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

Paying for College
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<p>Very few people can pay for college entirely out of current income. The presumption is that college savings begin at a very early age, so that the combination of savings, contributions from current income, and loans will enable the student to pay for college.</p>

<p>Needless to say, a college that costs $50K per year is going to take a greater combination of savings, income, and loans than one that costs $12K. Colleges that meet 100% of need attempt to offer aid that matches real need, but they can't often accommodate families that have high income, high expenses (with commensurately low disposable current year income), and low savings.</p>

<p>The ideal strategy (that can be devilishly hard to implement in high cost areas or with volatile family income) is to spend substantially below total income both before and during college years. In the years before, the excess income can be socked away in a college fund; when the student begins college, there will be some disposable income that can applied to tuition, as well as substantial savings for the rest.</p>

<p>Easy to say, hard to do...</p>

<p>Many baby-boomers (they would be "parents" here at CC) seem to have a pay-as-you-go approach to life and don't save much. They are surprised when college seems unaffordable ("What? I thought that school met 100% of need - I can't pay that!"). An even worse surprise may lay in store when they find their retirement savings are inadequate to maintain anything resembling their current lifestyle.</p>

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<p>Believe me, when my husband decided to put almost $8,000.00 in the Michigan Education Trust most people thought we were crazy. That was a lot of money then.</p>

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<p>One of the things we learn on this board is that your can define "middle class" by whatever standard you like, but basically if you cannot afford full fare at, say USC, then you should go to UCLA and pay half the amount because you are not getting aid.</p>

<p>OR, if you really feel a private school is what your child requires, then take your CA HE and go to another tier- not Vassar & Amherst, but Chapman & Baylor & Whitworth, schools which will give you $10k+ on merit and which are $30k-$40k not over $50k, so that $10k in aid brings the cost down to the same as the UCs.</p>

<p>Nope, not "fair" that your friend got full finaid at Princeton and is not that much poorer than you (thinking the $55k kids mentioned a few posts back) but it is real life.</p>

<p>I learned this the hard way, when my D applied to expensive Profile schools we could not responsibly choose those options, by the time I got through #1 kid, I was very proactive in telling the younger kids where they could and could not apply- thanks to CC. That does not mean it didn't feel unfair at first, esp when the line between you and some one else who does get in to that Ivy or other special school with a no loan policy and get the aid to afford it.</p>

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<p>Sorry, I mis-typed when I asked my question about the relative cost of "low-cost" California public universities. I meant to say that with total cost of attendance between $20 and $30K, are these really low-cost compared to public schools in other states? UC-Berkeley is $25K, for example.</p>

<p><a href="http://students.berkeley.edu/fao/ugbudget07-08.html%5B/url%5D"&gt;http://students.berkeley.edu/fao/ugbudget07-08.html&lt;/a&gt;&lt;/p>

<p>And while a $200K annual salary would allow most people to live like kings almost anywhere else in the country, the Bay Area's unbelievably high cost of housing takes a very large chunk of this disposable income, both for mortgage and property taxes. However there are opportunities in the Bay Area for innovation, research and education that are among the best in the country, which are all very strong attractions for people who can take the financial hit of moving here.</p>

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<p>I grew up in Bergen County, NJ (very close to NYC) but could not afford to raise my family there so I moved to western NJ where it costs less to live. Yes there are McMansions here but those cost a couple million. Avg houses can easily cost $500,000 & taxes are $10,000+. Housing prices are going down here, not up, as so many people are not able to keep up with mortgages and are foreclosing. A simple one bedroom apt costs at least $1000 a month - I truly have no idea what an apt costs for a family but I imagine a family would spend about $2000/month to rent a house. Our state schools are expensive, too, despite the high taxes we pay. Full cost is over $20,000/yr. We drool at how cheap some states are. Avg kids will not get merit scholarships at private schools.</p>

