NPR: College Costs Are Daunting, Even For The 'Comfortable'

Parent Cafe
101

<p>Another comment on [Average</a> cost to raise a kid: $241,080 - Aug. 14, 2013](<a href=“http://money.cnn.com/2013/08/14/pf/cost-children/]Average”>Average cost to raise a kid: $241,080) :</p>

<p>The low, average, and high costs listed come out to be about $7,953, $13,393, and $24,783 per year.</p>

<p>For comparison, the cost of non-school (tuition, fees, books) stuff for a college student is typically estimated to be around or slightly less than the lower number for a student commuting from home, and closer to the average number than the higher number for a student living on his/her own on or off campus.</p>

<p>The implication is that an average or high spending family may still feel pinched for the kid’s living expenses if s/he commutes to college, since their actual spending on him/her (excluding school costs) would be higher than the usual estimates, if they continue to spend the same as when s/he was in high school.</p>

<p>Indeed, for the higher spending per kid families, sending the kid away to college and paying for typical dorm rooms and meal plans may be cheaper on the living expense front than what they were spending to support him/her as a high school student.</p>

102

<p>Those estimates of how much it costs should be taken with a grain of salt. About half of the total is for housing and transportation. That may include a family buying a larger car or house, or buying a house in a more expensive area for the schools. That said, people without children or with fewer children may be paying just as much for cars or houses, just not small-child-friendly ones.</p>

103

<p>I just ran the numbers through one of the umpteen-million college cost calculators, and a family who is planning for a full-pay student at one of the expensive elites should be saving $1300 per month, assuming no other/prior savings. This assumes 5% increase in costs and 6% increase in after-tax returns per year, which seems reasonable.</p>

104

<p>Or one of the expensive non-elites, even.</p>

<p>Which I think is the point of the piece in the first place–even those who have incomes that place them well within the range of being “comfortable” find it daunting to fully fund a college account.</p>

<p>$2600/month (for just two kids), after taxes, is a lot of spare change to come up with.</p>

105

<p>Charlie, the woman is fortunate in that she is getting a salary that at least covers her direct costs of working. If she made less money, and most people do make less than that as she is making what is considered a “Good” wage, a high wage, especially considering her hiatus from the work field, she would definitely be losing out within her own family situation. </p>

<p>But this does add a layer of protection to the family, gives her a layer of personal protection too, and if she can make more in the future, net more when the kids are older and so much child care is not needed, maybe get some work at home opportunities, it is a good investment. </p>

<p>But right now it’s going to be a problem I doubt that her step daughter’s college will give a break to this situation. I’ve told here to list the child care, job cost figures and send them to financial aid. Doesn’t hurt, even if it won’t help.</p>

106

<p>

</p>

<p>Her husband could give up his “insecure” job and stay home. Then all the kid expenses go away and the income tax and Profile numbers come way down. Win-win.</p>

107

<p>

</p>

<p>The highest marginal rate applies to income (married, filed jointly) over $450,000. With her added income, they are well in the top one percentile in income. Do I have that right? </p>

<p>Okay, I get I’m supposed to have sympathy for the ‘comfortable’ but <em>that</em> comfortable?</p>

108

<p>My point wasn’t that $2600/month was reasonable, but rather that the calculator was making reasonable assumptions.</p>

<p>The worst of all worlds is when you scrimp, save and plot, and then find out that it’s still not enough because your assumptions have been wrong from the beginning.</p>

<p>$1300/month/child now is not a lot more than $500/month/child was in 1995 (to choose a randomly appropriate year).</p>

109

<p>" . . . you significantly increase the total lifetime aid received by your family if you do have 2 kids in college at the same time." - Charlieschm</p>

<p>That’s what I am praying for!</p>

110

<p>Sorry to put a damper on that speculation but it works only for schools which give you grants. </p>

<p>There will be many schools which consider the need and give you a loan to payback.</p>

