Merit aid cancels out need-based aid

<p>Oh please, 3togo, don’t even try to use the example of kids of Bill Gates and Warren Buffet as the standard example. That doesn’t even make a reasonable point. The vast majority of people that are full pay are working hard to cover those expenses. Whether they are borrowing money, pulling from their retirement funds or long term savings, or working extra. There are very few people that can pay $55K+ a year per kid without pain.</p>

<p>You know what else? The schools that get the Gates/Buffet kids score BIG TIME. They should give them free tuition. My kid goes to the high school that the Gates kids go to. And he donated over 40 million dollars to that school. Yeah, I think those guys pay their kids tuition. And a whole lot more.</p>

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Please read the complete response … I said the leverage point is the EFC calculation … if EFCs were substantially lower then the higher tuition bill would not bother many families … and while I used the Gates and Buffets as example a non-trivial % of students at top schools could absorb a big tuition increase (about 50% of students at the Ivyies with the current EFC calculation are full-pay).</p>

<p>It’s funny … families making $30,000 don’t have money for college … families making $80,000 don’t have money for college … families making $150,000 don’t have money for college … families making $200,000 don’t have money for college. At what point do families earn enough money that they save money or can cut back on expenses so they can pay for college? And if they save money, will they come to CC and whine about how unfair it is that they saved all those years, only to find out that they won’t get aid as a result?</p>

<p>Probably not best to bring up names of some of the richest people in the world for any sort of example. Sure if the EFC were substantially lower then many more people wouldn’t be paying full price. But I guarantee you that with the prices as high as they are right now, very few people would be willing to absorb a large tuition increase, no matter their income. Why kid A’s family should pay extreme multiples of tuition as opposed to kid B for the same education, is beyond me. I can’t think of any other product that gives the same result yet is so differently priced for so many people. Maybe people would be willing to pay $1mil for a guarantee of acceptance for their kid if they are filthy rich, but otherwise, who would do that to be put in the same pool? And why would that even be remotely fair?</p>

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I hear your guarantee … but do you have any evidence. There is evidence of the opposite … tuition has been increasing about double the inflation rate for about 30 years … and it’s driven so many people away that the Ivyies and other top school schools set records for applications every year; sure doesn’t look like they have found the level where the top 1% families balk yet … and I see no evidence they are not inclined to continue to push the supply/demand curve. Below the top tier there is some evidence that schools are pricing them beyond demand and schools have started adjusting (lower tuition and/or lots of merit).</p>

<p>kelsmom…good post. Too many making a nice income could save enough to pay for college, but they fall into the trap of having to keep up with how others making the same income spend their money. Instead of saving, they get the bigger house, nicer cars, ect.
It’s all about priorities, some choose the toys, others choose their kids education.</p>

<p>“I hear your guarantee … but do you have any evidence. There is evidence of the opposite … tuition has been increasing about double the inflation rate for about 30 years … and it’s driven so many people away that the Ivyies and other top school schools set records for applications every year; sure doesn’t look like they have found the level where the top 1% families balk yet …”</p>

<p>Yes, record levels of applications. But it’s not just the top 1% of people who are paying full tuition, there’s plenty of people in the upper middle class struggling to do so also. I suspect if a very small number of individuals were singled out to pay far higher rates in an obvious way, rather than the convoluted mess that happens now, to a large number of people…those people might just walk away and find other options.</p>

<p>“Too many making a nice income could save enough to pay for college, but they fall into the trap of having to keep up with how others making the same income spend their money. Instead of saving, they get the bigger house, nicer cars, ect.”</p>

<p>That is my exactly my point. Two families making the same income can receive very different aid because of different lifestyles. I personally don’t have a problem paying for college (not that I would say it is an enjoyable experience), but I do not feel the process should reward those who would rather spend their money as opposed to saving it for college. I also agree with busdriver11, not everybody in life can afford a Mercedes or a chalet in Aspen. No one seriously argues we should attempt to subsidize people who can’t afford these luxuries. </p>

<p>One reason why tuition has risen exponentially is because government has increasingly spent taxpayer money to subsidize the cost. If I am providing a service that people don’t have to pay for or are receiving funds from a third party, I will be much less sensitive about charging more for that service under the circumstances. Somewhat the same problem we are experiencing in health care today.</p>

<p>“As I have written earlier, many families have been sheltered from the true cost of education through the mostly asinine system we use to finance our public schools.”</p>

<p>Not only do I agree with this point made by Xiggi, but I would also suggest the poor quality of education many receive from our primary and secondary schools is a function of being sheltered from the true cost of it. Most things in life that I have gotten for free have not been worth very much.</p>

<p>I don’t think you can state a flat income that can “pay for college”. There are just too many variables. In NYC is $200,000 enough to live on AND pay $55K/year for college, probably not. If you figure that $150,000 is take home, roughly, half of that going to pay rent and utilities, they then have about $25,000/year to live on for medical expenses, groceries, etc. Take that same $200,000 in rural Kansas where you can get a nice house for $100,000 and $200,000 is a comfortable income even after paying $55K for college.</p>

<p>Also keep in mind that people making those high salaries probably haven’t made that much money all along. As people work their way up the chain, salaries increase, but so has the cost of living. Also, people should be focusing on their retirement more than their college savings. I hope that people are maxing out their retirement plans before they put anything away for college for kids. If you do that, even on $200,000, that doesn’t leave a lot extra to save.</p>

