How Families Sometimes Do It

Paying for College
1

<p>I am referring to paying for college. I have given the example on another thread in answer to someone asking about merit or need based awards.</p>

<p>My cousin and her husband make about $60-70K a year combined, She works part time. They have two sons and the older of the two is headed for college this fall. Bright young man, good student, graduated in top 10% of class. SATs about 2000. Huge public school, considered good, but not on an top US school lists, and about 3/4 go to college mostly to state/local schools with about 10% going to private, highly selective schools. </p>

<p>The parents saved what they could for both kids for college with Birthday, and Christmas money, bonuses. unexpected windfalls, graduation money,..you get the general picture. About $20K in savings for the college bound son whch amounts to about $1000 a year they saved. Kid has worked summers and saved money too, and has about $5K plus whatever he will earn this summer in the pot, but has paid his parents the money and they have it in their names so that it isn't counted as heavily for aid purposes.</p>

<p>Student applied to a good mix of state, local, private, selective, safety, midrange schools. There is a local state college (former teachers college and some community college options that are definitely affordable and would accept the student if he so wanted to go that route. He would have to buy a car, however, as there really is no public transportation and both parents have schedules that make it difficult to have them drive him to school without infringing on their jobs. The local state school, and a local Catholic school, both gave the student essentially a tution free scholarship. </p>

<p>Family EFC is $18K, so if student goes to local options, no financial aid but the full Stafford Unsub would be available to meet uncovered COA for commuting costs, and there is money available, as one can see, to buy a reliable car. If student chooses to live at the local schools, room and board are about $10, and can easily be met by work, loans savings and whatever the parent can scrape up out of the budget. There would be some savings having a young man out of the house and living in the dorms. So this is a very affordable option for the family.</p>

<p>Big State Us cost about $26K COA, and are too far away for commuting. The school offered a $2K scholarship, subsidized and unsub Staffords and some other loan to the student that is subsidized as the aid package leaving about $1500 unsub Staffords as unused and as a buffer. So the family would have to come up with EFC less the $1500 unused Stafford if the student goes this route, or $16,500. $5K from parents' savings, $2.5K from student's savings and summer work would leave about $9K to pay. Student expects to find a job during the school year as buffer and expects to have some Summer money left for a buffer too, and hopes to cut down that COA by being more frugal that the average student. In any case, the $26K is not all billed to the family as some of that is discretionary and flexible. But they are going to fund to that figure, so that means mom and dad are going to tighten the belt and use some of the money they save from having kid out of the house, towards the college costs and hopefully be able to come up with an extra $500 a month. Both parents have reasonably good cars in good shape, and no car payment for now, so this is a possibility. They are already stashing what they can aside this summer to pay for the drop off trip to college and have paid some deposits. So we are looking at a gap of about $2500 that they are hoping will be met with some extra work hours, tax refunds expected and whatever.</p>

<p>But student also has three private college offers. Two are reach school that accepted him, that guarantee to meet full need to those accepted. BUt the PROFILe comes out with a lower net need and higher contribution from the family. Also, there are some more loans in the package, maybe Perkins, maybe school loans. In any case, the net amount the family would have to come up with about $11K instead of $9K at Big State U.</p>

<p>The third private does not guarantee to meet full need, but gives merit money and gives the student a merit awards as well as a financial aid award, self help and leaves a bit of a gap, but is still doable. Student likes this school second best over all, second only to one of the privates that has the biggest gap to meet and least possibilities in moving off campus in future years to reduce cost, and fewest job opportunities for the student to find work. Also the highest cost to travel there. Also does not have available possible course of study that student might be interested in doing though not current stated major. </p>

<p>So Private #3 it is, and parents may end up borrowing from PLUS if things are tight next year. They can make it a go for the first term. Deposits have been sent, and student just got notification of an outside scholarship, which he can keep since EFC was not exactly met, and student is sure that first term is a total go as he is covered by family health insurance and does not need or want the full meal plan. Knows some upper classmen who assure him that off campus living cuts the costs drastically, and he has checked it out and is confident that this is what he can and wants to do after freshman years in the dorms and on the meal plan. </p>

<p>An example of how a family will do it combining past, present, future earnings, and looking at private, public options on a number of schools. Yes, going locally would have been the least expensive way to go, but going away to school, a luxury is affordable for this family with both student and parents working to gether to make it happen. Loans will be there, but within a manageable range.</p>

2

<p>Had I seen this post when I first embarked on ‘Paying for College 101’ in 2005, I might have done things somewhat differently. Of course, the economic climate was markedly different 7 years ago. It was go-go, ever higher salaries, more home equity, jobs for graduates aplenty.</p>

<p>Now? Not so much. In hindsight, we probably went a little overboard with our PLUS loans at the time, but they’ll get paid eventually and my D’s got and are getting a stellar education at different Big State U’s. But I will say that my instincts even back then that the designer privates & LAC’s at (back then) $45K/year was too pricey turned out to be–at least in my opinion–accurate.</p>

