Need-based Financial Aid...a raw deal for middle class?

Paying for College
1

<p>Is it just me or is the "need-based" financial aid system a complete failure when it comes to helping middle to upper middle class families with multiple kids?</p>

<p>Okay, let's assume a family makes $200,000. Given the graduated income tax rates of 2006, $52,591.50 would be spent on federal income tax alone. Roughly $15,000 would go to state income tax (varies with state).</p>

<p>Now we have $132,408.50. Let's say that the family has two kids. Both of them want to go to [insert expensive prestigious private school here]. Now, the tuition for such a school will probably be around $50,000 (including room, board, books, and various other necessities)</p>

<p>This it more than 2/3 the family's spendable income. They now have $32,408.50 left. Assuming a 1% property tax on a $500,000 home, that's $5,000, leaving your family with $27,408.50.</p>

<p>Given the payments for food, gas, electricity, insurance, and other miscellaneous things, you'll end up with next to nothing to put in any sort of savings account.</p>

<p>What's the matter? I thought need based financial aid was supposed to help those who couldn't ordinarily pay to attend a private institution. When many people see an income of $200,000, they wonder why the family would need financial aid. In truth, given all the expenditures that must be made, the $200,000 will quickly vanish.</p>

<p>Is the system designed to destroy the middle class, or am I missing something big here? I sure hope I am, because I am in a situation very similar to the one described above and the way things are looking, I might not be able to attend a school like Stanford (provided i even get in).</p>

<p>Thoughts? Comments? Ideas?</p>

2

<p>200,000 isn't middle class to me.They may not be able to afford 50k a year easily, but they could definitely pay for some kind of school if the money isn't all going into debt or they aren't living above their means. </p>

<p>A home that costs half a million? That's not middle class to me. If a person is truly middle class, then I think it does hurt them a lot when it comes to financial aid. My mother makes around 50k a year before taxes. Our home is 70k. I have one younger sister that will be in college right after me. We don't have any savings at all, not a dime. I consider our situation middle class. I've seen what lower class looks like (financially speaking), and we're not there yet.</p>

<p>The FAFSA estimates around 9k a year for us. That's a lot out of 50k, even before it gets knocked down after expenses. I've never been so shocked in my life. That EFC truly drives me crazy every single day. Even if we had the 9k, most schools gap and you have to add that into the equation. </p>

<p>You subtracted the cost of the school from your final total, no financial aid. 27k left. That's the sacrifice. It's like driving a Luxury car home to a studio apartment, it makes no sense. At least not to me. Federal loans could ease the cost for a while, but it's still way too much. That family is rich, but they may not be that rich. Stanford is luxury. If they really want to pay for that, then something is going to have to give.</p>

<p>The cost might be a little less since the EFC would be split due to the two kids, but I have no idea what an EFC would be on 200k. </p>

<p>Being middle-class makes going to college an uphill climb. My friend is in the same situation as me, but it's only him and his mother. He's going for it in all loans. You can open the door, but be prepared to be set back miles away from being able to enter it.</p>

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<p>JP:</p>

<p>Grow up. As the previous poster noted, $200,000 per year is only middle class to someone living in some posh suburb that is out of the reach of the vast majority of Americans. Parents don't want to do what is necessary for you to go to Stanford? Boo hoo. There are many people who struggle just to pay for community college.</p>

<p>Count your blessings.</p>

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<p>Can you see me playing my teeny tiny violin? Particularly since you live in CA, with Cal and UCLA as financial safeties you are luckier than most people.</p>

<p>Majesa, you sound very mature, best of luck to you!</p>

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<p>Median family income in the US is about 48K. At 200K family income, you're in the top 2%. Wealthy. Well-to-do. </p>

<p>I see this over and over, here on the discussion board, and also in our community. Kids live in 3,000+ ft houses with a couple late model leased cars in the drive, maybe a motorcycle or boat for recreation, a housekeeper that comes in. One or two pricey vacations each year (usually skiing in the winter, Europe or Mexico or the Caribbean in the summer). Parents making similar to what JP makes, give or take.</p>

