NYT: Today's Lesson: Rethink College Funds

<p>I have no idea whether my S is more meritorious than his roommate. I doubt they have asked each other SAT scores and GPAs. Anyway, what is merit? Will a student who scored 1600 on the SAT necessarily do better than one who scored 1500 or 1400?
There's also more to merit than pure stats. S's roommate has been invited to sing in one of the choirs; S could not sing to save his life.
What I know is that we have the ability to pay full freight and his roommate does not. To me, that is reason enough to give a scholarship to the roommate and not to my S. Had I wanted S to get a merit scholarship, I would have insisted he apply elsewhere.</p>

<p>lfk: need-based aid is normally called grants, not scholarships.</p>

<p>Feel better?</p>

<p>Added note: yes, I know tht there are some merit scholarships that take into account need, to, but they're still scholarships; they take into account achievement,as well.</p>

<p>Edad and Audiophile;
Phew, edad had me confused, too.
Thanks for profiding some clarity regarding the issue of whether it's worth it to send the motivated one to a non-merit aid based college for $44K per year.
We're facing a similar dilemna regarding high achieving D and not so motivated S.
D wants to attend the best possible college possible, and I feel she'll be like Audiophiles' D. Questing for more, more, more.
S is smart but not nearly as motivated. Should we send him to a $44K college. Not likely.</p>

<p>From the kid and the "paying-my-own way" end of life:</p>

<p>My parents were very up-front: four years wherever I got in, so long as I kept working hard, but no grad school. (Very generous and so very lucky for me.) Archermom - with professional school topping $55k/year, you might want to have a chat with your D! (Urban law schools, with room/board/tuition are roughly $56k/year; urban med schools are about the same.)</p>

<p>I love, love, love the idea of telling kids up-front what the deal is. To me, what the deal is is less important than knowing it (and having parental help filling in the gaps between what you can get and what you want - whether that be by co-signing loans, educating the kids on what it will take, letting them live at home to save money - whatever) and acting accordingly. </p>

<p>Said it before and will say it a zillion times - April of senior year is the wrong time to give your kids a dollar figure! Do it before the college search starts. Kids are pretty wise - they know that you can't afford everything and really want to know where they stand. </p>

<p>Anyway... I guess I do resent the idea of having someone else pay for your school. A college needs a certain amount of income every year from tuition. Someone has to pay that money. If it's not you, then it's your kid's roommate. While there is some financial appeal in all of that... have some morals! It's your bill. It's not someone else's bill. College is a bargain - the sticker price is half of what the total cost to educate a student is, and there are usually financial aid reductions on top of that. Not going to debate the merits, but really, it's a great deal. </p>

<p>I do agree with not robbing the retirement account... but do wish that financial aid were different. As it is now, if you do something like put the savings in the kid's name, you'll get creamed when you apply for fin. aid. The current system penalizes savers, those who live in nicer areas, those who have two parents working, those who have small businesses, etc. The system is ripe for some substantial change in financial aid calculation. </p>

<p>Oh yeah - says the woman who is over $80k in debt! IMO, it's my bill - getting a fabulous education which will (hopefully) be worth every cent.</p>

<p>Aries,
Our children learned the true meaning of "budget" many yrs ago...unfortunately for them, that is my line of work! LOL With 2 incomes, we do not qualify for financial aid...but, to hold D accountable for her education, we did and will continue to take out Stafford loans in her name. Believe me, she (and her siblings) are fully aware of the financial implications/burden of their education on this family. And, hopefully, all the sacrifice will not go to waste. We are watching and waiting....</p>

<p>The FA officer at my son's school said that parents are allowed a certain amount for retirement funds but if the payments to the funds are voluntary and are above the allowance, it is expected that you should decrease the amount you put into retirement to apply toward school costs. Does anyone have more information on this ?</p>

<p>what we found was that while the amount of money in retirement accounts was not expected to be available for tuition, the amount of money that was put into the account the year that FAFSA covered, was expected to be available.</p>