<p>What cpt has posted here should be a sticky for sure.</p>

3

<p>Thanks, Jnm. I wanted to share this as I worked with said cousin for a number of years. A few things that have always bothered me was that a lot of families simply do not save for college and do not have their kids save for college. This is an upper middle income family here, but by absolutely no stretch going to be able to afford a $60K a year college for their children unless they get aid, save money , tighten the belt, borrow and make sure their kids understand they will have to work through college. Even with an income level close to what the a private college COA is, the schools are expecting about $20K+ in contribution from the family and student each year. And some of the schools are sucking up the Stafford loans the kid can take as well as the work at school option with workstudy awards to make up what is defined as need. As all can see, even the state u option is pricey, and actually close in cost to what a private u would cost.</p>

<p>One thing that this student did not do, was look at other public colleges and universities in the state. It is highly likely that a school similar to local state U where he got a full tuition award would have offered a similar scholarship. But student felt bases were covered in that area by applying to two local schools,and did not feel like checking out other non Flagship state schools. </p>

<p>All three privates are close in USNWR rankings, though only the one does not guarantee to meet need. None are schools that are the absolutely most generous that do not put self help in packages. He did not get accepted to those choices. He was rejected by the most selective schools on his list, so the three privates and the Flagship are what accepted him from his reach/match stack. He applied to ten schools altogether and was rejected by 3. Three selective privates accepted him, the selective flagship U accepted him, the local state university accepted him, a local Catholic college accepted him and he also had the community college options, which would have cost MORE than either local state U or local private college, as they did NOT give him a tuition free package. But very low sticker price with $1000 sweetner was the draw there, plus automatic acceptance and some special privileges as a high achieving student going there.</p>

4

<p>We attended a financial aid night at one of our local high schools when D was a sophomore. We like in a modestly affluent community, and the financial aid officer giving the presentation stated that he would expect most families in the room to have an EFC in the range of $20-25,000. You could have heard a pin drop. He obviously knew this would surprise most in the room. </p>

<p>His next slide demonstrated how many of these families could come up with $25,000 a year to pay for Junior’s education it included items like:</p>

<p>Cut back on cable TV - do you really need $150 a month service? You’re at work most of the time, and Junior will be away at school. Drop it down to basic service at $40, and allow yourself $10 to rent the occasional movie - or borrow the movie from the public library.</p>

<p>Cut back on the cell phone bill. Are you that attached to your phone? Learn to use your land line (if you still have one), for local calls, and be more frugal. You can probably save $100 a month there too.</p>

<p>Wait an extra year or two to replace that car - the one you were planning to replace because it’s (gasp!) 4 years old.</p>

<p>Eat out a little less often, and plan your meals at home (buy in-season foods, or maybe even match your meals to the sale flyer when it comes out on Sundays). Also, consider whether the name brand items really are worth the extra expense (yes, some are, but don’t assume all are).</p>

<p>That family vacation - the one that cot you $10,000 last year - find something else to do. Stay closer to home, or see if you know someone who will rent you their timeshare. Save a few thousand here.</p>

<p>For those in the upper middle class, you might not think you have that much discretionary income, but if you actually look at where your money goes for a whole year, you will see where you can find significant savings. For those just starting to look into colleges, with kids in 9th or 10th grade, now is the time to watch your budget, and see where the money is going, if you don’t already know. Then you can give your child a real sense of what you can afford, and you can start the process of cutting back if necessary, so you don’t have to do it all at once. Chances are, you can afford that EFC, it just might require some small sacrifices.</p>

<p>When we ran Net Price calculations for about 50 schools last month, some places estimated as little as $6,0000, others as high as $35,000. We expect we’ll end up paying something near the middle.</p>

5

<p>Sigh, we have cut vacation, again, and will for several more years. We’ll have had a child in college for at least 17 years, most of the time with two in college. Cable is a must for us as my mother and MIL live with us and they live for the TV, especially my mother for whom we get special programming as she is not from this country. Extra cost plus needed to upgrade service to be able to even be eligible to get that channel. </p>

<p>Good luck in lowering cell phone bills. DH is required to have a smart phone for work, and our kids use theirs actively to stay in touch. The only carrier that has decent coverage here is the one we use. I am out a lot and my cell phone is my life line. </p>

<p>My car is 8 years old, has a quarter million miles, air conditioning shot, and I’m still trying to keep it alive. It’s getting close to a car payment to do so.</p>

<p>I cook dinner every night, and have special diets including my mother’s that have to be accommodated, and I’m always looking for ways to save money on food and still feed everyone well.</p>

<p>We are upper income, but just basically put ourselves in the corner in terms of standard of living. Should have bought a cheaper house in not such an upscale neighborhood. We’ve enjoyed the benefits so much of where we live, but it does cost us. The other big cost item has been education, and programs for our kids. Not much in other things at all. </p>