<p>And they think they're middle class. Or maybe upper middle class. </p>

<p>Why? First, nobody wants to admit that they're rich-- it has an odd stigma. More significant, I think, is that these kids see that everyone around them lives a similar lifestyle-- so they just assume that that's the way most people live.</p>

<p>So college time rolls around, and they're surprised that that nasty financial aid formula predicts that they should (Gasp!) pay full freight for college. "A raw deal!" they complain.</p>

<p>Well, who do you think should subsidize your education? The government doesn't just make the money (well, actually they do, but that's another story). The federal and state financial aid funds come from other taxpayers.</p>

<p>Bottom line, JP, the taxes your folks pay go to help others afford college, not the other way around. It's expensive to live expensively- true. Those are choices you make. But your family is much more able to afford college than most. You're fortunate.</p>

<p>College costs are rarely paid in a given year out of current earnings. For most, and probably for your family, you'll need to pay for college out of current earnings, savings, and perhaps some loans.</p>

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<p>Oh come on. I want to discuss the flaws in financial aid and all people do is berate me for "not counting my blessings".</p>

<p>Did I ever say I wasn't applying to CAL and UCLA? No, I am applying to both and think of them as excellent schools (especially CAL). Am I saying that I am the only one suffering? No.</p>

<p>I'm trying to make a point about need-based financial aid and how it doesn't do what it is supposed to. All it does is enable the very poor and the very rich to attend a school and does nothing for those in between. I chose the $200,000 income to demonstrate that even people who have what seems like a lot of money will have a difficult time paying for an elite private university without aid.</p>

<p>I am not saying "oh noez my family sucks they can't pay for stanford". I am saying that need based financial aid isn't as need based as people usually think, as when it comes to paying for a university like stanford or harvard, everyone but the rich needs money, but those who aren't very poor don't receive it.</p>

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<p>It's been said elsewhere on the board before, several times, and I'll repeat it here: financial aid is not there to make it easy to go to college, it's there to make it possible.</p>

<p>EVERYONE has to make a sacrifice in order to make it happen, no matter how rich or how poor. How much it hurts depends on any given family's spending habits and values. Choosing a half million dollar home instead of savings or college funds is just that: a choice. Even the lowest class, which receives the most money, has to pinch to send a kid to college; they lose an income-earning member of the household, an extra helping hand, and even they often have to take out student loans.</p>

<p>It is never easy to pay for college. It's not meant to be. Whether that should be the case or not is the debate. </p>

<p>Personally, I've been on the full-Pell side of the equation and the almost full-freight side of the equation. Believe me, it HURTS -- put off home repairs, forgo spending too much at the grocery store, pray a little harder for the '85 Ford to keep running. But it's worth the sacrifice to my family and myself, and because of federal aid we can pull it off. I wish that I didn't have to keep confronting the guilt of straining my parents to make this happen, I wish we got more aid, of COURSE I wish it didn't hurt my family and I this much; but the point is that we can still make it possible for me to do this. </p>

<p>I can guarantee I'll never feel entitled about it: I've had to work damn hard to get here, damn hard to pay for it, damn hard to make it to graduation, and I will be working damn hard to pay off my loans once I'm through.</p>

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<p>You may not have mean to appear ungrateful, but the post just comes off that way. The example you gave doesn't really show the financial aid problem. It just paints the picture of a family that's well off and upset that they might actually have to downgrade their lifestyle a little to get another luxury in life.</p>

<p>In the example, the family can afford it of they wanted to. They don't need a ton of help. They'd still have money left, after a 100k in school costs for two kids. If they moved into a smaller house or something, they could actually afford it. That's why it fails to make the point. It plain annoys a lot of people to hear how much some rich family needs help paying for some "elite" and expensive school. What would have worked is an example of who some middle class kid can't afford a state school because they're too rich for aid and to poor to actually the pay the bill. That's a little close to what you were trying to say to me. </p>