<p>I believe this is correct. I tried several scenarios with the FAFSA calculator. Retirement accounts and I believe home equity is not included in the EFC. In my case, it appeared that other assets were not exempt. For the student's assets, the FAFSA took about 1/3 per year. For the parent's assets, they were more generous. They did want almost all of the assets, but spread out over 4 years instead of 3.</p>

<p>Whether or not families were "expected" to divert retirement contributions to college costs, we definitely did that! ;)</p>

<p>I think the article is right on in its prioritys. The 'Elephant in the room' here on CC is that most people are funding their kids educations at the expense of their own retirement. If you run the numbers on how much you will need to retire it is in the millions - you can draw about 4% of your principle per year. The reality is is that people are either going to be going into relative poverty or putting themselves on their kids to help with support. Often retirement expenses are outside our own control - we cannot control our own health or the cost of medications we may have to take. Perhaps our soceity will go more like Japan or China where the middle generation supports both the grandparents and the grandchilderen? Who knows? If that is the case then how are our grandkids expected to go to college? The reality is that most people simply cannot afford to fund their kids private U tuition and their retirement. And since the college $ need is more immediate it is the one to get funded. I like to think of not funding your retirement is the same as saying that your grandkids education $ will be used to pay for your retirement. </p>

<p>How a student is supposed to fund the $20K per year that our no-tuition state UC costs with part time work is beyond me. In fact if the college work is hard then their grades will suffer and it will take longer to graduate. Your student ends up saving 10K from work savings and having to spend another 20 for an extra year in college. And without work what can a student borrow except a few thousand form Stafford loans? That is all that is available to my D. It is for this reason that I have made my funding of my D's education contingent on her having no jobs during the year unless her GPA is over 3.</p>

<p>There is another thing to consider. Our college warned us not to fund 100% even if we could. They said students who have some loans do better accademically and graduate sooner since the loans provide some focus for college work. </p>

<p>TC</p>

<p>well our strategy is to work till we die-our neighbor is 92 and she is still working! ( seamstress- pretty amazing)
( planning own business after retirement- right now it is hobby-)
We pay most of EFC- but D contributes by putting in her summer earnings ( which is assumed as part of EFC anyway)- takes out loans- workstudy pays for books/personal expenses/transportation.
She also took college classes summers- so that her schedule could be a little lighter if need be during the school year-( taking a year off to earn education stipend helped as well)
Her college choices were all reasonable- instate colleges- out of state that offered merit aid & private college that met 100% of EFC- all were more or less same price after grants and scholarships-( give or take a thou) so that actually made the choice a little more difficult
We don't expect grandkids- with 5 ( at this counting) Mormon cousins- they will have lots of nieces and nephews to get their kid fix</p>

<p>I'm with you, timcob. We chose to not divert retirement savings for college funding. Having seen my grandparents life savings spent on health care and nursing homes, and having seen my mother-in-law needing to depend on family assistance to keep her home and buy groceries, I sure don't want to be in those situations. I work with a guy in his mid 70's who can't afford to retire, although I'm sure he would like to. My husband actually felt so bad about the lack of financial aid from my son't first choice college that he offered up tuition from our 401K...thank goodness we didn't do that!</p>

<p>I have not spoken to a financial advisor, since we already decided the a university will get our disposable income and a major chunk or our assets. The 4% figure does not sound correct. My retirement plans are doing better than 4% and I know I will be spending down the principle and home equity. I have told my kids that college is taking their inheritance. I think most of us will also be relying heavily on social security and medicare. Considering how much I have paid in, I feel entitled. I get very angry when I hear George W talk about his half-assed plan to "reform" social security. Let's face it, the way the system was set up, we have been paying for our parent ss benefits and our children will pay for ours - unless George reforms the system his way. Some of you voted for this guy..</p>

<p>
[quote]
Considering how much I have paid in, I feel entitled.