111

<p>What usually happens is that most of us try to improve our standard of living by buying a house in the best neighborhood, the best house, the best yard, best location, best commute, best school district combo that we can afford in order to have the best quality of life for the present. I know friends who live in CA who find doing this daunting, and many live in homes that would not be considered luxurious by most standards in this country. My brother’s house is about the size and layout of a mobile home, and I don’t mean the fancy ones. But it’s close to work and the school of choice for his kids and it makes his “now” quality of life as high as it can be given the combination of goals he and his wife have.</p>

<p>So you settle in at that price point and make commitments based on it. Then you get hit and realize that you need back up. You realize you missed a beat. You didn’t do the math to figure out what you need to save to continue this standard of living or close to it through the rest of your life with old age contingences covered. And then there is college.</p>

<p>The ones that are going to get hit hard in the scenario of the woman going back to work are the step kids. StepD1 is going to a school on what Dad committed to pay per year, what financial aid was given, student loans, student work and what Mom could scrape up to make the difference. Now the financial aid is disappearing and Dad doesn’t have the extra to make up for it because though it’s the extra income that caused the aid to dry up, no extra money is making it to the household, and the cost of returing to work may well outstrip the monetary net gain for this year and the next. But the PROFILE form doesn’t see it that way at all. So, yes, there is a problem brewing. </p>

<p>Not heart wrenching at all, as these are luxurious problems to have. But ironic in that more work and more pay can lead to less money net. </p>

<p>It is altogether possible in this type of scenario, that someone who goes back to work loses a lot of money in child care, commuting, work expenses instead of netting any.</p>

112

<p>

</p>

<p>It’s entirely possible in many scenarios. We, as “the middle class”, became kind of used to one parent earning income and one parent doing tons of unpaid work. When both parents work, we find childcare, house cleaning, budget management, chauffeuring, etc is not free after all and paying for it can in fact eat up most of the income of the second working parent. College financial aid formulas often make that worse.</p>

113

<p>

</p>

<p>And I’m agreeing with you completely.</p>

<p>The NPR commentary was an observation–“Wow, college costs even more than I realized and even those of us who know we’re pretty affluent and have been doing our best to sock college money away are going to have a hell of a time getting that much dough together.” The only response that occurred to me was “Amen to that,” but obviously there seem to have been a number of other possible reactions to the piece.</p>

114

<p>

</p>

<p>I cant speak to the above. We are not from the educated socioeconomic group that expected their lot to improve each year.
We knew that we had the likelihood of unemployment & underemployment to look forward to, so we made a point of setting achievable goals rather than the hope that our salary would grow into what we would need for that balloon payment down the road.
Ironically, we are now able to pay our EFC easier than those families who tried to live the life to which they hoped to become accustomed.</p>

115

<p>

</p>

<p>But isn’t that a matter of choices, as in the choice to spend everything on current stuff versus save some for future stuff?</p>

<p>I.e. just because a household makes $250,000 of income ($160,000 or more after income and payroll taxes) does not mean that the household has to spend every last dollar of it on current stuff. Indeed, wouldn’t many people have a point where increased luxury spending gives no improvement in quality of life?</p>

<p>

</p>

<p>Obviously, when a home maker returns to the work force, the actual net needs to be considered; if it is too low (or negative), then it may not be worth it to return to the work force, unless it is a needed stepping stone to much better work in the future.</p>

116

<p>It’s nearly always a matter of choice, even when it appears to not be. </p>

<p>The thing is, with most folks, they don’t start their career at $250k/year.</p>

<p>When dh and I married in the mid 90s, his house payment was $400 a month. We were sort of DINKs at that point, so we ended up refi-ing to a 15 year and not quite doubling the house payment - still a ridiculously low monthly amount even back then given our incomes - which was mostly his at $50k or so until I started working and then it was maybe $70k combined to begin. I was pregnant when I got my first job and we had two kids in 15 months, so most of my income was going to daycare. Dh always has contributed the max to his 401k, which would’ve pulled $10k+ from our gross salary, so after taxes we weren’t taking home a heckuva lot. </p>

