over the last 18 years enough to build some college savings.</p>
<p>I feel for folks in the “donut hole”. But 300K and over? harder to cry.</p>