<p>I think people in other areas of the country simply have no idea of what it costs to live elsewhere. We are a relatively low income family (about $70,000)and it's tough to make ends meet. Some suggest moving to other areas of the country where costs are less. That is so simplistic yet we considered it years ago, when my DH was "down-sized" twice in 2 yrs. Certain businesses are prone to that. But we found it a difficult choice.</p>

<p>We have a child who has required 18 surgeries and MANY nonsurgical issues. When researching, we found that neurosurgeons who have ANY experience with these conditions are not even available in many states. We simply NEED to be where the medical opportunities are available - which means being in a metropolitan areas and unfortunately, these are all expensive areas. Believe me, while driving an hour into NYC as my child was in dire need of immediate surgery, I wished I lived closer but I simply can't afford to live there - yet I still live in an expensive area in relation to the rest of the country just not as expensive as living in NYC itself.</p>

<p>My situation is not unique. There are many reasons families can't just pick up and move to some obsure place where costs are low. I simply wish FA took into consideration that cost of living varies so much. Using one's income is deceptive. It's so simple to say, "you chose to live there so stop complaining." Is everyone living in NY, NJ, CT, CA, DC and every other metro area (Boston area, Research Triangle in NC...) supposed to move? That suggestion is ludicrous. </p>

<p>Luckily, we have found that the more selective schools Will take certain costs into consideration. Most state schools did not (UVA was wonderful). But that was only for a child with exceptional stats. My other child (good student but not tippy top) did not get any extra consideration so I've experienced both sides of FA and I still have one more child to go. If only I knew to have my kids all at the same time - sure would have helped out with FAid.</p>

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<p>I can understand the frustration that FAFSA does not include regional costs when computing aid--there most certainly are big differences around the country. One aspect that might make one feel a bit better, however, is that when it comes time to retire to a less expensive area of the country and downsize one's home, a person living in the Bay Area can sell their "typical" home for usually above $700,000 + and have the rest to live off of, but someone in a much less expensive place may only be able to sell their "typical" home for $300,000--and would have to put the entire amount into a retirement home.</p>

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<p>for Middle-income families, the system is not THAT screwed up. Could they give more $$ ? absolutely, but you can still afford a decent university with the financial aid offered and by taking some loans.</p>

<p>Your problem here as it has been pointed out by many people is that a 200k income is not midde-class AT ALL!... If you want a middle-class income try $50,000 or $60,000, that's middle income. The system doesn't offer wealthy folks like yourself countless amounts of free money so they can pay completely for a private school. It is designed to HELP (not fully finance) middle-class families with their college (public) expenses.</p>

<p>There's a whole lot of more needy people than yourself. I've heard of families making $24k a year and trying to send 2 kids to college, THOSE are the people that the system is designed to help, not wealthy folks living in a 1/2 a mill. house in California's Bay Area. No offense, but people couldn't careless about them...</p>

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<p>The problem for "city folk" is that the "rich" income provides what would be a middle class lifestyle in many other places, but if they move to those places, they lose that income- so it feel unfair to them. </p>

<p>Yes, they do have the HE to use for retirement someday and could choose to retire early adn move to a smaller place, buy a home for cash, etc., all for college financial aid, but very few people will do that. Doesn't mean it is not a shock to them to realise they have to pay 100% out of pocket school.</p>

<p>I do not live in the city any longer, left 20 years ago, but I can empathize with how people in those situations feel.</p>

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<p>I do live in the San Francisco bay area in a house that on paper is worth well over half a million (but obviously cost a lot less when I bought it almost 20 years ago). I also live on an annual income of less than $60,000, and I am sending my daughter to an elite private college where I get plenty of need-based aid but still have to pay 5 figures out of pocket.</p>

<p>I'd like to pay less, but it is not impossible for me to send my d. to her college. And my share is inflated by the fact that my d's father's income is included in the calculation, but he does not contribute -- so essentially I am paying the share of 2 middle income parents (he also makes ~$50K annually). </p>