<p>I'm not trying to berate you or anything, just be ready for the reactions.</p>

<p>On the the other side of the fence, UCLA? Love it, wish I was there. That schools seems like nothing but a full glass of wonderful.</p>

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<p>According to a recent government study in California, a family of four living in the ten counties of the San Francisco Bay Area needs an income of $77,000 to meet basic expenses. That includes childcare but no retirement or college savings. The biggest expense is housing.</p>

<p>FAFSA doesn't take into account regional differences in housing costs. People who do not live in California don't have much idea of how much housing actually costs here (rent or buy). It seems like there's enough resentment around this topic that people aren't able to listen to anything that contradicts their perceptions - they seem to think that if a house costs so much, it must be a mansion. I can understand the incredulity. The costs of housing have become so high in the past ten or fifteen years that they must sound completely unbelievable to people outside our state, but they're unfortunately real. I love the fantasy of a 3000 square foot house for $500,000; in my middle-class neighborhood of post-war bungalows and small ranch-style houses, a place like that would cost several million dollars, if you could find a house that big. Rents are also very high.</p>

<p>But there are lots of other things FAFSA doesn't take into account besides housing, and besides, many colleges don't even meet all the need that students can actually demonstrate using FAFSA. So no one should feel singled out as having the most difficult time in paying for college, and it's unhelpful to suggest that others are having an easy time. EFC's are also way too high for families with very modest incomes. Paying for college is just plain hard for most people.</p>

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<p>HGTV has shown that the houses in California are super expensive, time and time again. Those shows make it look so sad. If all the houses in California are that expensive...how does anyone not making a fortune even live in Cali? I'm curious. </p>

<p>I live in Alabama, enough said.</p>

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<p>Thank's for stating that so eloquently Calreader.
Majesa: Simple, don't live in the bay area. The bay area is where prices REALLY start to skyrocket.</p>

<p>I'd totally forgotten what a $500,000 house would sound like to people in other states. Really it isn't anything special in the bay area. Just a living room, a couple bathrooms, a couple bedrooms, and a kitchen. Heck I had to share a bedroom with my brother for years before we installed a cheap wall to divide the room. Hardly the mansion complete with personal housekeeper many people imagine. And late model leased cars? The newest vehicle we own is about 7 years old, and the one after that has been around as long as i have (17 years). The last real vacation I went on was 3.5 years ago.</p>

<p>Am I saying I'm poor? Not by any means. I'm pointing out that I don't lead such an affluent life that my parents can "sell the house and buy another one" to send my brother and myself through college.</p>

<p>As for poorer families suffering...well...I wouldn't necessarily say that. I'll admit I have very little exposure to lower class kids who attend schools like stanford, but a very good friend of mine attended Harvard and didn't have to pay a dime. His family made less then $20,000 a year, which explains the very generous financial aid he received, but as they had already fully paid their house off, lived comfortably. The family saves a fair amount of money each year and will be able to retire painlessly. I appreciate the fact that aid like this exists. Without it he wouldn't have been able to go to any college period.</p>

<p>It's just that too often people dismiss families like mine because we make what seems like a fair sum. In actuality paying private school level tuition for myself and my brother will cost my parents an arm and a leg, as the sum will probably come close to half a million dollars given the rising costs of tuition (approximately 10 years of savings, there goes the retirement fund). If our family doesn't receive any financial aid (and we probably won't, given our "enormous" income), going to a private institution is practically an impossibility.</p>

<p>Why give aid to the poor only and not even consider the middle class (and upper middle class for all you nitpickers) when in reality paying for an expensive college is almost an impossibility for all of these groups?</p>

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<p>I don't know how people do it today. We bought a house twenty years ago that was a stretch with two full-time engineering incomes. We couldn't buy our own house in today's market. No complaints, though! It's a great place to live, but it's a pretty crazy situation.</p>