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<p>How does “the process” do this? Someone who knows more about how this works than I do, please correct me, but I understood that the biggest factor in determining EFC is income. My FAFSA EFC (I just did a quick calculation) without investments would be only a couple thousand less than it is now. (Again, if I’m “doing it wrong,” I hope someone will correct me.) If you have an AGI of above $100K per year, you will be expected to pay a fair amount for your kid’s college education at most places, and you will be expected to pay a lot whether you saved or didn’t save. Having savings, of course, does help, and colleges will expect you to use them. But you are not really penalized for having them. More to the point, you are not rewarded for not having them.</p>

<p>“Why kid A’s family should pay extreme multiples of tuition as opposed to kid B for the same education, is beyond me.”</p>

<p>Because in the view of the school, a university filled with lots of Kid A is a luxury resort and not a 21st century university. Put another way, Kid A gets a better education with Kid B around, and vice versa. You don’t have to agree with that position, but if you don’t, then maybe the school is not a fit for philosophical reasons.</p>

<p>Here is a hypothetical example of what I am talking about. Take two families living in the same area and both make the same income (let’s say around $100,000) and have the same number of children. One family has a big house, luxurious cars, travel frequently and, consequently, no money saved. The other family has always lived frugally, sacrificed to save their money and has managed to accumulate $500,000 for their retirement. Will both families receive the same financial aid for college. I don’t think so. I could give you many more inequities with the process, but this is one example.</p>

<p>So it isn’t about families who make $50K and have an EFC of $14,000 with the college meeting the rest of need but a perception that other families might get to have their cake & eat it too?</p>

<p>parent57–I get what you are saying but you are assuming that the big house and the nice cars prevent people from saving. There are other factors involved. What if the family with the big house and doing all of the traveling saved heavily before they had kids and have $1,000,000 set aside for retirement already? What if they want to expose their kids to the world as part of their education? What if they have parents that are going to help out and don’t need to save? The “frugal” family isn’t all that frugal if they only have $500,000 in retirement accounts after all this time. Also, retirement accounts, for the most part, are not liquid for college expenses, at least not liquid without penalty. Are there colleges around that really expect you to tap into your 401K to pay for college? The savings comes in when you earmark money for college specifically. Again, I don’t believe in putting money aside for a child’s college until you have maxed out your own retirement options. It is just not a wise strategy to do otherwise.</p>

<p>Even the federal government expects kids to foot quite a bit of the bill for college. Too many parents think otherwise and I think that is where the EFC gets messed up.</p>

<p>SteveMa, you changed my hypothetical. In my example, one family has no savings because of an extravagant lifestyle and the other has manged to save most of their money in non-retirement accounts. Remember, there are limits to how much you can contribute to a retirement account. These two families will be treated quite differently by financial aid offices.</p>

<p>Location matters. In other posts on this subject, others have disagreed but $100K per year is very different in the NY suburbs than in the midwest. The financial aid formulas do not take that into account. There are many families that bought reasonably priced homes for their areas that have seen their property taxes skyrocket and pay high state and local taxes. They may have newer cars because they put 25K miles per year on their cars driving to work. They may spend money not on fancy vacations but on child care, music lessons, soccer teams, summer camp and band trips for their kids, and build family closeness and memories with vacations and trips to the nearby City. </p>

<p>The reality is that private college has become something of a luxury item. I find it hard to believe that anyone with more than one kid that lives in the NE can make $100K and manage to save $500K for retirement and $200K for college. It is just not possible to do so in 18 years, unless you start with a big chunk of change.</p>

<p>In my opinion, a big problem is the refrain students are told to apply where they want and not worry about cost because there is so much aid available. This even comes from info sessions at colleges. The reality is many colleges don’t offer merit aid and those that do offer very little. Most colleges do not meet the COA with grants, but with loans and some work study (and it is not always easy for students to get a work-study job). Most colleges expect parents to use retirement savings to pay for college, but many of us know that is a foolish risk to take. When my oldest applied I knew that what we thought we could pay was lower than our EFC. What I didn’t know was that merit aid is very hard to come by, even for a NMF with good grades. </p>

<p>Each family decides for themselves what their level of savings and spending can be. Is it really worth never going on vacation or building family memories through fun activities just to spend all that money on four years of college? Maybe having a reasonably good life with your children when they are young and going to a State school is a better choice.</p>

<p>If a family has high income, but did not save, they will not be rewarded. They will be those parents we read about on the FA forum where there kids are in a panic because EFC is high (based on income) but they are not able to meet it. They may receive about the same package as the high income savers but it ends up being an accept/deny.</p>

<p>However, there are plenty of people who make what might seem like decent middle income in some areas (50k-80k maybe, arbitrary numbers so no quibbling over that) who have not been making that their entire adult lives. If you add in jobs with no health benefits where insurance is paid out of pocket, or job insecurity where rainy day fund is wiped out by unemployment you have a different picture. So, as was said further up the thread, would you rather be the family with solid income, retirement savings and college savings or the family who lives on the edge of making it with enough for basics (not poverty) but not enough to get ahead.
We are closer to the second group and I don’t think my kid has a God given right to go to Bennington, or NYU or Hampshire or any number of other schools that could be seen a luxury items. But, if a top 50 type LAC feels that my very strong academic, fairly unique EC kid would add to their academic and community mix they should be able to give away their merit aid and institutional grants (from money donated by alums for that purpose) as they see fit.</p>

<p>“Each family decides for themselves what their level of savings and spending can be. Is it really worth never going on vacation or building family memories through fun activities just to spend all that money on four years of college? Maybe having a reasonably good life with your children when they are young and going to a State school is a better choice.”</p>

<p>I agree, but financial aid offices will favor this family over the one that decided to save their money instead. That is the problem I am having with the process.</p>

<p>“If a family has high income, but did not save, they will not be rewarded.”</p>

<p>I disagree.</p>