<p>I am borrowing some, not all, of my EFC. I do have all that equity in my house, after all. This year I will be borrowing $6000. I looked at my finances and figured I could afford to pay $75/month. I also have taken some money out of savings and I have cut some expenses and used the savings to pay for college -- for example, I took my d. off the car insurance and switched her health insurance to a cheaper, high-deductible plan. And my daughter works and is taking on debt. </p>

<p>In the SF Bay Area, $75K annually is middle class. $200K is not -- it is upper income. Yes, the homes are expensive, but there is no law here requiring people to purchase homes. My son was living quite comfortably, on his own, in a beautiful apartment in SF, on an income of under $25K a year. Of course he didn't live by himself, he has always shared an apartment or house with roommates -- it costs about $500-$600 a month for a room in a reasonably nice shared apartment. </p>

<p>If I wanted to buy a different home, I would sell the one that I have -- and of course that would be the source of my down payment. If I thought I could save money that way, I might explore that option. However, because I live in an area where real estate values are on the low end of the inflated market, I prefer to stay where I am -- but with an empty nest, if I wanted extra income, I could consider taking on a rent-paying roommate myself. Obviously I could easily charge $500/month for my son's bedroom. </p>

<p>My observation is that people with $200K incomes who complain about finances are generally spending a lot more each month to maintain a lifestyle that is not particularly better than mine, but more expensive. They have opted to buy into more expensive neighborhoods, to drive more expensive cars. (I sometimes wonder if I am the only person left who still drives a car with crank up windows and mechanical locks.)</p>

<p>"Need" based aid is something that logically should go to the needi*est*. If the upper 2% think that they "need" help.... well, they just have to wait in line after the other 98% who clearly need more. </p>

<p>My question to the $200K earning family complaining about paying for college is two-fold:
1) How much did you save specifically for college?
2) How much are you planning to borrow?</p>

<p>If the answer to both questions is -0- -- well I am not going to shed any tears for them. Those of us who are truly middle income and sending kids to elite private colleges are prepared to sacrifice in order to get there.</p>

<p>On the other hand, my son has found the CSU system extremely affordable, especially after his first semester when his grades qualified him for a several very generous privately-funded merit awards. (He is paying his own way).</p>

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<p>what do you consider middle class? my parents combined income is roughly 100,000 for a family of 3.</p>

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<p>sorry but I think 100,000 is very middle class
we have a nice home but do not live high on the hog 6 figures is just not that much these days</p>

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<p>A six-figure salary will always be a quite a bit somewhere.</p>

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<p>FAFSA also does not consider the cars you own. A middle-class family who's saved $30,000 toward two kids' college by living in less expensive house and driving old cars gets hurt worse than a family making three times as much money and puts that same $30k in a new Honda van. The asset (van) is not considered by FAFSA but the cash is. Now most middle-class families don't have $30k in cash saved, but most making $200k drive cars worth at least $30k, even if they lease them. As a self-employed contract worker all my self-employment taxes are not considered as taxes on the FAFSA form. I don't know what the poster from a while back is saying but when I try and count them as taxes, FAFSA corrects my figures, bumps me $10k in income, and raises my EFC. Still, my kids go to private schools for about what it would cost me to send them to in-state publics. And they will each graduate with nearly $20k in debt to my $50k for each. I'm unable to save for retirement and I'll be working until I die to pay for three kids in college. If you're making $200k a year, try living like someone who makes a third of that and see how much money you'd have left over each year to pay for college before you complain about how unfair the FA system is. It's one the few forms of socialism that really works in this country. Now lets talk about what a bite health care costs are for someone making $200k versus someone making $70k and figure out what we can do about that, too!</p>

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<p>Proud dad:</p>

<p>My family doesn't own a single vehicle worth anything close to $30,000.</p>

<p>We have:
A 17 year old sedan that was probably $10,000...17 years ago
7 year old van (our only vehicle that is even remotely luxury) that was about $20,000 when we purchased it.
an ancient tiny car that used to be my uncle's. he had his right leg amputated so he cannot drive anymore; that's the only reason we have his car.</p>