<p>When I left the workforce when my oldest was 2.5 years, we immediately had more money each month, plus dh was suddenly making $60k/year. When the oldest was ready for kindergarten, we looked around and realized that our large urban school district wasn’t exactly great. They current graduate about 65% of their students. </p>

<p>So we fled to the great school district, opting for a hovel of a house in the best neighborhood in the best local district, all the while having only one income and contributing the max to the 401k and some (but not as much as we needed) to the 529 plans. The graduation rate at this high school is nearly 100% and kids go to Ivyies and other selective schools.</p>

<p>Now we have a combined income of slightly under $250k. It just hasn’t always been that much - really only the last five years or so. It hasn’t been - and never will be - a luxurious life. We save a lot, and we fully fund the 401k and pay on this mortgage at a faster pace (only 9 more years or so). We plan to have enough to carry us through, but not so much that we will send the kids to private colleges. They have always been told “state tuition or equivalent, no debt”. That’s the promise we’ve made, and it’s in line with our retirement goals. </p>

<p>If we’d shorted the 401k fund over the years, then we’d have more than enough to fund private colleges. But we thought it prudent (and I still do) to fund our retirement up front rather than wait until our salaries caught up. </p>

<p>If we’d stayed in the old house, we’d have no mortgage at this point. We’d maybe be looking at sending our kids to a private college but not necessarily, since I don’t think they’d have had the same opportunities at all. It’s all about choices. We made the choices we made based on advice given to us at various points. We saved instead of spent (other than moving to this hovel) and now make a very good combined salary that I’m not complaining about, it just isn’t like we have been making this particular level of salary for oodles of years and jetting off the the Caribbean twice a year when non-existent Jeeves drives us to the airport in our non-existent limo.</p>

<p>(We also dip our tax toes into the AMT each year. It’s fair - I’m a liberal that believes that taxes are necessary for a functioning society - but it still hurts like hell. Our ability to take many deductions has long since disappeared.)</p>

117

<p>missb, thank you for your candor. I especially appreciate your emphasis on CHOICES. We all make them.</p>

118

<p>Thanks Missb as you articulated what some others have experienced. Add in our own student loans, paying for grad school for ourselves, long commutes, recession leading to no raises and a job loss, sky-high property taxes etc and it was just not possible to save enough to send 2 kids to $50+K schools and one (still in high school) to $60K. We also had our last a bit later than typical and so don’t have as much time to sock away additional retirement funds. We will pay for college for 12 straight years, with possibly one semester of overlap. We have no family money and expect none in the future, and, like you, felt our first responsibility was to save for retirement. It almost makes it harder to not fund a private college, as the money is there, it is just not for college. </p>

<p>Not complaining, as I know we are privileged in many ways to even have a retirement fund and enough to fund a public education and a private with merit money. But I don’t see how anyone in our circumstances could actually spend $620K to send three kids to private schools (costs for our kids) with no aid and still have enough left to fund a decent (but not extravagant) retirement. That is a heck of a lot of money and would not have been achieved even if we did not replace our 12-year old car, never ate out, or never took a vacation. </p>

<p>Yes, it is a choice, but the benefit of private college (especially once you get past the top 25 or so) is often over-stated. And IMHO, not sure most of them are worth 25 years of total deprivation (no dinners out, never taking even a local vacation, working to excess, no extra curriculars for the kids, etc) that it would take to save that kind of money.</p>

119

<p>"Why have a larger family than you could afford? " - GreenCat4</p>

<p>Oh, so if you don’t earn enough money for a mortgage in the Bay area, day care and ballet lessons - no more than one kid for you? really? Thanks for your input Mao-kitty.</p>

120

<p>Unless you are truly low-income. Then it’s apparently fine. LOL!</p>