<p>I just looked up the statistics for Redwood City, which is a medium-sized town in the Bay Area. It is middle class and ethnically mixed. The median income is $74,000, just under the amount that the recent state study said was needed for a family of four. The median house price is $710,000 and median house age is 40 years. Most neighborhoods in Redwood City have 2 and 3 bedroom houses.</p>

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<p>"Am I saying I'm poor? Not by any means. I'm pointing out that I don't lead such an affluent life that my parents can "sell the house and buy another one" to send my brother and myself through college</p>

<p>Most people in this country including most middle class people can not afford to live in San Francisco or the area around it. I'd love to live in SF, which is a fabulous city, but decades ago, I realized that there was no way that I could afford to live there unless I wanted to cram my famly into a very, very small apartment.</p>

<p>The fact that your family lives there and has a house means that they have far more means than do the overwhelming majority of people in the U.S. an in the world.</p>

<p>My family makes far less than yours does. My S didn't qualify for any need-based financial aid at the private college he's going to. We did not complain because while we really are not affluent, we know that we are far better off than are most people.</p>

<p>And our house is worth far less than half a million dollars.</p>

<p>We also don't have the advantage of the excellent public colleges with very low instate rates that California residents have.</p>

<p>When I taught college, it was at a public university where there were lots of poor students, some of whom were having to work and not only help pay for their own education, but also send money back home to help their parents, siblings or grandparents.</p>

<p>Some graduated with as much as $30,000 in debt plus had to rely on themselves to do things like buy cars, computers, pay apartment security deposits, etc., the kind of things that middle and upper class kids can rely on their parents to help with.</p>

<p>I have lots of sympathy for students like that. I saw some working 30 hours a week plus taking full loads.</p>

<p>No, I do not have sympathy for people like you or me. We are extremely lucky as are our kids, who not only had the financial advantages that come with middle and upper class lifestyles, but also had the advantages of having excellent school systems and highly educated parents with the schedules and knowledge that allowed us to be involved in their education.</p>

<p>Most poor students can't go to an expensive college. They are lucky if they can afford to go to a community college. Since public schools in the U.S. are supported by property taxes, most poor students go to the worst public schools and consequently don't have the coursework, scores or guidance to get into the private schools that offer excellent need-based aid.</p>

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<p>Okay this thread seems to be going off on a tangent. It has nothing to do with the quality of living, it has nothing to do with the quality of public schools in the kids' area.</p>

<p>I'm only talking about the financial aid policies of elite private institutions.</p>

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<p>Schools that cost 50k don't cater to the middle class. It doesn't seem like any of the schools really care too much about helping out the middle class. It's just a sticky situation. If the cost of a private school like Stanford is going to cause that much trouble then...Stanford gets a kiss on the cheek and a nice wave. It's too expensive. That or take on a bit (more like a chunk) of debt. </p>

<p>200k may not go far in California or New York, but I don't think that it's the normal situation around the country. I believe that's why people tend to dismiss families like yours. It actually is a fair amount of money, just not where you live. </p>

<p>The people at the bottom of the ladder look up. The people at the top look down. The people in the middle can look either way and see absolutely nothing. Enjoy these little phrases, I do. (Humor implied)</p>

<p>And Northstarmom, I'm glad you said something about how bad some public schools are. They are certainly not all equal.</p>

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<p>Northstarmom made the comment that California has excellent public colleges with very low instate rates. I'll agree with the first part of that statement, but are the instate rates really that low? I confess my ignorance about instate rates in other states, but the instate tuition at the UCs and Cal Poly really doesn't impress me as being very low. $25-$29K for UCs? $20K for Cal Poly? Is this low? (I'm not trying to be obtuse, really)</p>

<p>I remember when I moved here to the Bay Area 10 years ago and looked at a tiny 2-bedroom house in Palo Alto for $800K. I thought the real estate agent was joking. Seriously. That same house now would cost $1.6 million.</p>