<p>And people, PLEASE STOP MISINTERPRETING MY ARGUMENT</p>

<p>Forgive my frustration but all the evidence you are putting out SUPPORTS what i'm trying to say. Middle class DON'T get enough help from financial aid. I used an UPPER (note the word UPPER) middle class income to demonstrate that even with income of this level, paying for college becomes a near impossibility without significant sacrifice. This sacrifice will be EXACERBATED if one makes less money but still does not qualify for full (or very substantial) financial aid.</p>

<p>You know, I think I'm going to start a thread about how money isn't everything because so many people on this thread probably just looked at the income and thought "Oh well you know...you guys make that much money you have no problems at all in life. Stop assuming you don't have to do anything" You assume that just because my family is upper middle class that I should be completely content and that if I make one little peep about being dissatisfied with money, I am a spoiled whiny rich kid.</p>

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<p>
[quote]
As a self-employed contract worker all my self-employment taxes are not considered as taxes on the FAFSA form

[/quote]
Not true. We self-employed deduct one-half of the SE taxes on the 1040, reducing your AGI. The other half is the same as FICA and treated the same way -- it is already included in the calculation for earned income, and is why earned income is treated differently than unearned income. (Since its a flat rate there is no need for us to write it down). The reason that the FAFSA doesn't allow you to treat them as taxes is simply because it is already accounted for in the formula. </p>

<p>Self-employed people also have a little more control of cash flow -- if income seems higher than usual, we can opt to defer billing toward the end of the year, or buy needed equipment and supplies in December rather than the following year to increase our write offs. </p>

<p>There are a lot of problems with being self-employed -- the thing I hated was the way that my "business" was assigned an arbitrary value as an "asset" by my son's college (I'm a freelancer, work from home, no employees, no inventory) -- but that has changed and now business valuation isn't included unless the business has more than 100 employees. So I really don't see any downside for self-employment as far as the system is concerned; on the contrary it gives me a slight advantage in terms of lifestyle because of the ability to write off certain expenses, such as business travel. </p>

<p>It's a little trickier when the CSS Profile is involved, because the Profile colleges go over the Schedule C and add things back in -- so you need to be alert to that and plan accordingly.</p>

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<p>JP_Omnipotence, I assume that if I am a single parent earning ~$50K and can send my daughter to a private college at ~$20K per year, then a family making $200K would have an even easier time sending their kid to college at ~$50K a year, because they make approx. $150K more than I do. I realize they have a bigger tax bite, but the are still keeping a lot more than the $30K difference of income.</p>

<p>I also assume that a private college is a luxury item, like driving a BMW. If I wanted to drive a nicer car than I have now, I would probably finance the car over time or lease a car, so I would have a monthly payment I could afford -- but I wouldn't gripe over the fact that the car dealership was unfairly charging me more money for it than they would charge for a pre-owned vehicle -- I recognize that I am making a choice. </p>

<p>As I noted, my son is managing to pay his own way to attend a CSU, where annual tuition is less than $4K a year -- and he has had a very good experience and excellent opportunities there. </p>

<p>The problem with your hypothetical is that $200K is not the upper range of middle class; it is upper class/affluent. A family with that income can afford a private college if they want it -- the problem is that you seem to think that it should be easy for them. </p>

<p>Personally, I think need-based financial aid is a great deal for the truly middle class, because I make far too much money to qualify for welfare or any other kind of breaks. I always had to pay the full cost of my children's lunches at school; I never qualified for subsidized day care; I couldn't get food stamps. But when my son went off to college, for the first time in my life I actually qualified for financial assistance, and I thought that was pretty cool. </p>

<p>It's the other stuff that sucks -- like the health insurance premiums that keep going up and up, or the price of gas at the pump. I wish they would charge the owners of luxury vehicles more per gallon, and let those of us driving older model compact cars pay less. </p>