<p>It’s tough to hear what colleges contribution calculators are going to come up with what you are expected to pay. Even harder to learn that few schools will even cover that figure. It’s just a guideline, and the BEST you are likely to get from financial aid, not a guarantee.</p>

6

<p>cpt, I agree that it’s a challenge to maintain college payments over a long period of time. I’ve been paying for college for 8 years. My car is 12 years old and I am faced with at least 5 more years of tuition. There’s no way to defer that expense any more. At the same time, there are some major house repairs that need attention. Financial aid doesn’t take any of that into account. As a matter of fact, when my last kid hits college in a few years, financial aid forms will reflect a family size of 2 (me and kiddo) with 1 attending college. It will not reflect that it is year 9 or 10 of consecutive college tuition.</p>

7

<p>We were hit with major dental expenses this year, and my son could not continue his job at school He’s decided on a major and already behind the 8 ball to graduate in 4 years with this major, so he’ taking a summer course. Has a great opportunity for the last 2 weeks in August, but it costs money, and he ran behind 2nd semester in his financial plans. </p>

<p>Then car repairs for us, and some things started going in our house that needed to be addressed. Big old tree died, and the cost to cut it down was a real zinger, but it is dangerous as it stood. </p>

<p>I don’t expect the future years to be much easier. That is why borrowing is not a wise thing to do. If you think it was hard to save the money in the past, so hard you couldn’t do it, and you are hurting, trying to cut costs right now in the present to come up with extra payments out of salary, how the heck do you expect that it’s going to be easier to pay the amounts borrowed + interest in the future? Things keep coming up, and we are getting older. You really think it’s easier paying back loans?</p>

<p>My cousin’s son has friends who tend to be from more affluent households, and he, and his parents really thought that with his grades, test scores and the talk, that they would be getting close to a full ride for him. They were right, but it was to local schools, not the name school that topped his lists. It was a surprise that he was turned down at two of his choices and a surprise that the packages from the accepted 4 reach/match schools expected the family to pay so much and that loans were unavoidable in going to those schools. </p>

<p>What was even more surprising, my cousin told me, is that these more affluent friends of her son’s, seem to all be taking out loans as are their parents.</p>

8

<p>But that’s the point - those more affluent friends are not willing to cut back, so they will take out loans. It sounds like you’ve already made many of the sacrifices where you can, but many families don’t and are resistant to doing so. Many are in denial about where they stand - we had a young man who posted here recently who thought that his father’s $250,000+ income put him in the upper middle class! </p>

<p>We made decisions long ago about how to handle our finances; decisions I don’t think most families ever considered. My car is a 99, his car is a 95 (or older, I don’t recall). They will both be replaced in December before will fill out the FAFSA. We put a significant amount of money into the house last summer to replace windows, siding, and roof (paid cash we had saved up), and are set to pay off the mortgage next August, in time to convert those monthly payments toward tuition bills. That’s where we will come up with the bulk of our EFC. We have sacrificed all along, though it never felt like it, because we live within our means. Aside from eliminating mortgage payments, we don’t have $25,000 to cut out of our budget. I suspect some of our neighbors make considerably more than I thought, if they have that kind of discretionary spending. We could be bitter about the fact that we are penalized for saving for our kids’ educations, but we know that our previous sacrifices will leave far more options open for them than will be available to many of their friends.</p>

9

<p>Not being sanctimonious here, as we have made a lot of mistakes in the way we spent money and dealt with college.</p>

<p>Next year the first parent loan we took will paid off. The only reason that is the case is because we started payment right away on the loan rather than waiting until 6 months after grad. Had we done that we would not be done for another 4 1/2 years. People have done less time than that for some serious felonies. It’s like buying another house without the house. </p>

<p>We are upper income and it has been very painful paying for these loans. A ten year sentence is a l-o-n-g one. And this loan is just for year one of our oldest son’s college.</p>

10

<p>I agree with all that’s been written here. It takes planning, sacrifice, and a willingness to refuse to be in denial about where the money is going to come from. </p>

<p>Before we had children, my husband and I set a financial goal for ourselves of having our children come out of college debt free and with a car. We were the ones who made the decision to have 4 children, which meant 10 years of college, 4 of them with 2 in and 2 of them with 3 in. Those years were hard. But we planned, saved, and sacrificed. We preached affordability as a prime factor in college choice. 3 went to in-state publics and 1 went to out of state public which was actually semi-affordable 10 years ago but wouldn’t be today. We now have 4 college grads, all employed, who have no debt and have a car. We did it!! The curve ball we got was getting unexpected custody of 3 teen nephews 3 years ago. We had planned for 4, not for 7 :slight_smile: but we’re preaching the same thing to these 3 guys. Since they are all 3 independent students as wards of the court, they have 0 EFC. We’ve directed their college search accordingly and so far so good. Nephew #1 just finished his freshman year with a full ride at Carleton and due to a private scholarship, work study and summer work as a lifeguard, he’ll graduate debt free. 5 down…2 to go.</p>