[/quote]
That was the plan, all along.</p>

<p>I just wanted to give the perspective of someone who has gone from a poor student who funded his education through need-based (and some merit) financial aid to a parent whose son does not qualify for need-based aid. My parents were immigrants, and they had no clue about how I was going to get into college or how to pay for it once I got in. I filled out all the financial aid forms, and they signed them. I got a great undergraduate education at a world-class public university and my professional degree from an elite private university. I graduated from both with ZERO debt due to generous financial aid packages! Now my son has been accepted to a private university with wonderful programs, and I have to pay full freight for this elite education that he so much wants. I don't mind paying at all! Why? Because I got the advantages of a free education so that I could move up in society and earn enough money to pay for my son. Yes, I am subsidizing other people's children, and my answer to that is that I am more than happy to do it!</p>

<p>There are lots of retirement planners on the big brokerage websites that you can use to figure how much you will need - but as a rule of thumb, they say 5% on the first and last year of your retirement and 4% on the other years should be enough to make sure that you will not run out of money. So if you think you need 20K per year on top of social security then you need to have 500K put away for retirement.</p>

<p>You cannot plan on working til 95 - it is only the lucky ones who get to do that. If you get sick there will be expenses that have to be paid and the money will have to come from somewhere. It would be horrible to put your kids in a position where they have to choose between your medical expenses and their kids education.</p>

<p>Im not saying dont spend the $$ on private education. Im just saying that we should have a solid plan figured out for retirement first and then we can know how much $ is truly available for college. Too many people have the 'cross that bridge when I get to it strategy' for their retirement which is really gambling with our childrens welfare. </p>

<p>Tim</p>

<p>
[Quote]
I got a great undergraduate education at a world-class public university and my professional degree from an elite private university.

[/Quote]
</p>

<p>So did I, but with far from zero debt. Fortunately ,my profession allowed me to pay it back comfortably after the first few years. But those first few years were rough!</p>

<p>H's uncle is a successful exec with Smith-Barney and gave us 1 piece of advice when 1st child was born that saved us..."Take care of yourself first....THEN worry about the baby later." I was always a good listener and responsible "child"...so planted the retirement seeds in the mid to late 80's when biotech took off. Still contributing to our tax deferred plans....</p>

<p>Wyogal & others- I think the real issue stems from the conundrum: student A comes from a very low income family, is a brilliant, earns an Ivy acceptance and gets a full financial package-maybe a work study, but not even a loan at some schools; student B, nearly as brilliant and with wealthy parents earns the Ivy school and family pays $40-$50k annually for the priviledge. That is all fine, it is student C who has the probelm, middle class, decent life, also brilliant, earns the Ivy acceptance and simply cannot responsibly affford it- yes a 2nd mortgage might do it, but with siblings in the picture and the fact that parents cannot afford that increased mortgage payment, it is not an option. Student C appears more comfortable than student A, yet not enough better! There are some semi-arbitrary points in the formulas where a small increase income can make a difference, like a pell grant or other grants with qualifying incomes.</p>

<p>The frustration of some the "middle" class is that they really and truly would be irresponsible to try to afford that private school pricetag, even with some aid, yet their friend (who may even have had an irresponsible family) gets a full ride. So, when student A is at the big flagship, not the Ivy, there could be some resentment engendered!</p>

<p>There have to be rules and guidelines and some one is always going to just barely make it in or out of the mix based on a formula, but when families witness acquaintences seeming to benefit, when their student seems to be "harmed" or at least miss out on an opportunity, then it is tough.</p>

<p>I am not talking about all the students who say dad won't pay and makes $200k annually, but the ones who are say $50-$100k family income and who are not that far from qualifying for more aid.</p>

<p>I look at it like this though.
The student who would qualify for a full ride-who is either a ward of the state or who has very low income parents, has not had the benefit of a family making even $50,000.
Growing up in public housing, living on food stamps and handouts, is not going to get most kids to a place where they can benefit from and be accepted at a top college.
The schools that pledge 100% need are fairly competitve schools, like Harvard, the kids who are accepted can do well there. A student who has done well enough to be accepted to a competitive school despite coming from an impoverished background is going to be a student who has his own inner resources and who can contribute greatly to the community.</p>

<p>Ivies as well as other schools pledge to meet EFC.
Our daughters school is more expensive than Harvard. Her school meets our EFC. It is challenging, but it is not undoable.</p>