<p>One thing I thought was pretty cool about the federal financial aid system is parent PLUS loans -- you don't have to qualify for need-based aid for those, and they offer all parents a financing option on reasonable terms. So a family earning $200K could decide that they would pay $20K annually for college, have their kid pitch in $10K in combined earnings and loans, and borrow the other $20K -- they'd start out with a monthly payment of about $260 and end up with a monthly payment of about $1035. I figure that once my daughter is out of college and supporting herself, I'll be able to accelerate my payments and pay down the PLUS loan faster than planned -- I'll bet a family earning $200K annually could do the same.</p>

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<p>


Reasonable terms went out when W raised the interest rate as soon as I needed the assistance. Now my home equity (25 years in the same house) seems to be a better deal, but not everyone has that option. We do nothing to help with health-care costs and now we raise the interest rate on loans for college education for those who need it but drop them for those who flip houses for a living? And now we're contemplating relief for those who flipped one-to-many houses and got stuck when the boom went bust? Tax relief for those who bought more house than they knew they could afford but did it anyway in hopes of profiting from flipping it? Bust the balls of honest hard-working schmucks like me who don't play games and just want a good education for their kids? At the current PLUS loan rate you can see why there's so much corruption among those offering the loans. I can lock-in on a home loan for 30 years at 2% less than a PLUS loan rate. Yes, I understand what "secured" means. How 'bout some help here from the incumbent.</p>

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<p>ou were lucky in your financial aid awards, which is great. But not everyone shares your luck,</p>

<p>It wasn't luck
she earned it and BTW it was the only private school she applied to.
If finances had been more limited or if we had decided NOT to borrow our EFC, she could have attended a cheaper school-
Also by the way- I live in an area where a 100 + year old house- less than 1000sq ft is "worth" $500K</p>

<p>We are fortunate that we can use that equity for retirement and relocate to a less expensive area, even if we had to borrow against the equity to pay for college</p>

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<p>"I used an UPPER (note the word UPPER) middle class income to demonstrate that even with income of this level, paying for college becomes a near impossibility without significant sacrifice."</p>

<p>What you say simply isn't true. One doesn't have to go to an expensive private college. That is a choice. For upper class and upper middle class people -- going to an in-state public is very affordable. Due to the excellent private and public educations and support from educated family members that such students typically get, they also have the scores and grades to be first in line for merit aid that public universities typically offer to top in-state applicants.</p>

<p>Sure, it's a significant sacrifice if one chooses to go to an expensive private where one would have to pay full costs. Virtually all upper middle and affluent students, however, can have far more affordable choices including from good private and public colleges that would offer them excellent merit aid making college far more affordable than the private high schools that many such students attend.</p>

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<p>Don't know about the rest of you middle-class bums (myself included) but the cost of attendance at the three state U's my D applied to were all about $18,000/year. With two kids in college, that's about half a middle-class income before taxes! Of course we all know you pay for college with future income and retirement with current income (how many of you middle-classers out there have anything resembling an adequate retirement nest egg? Especially those without access to 501ks?). Our state schools figure it's perfectly adequate for a student to graduate with nearly $20k in debt. That leaves $50k for the parent, per kid! In-state!! In more than one FA offer, private schools were cheaper than public in-state for my Ds.</p>

<p>Why, when we're fighting a war over oil will I have the highest annual heating-oil cost ever this winter. Why has "demand" doubled my gasoline costs, or why we can't afford health care for our citizens even to the extent that I'm allowed to be eligible for the same "group" coverage as a congressman, and all the while we don't bat an eye at the Trillions spent on invading middle-eastern countries? And we have the highest interest rate on education loans in six years even when college costs have fairly doubled over that same time. Anyone else's middle-class income doubled over that time? All these fixed expenses disproportionately effect the middle class. When those who can afford to drive cars that get 12mpg and heat homes over 7,000 sq.ft. cause the middle-class to pay for their excess, the least we can look forward to is a break on financial aid for college.</p>