<p>There are so many inequities in financial aid calculations, but it's really difficult to imagine how to make it completely equitable. It would be nice if it took cost of living into account, but as others have said, there are a lot of choices that we as individuals make that have a significant effect on our living expenses. For example, if FAFSA used taxable income rather than adjusted gross income as a starting point, this would benefit those of us who live in areas with high mortgages and high property taxes (ie, Bay Area). But for those who don't choose to take out large mortgages, this would be seen as unfair.</p>

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<p>It is about choices, and that's what ultimately makes me think that the financial aid formula is as fair as it's going to get. Despite what you think, you don't HAVE to live in San Francisco -- there are cheaper places within commuting distance that other families live in, making the choice to save money commuting from a home in a "less desirable" community rather than spend every dime owning a home 10 minutes from work.</p>

<p>No one says you have to go to a private institution, either. That's what the public ones are there for -- like federal aid, governmentally supported institutions provide the OPPORTUNITY for people (and their families) to CHOOSE to go to college. </p>

<p>Not that tuition and living expenses there are much better at a certain level. My dad makes around $100k a year -- quite a jump from the $30k he was making for the 15 years prior. The difference bumped me from nearly full Pell Grant eligibility and low-loan financial aid to nothing but unsubsidized loans and a small portion of the full Cal Grant I'm eligible for. The loans I'll have at the end of school are not looking pretty, even though I'm going to a public school with in-state tuition.</p>

<p>I certainly wish they'd take into account that he's a contractor, and the self-employment tax cannot, in fact, be waived with deductions, or that he'd been supporting a family of four on an extremely low income for 15 years with no savings, or that my mom hasn't worked in 15 years due to a severe on the job injury (and all the associated medical costs), or that my parents had declared bankruptcy a number of years ago, or any of those things that paint the ACTUAL financial picture. </p>

<p>Nevertheless, my parents and I are finding a way to make it work. I could wish for more, but I certainly don't expect it.</p>

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<p>The FA system is set up with the understanding that if your parents save $2000-$3000 a year for 18 years, there will be plenty of money for college saved up. Middle class parents can choose whether to do this or spend it on something else.</p>

<p>FA is not designed to provide a luxury education for children whose middle class parents spent all their money on something else, so there is no "raw deal" here.</p>

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<p>"I'm only talking about the financial aid policies of elite private institutions."</p>

<p>Then you have nothing to worry about. You don't even have to concern yourself with FAFSA as all of the elites use the Profile and a large dose of "professional judgement" in making FA offers. So, the question will be, how much do they want you? Because if they really do, believe me they will pony up to make it possible.</p>

<p>Not to mention that these are the schools that have endowments in the 10's of billions. Why blame the Federal FA system when the schools you are looking at could easily give a free ride to every student if they chose to?</p>

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<p>
[quote]
Now we have $132,408.50. Let's say that the family has two kids. Both of them want to go to [insert expensive prestigious private school here].

[/quote]
Try sending your kids to public school, like we truly "middle class" families do. </p>

<p>$200K annually is not "middle class". It is upper income. It may not be wealthy but the reason you don't have enough money left over for a private college is that you chose to spend rather than save. If you have the funds to support kids in private school @$50K/year from K-12, you ought to be able to continue to pay the same $50K when the kids go on to college. And if you were referring to the college expense.... well then obviously there is enough to pay, as by your figures you are left with almost $30K annually after subtracting that out.</p>

<p>If you want to whine about the high costs of college, go right ahead, but please don't insult all of us who are struggling to get by on incomes in the $40-$60K range by calling yourself "middle class".</p>

<p>(Another hint for the well-heeled who whine: college-aged kids are old enough to earn money and take on debt for part of their college expenses. My kids were rather appalled to meet kids in college who had never worked a day in their lives, even for pocket money. Try re-doing the math with the kids' share of the expenses subtracted out from the parents' share)</p>