<p>“Anyone who thinks that $125k a year isn’t rich is seriously cut off from reality.”</p>
<p>Anyone who thinks $125K per year is rich in, say, Boston, New York or DC is seriously cut off from reality.</p>
<p>Again, strenuously disagree. The vast majority of people (yes, even in those cities) live on far far less than that. It doesn’t mean that you are going to be driving your Ferrari to your private jet, but it is way above average.</p>
<p>“Rich” is very much a relative concept. People will buy (or rent) homes wherever their income allows them to afford, and then look around at their neighbors and say to themselves, “I’m no better off than anyone else, as far as I can see.” They see their neighbors remodeling their homes and buying new cars and think they’re falling behind, when they’re actually surrounded by their economic peers.</p>
<p>That being said, there are many cost of living calculators available online to show that, for example, earning $125,000 in Manhattan is equivalent to earning $50,000 in Omaha, with regard to what standard of living you can buy with that money.</p>
<p>Businesses are well aware of this. Someone doing business in Manhattan knows he must offer $125,000 to attract an employee who would otherwise be doing fine with $50,000 in Omaha. Offering $100,000 (double the employee’s current salary) would not be enough.</p>
<p>Someone should do a comparison and see how the income to buy a median priced home in each major metro area compares to the IS cost of attendance for the state’s flagship public university, and also how it compares to the average COA of nearby LACs. Berkeley looks downright cheap if you live in SF, but not if you live in Fresno; UVA might be unaffordable if you live in Lynchburg, &c.</p>
<p>It may be relative of course, but I think if you’re in the top 20% of your city, you’re gonna be classed as rich.</p>
<p>“The vast majority of people (yes, even in those cities) live on far far less…”</p>
<p>Nope, not true. In my county, $125K is certainly an above-average family income. But it’s hardly rich, and only modestly above the median. Where I live, median family income is $100K per year. And frankly, that median income includes parts of my county where I wouldn’t drive at night. Mean single-family house price in my county is $470K.</p>
<p>The US median family income is roughly $64K (household income is less - but I live in a family, not a household - almost by definition, all families with dependent children fall under the definition of “family”). $125K is 20% than my county’s median household income. Twenty percent higher income than median is hardly rich. That’s analogous to a household income of $77K as against the median family income for the entire country.</p>
<p>In the United States generally, $77K is clearly a good income, but it’s hardly rich by any stretch of the imagination.</p>
<p>But that’s the equivalent to $125K where I live.</p>
<p>And that doesn’t factor in higher tax rates applicable to folks at $125K than $77K and the fact that these “evil rich folks” must pay much higher amounts for such luxury goods as… college education.</p>
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<p>I’m not entirely sure about this. Things may cost you more there, but you are getting one huge advantage for your money – the chance to live in desirable area X. You have my sympathies if you <em>must</em> live there for work, but otherwise it seems to be a case of ‘money doesn’t go as far after you’ve spent it’.</p>
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<p>Where are you getting ‘evil’ from? Or is it just self-pity?</p>
<p>I fail to see the relevance of higher tax rates, and I’m curious – what else other than education do you generally have to pay more for, purely because you have more income? I can’t think of anything else…</p>
<p>Online degrees aren’t the solution to anything. They’re not even that much cheaper. Correspondence courses have been around since the invention of the postal system.</p>
<p>“I’m not entirely sure about this. Things may cost you more there, but you are getting one huge advantage for your money – the chance to live in desirable area X.”</p>
<p>Someone making $125K per year in my metro region can live in a nice area, but far from the most desirable. Someone making $125K couldn’t afford the property taxes in some of the best neighborhoods in the region. Or even the second or third best neighborhoods. For myself, I previously lived one county over, where median family income is less than where I live now. Still above the US median, but less. But it wasn’t a very good area. I moved.</p>
<p>@austinmshauri had a very nice definition of a modest lifestyle. Here is part of it: “It’s in a safe neighborhood where my kids don’t have to be afraid to walk around at night. We have a good school district in a decent neighborhood.”</p>
<p>Where I previously lived was a high-crime area and had terrible public schools. Atrocious public schools. Not safe to walk at night. Still more expensive to live their than in most of the United States, but definitely a lower cost of living than where I live now. That’s why I moved - to achieve that relatively-modest lifestyle of living somewhere I and my kids can go outside after dark, and that has decent schools. Or am I too rich to deserve that? </p>
<p>“You have my sympathies if you ‘must’ live there for work, but otherwise it seems to be a case of ‘money doesn’t go as far after you’ve spent it’.”</p>
<p>I’ve lived in this region since I was very young. My wife was born here. I have an established business in this area, and it would be very difficult to sell it, move somewhere else, and start all over from scratch. All my business is local, and is dependent on contacts I’ve made over the last half century. I do business, in some cases, with folks with whom I went to elementary school. My wife and I talk about moving, once our sons get through school, and we can afford to retire. Most of the rest of the United States is far cheaper than here, and frankly, I’m not far off from having enough in retirement accounts to eke out a comfortable living in another part of the country.</p>
<p>But part of my retirement plan includes selling my business, and ironically, if I were to sell it now, I’d have to pay even MORE tuition for my sons than I do now because of my one-time capital gain! Maybe after the first one graduates, I’ll take the hit for the other one.</p>
<p>By the luck of the draw, where I live happens to be very expensive to live comfortably.</p>
<p>It’s sad, though, that the implication here is that I don’t have a right to live where I grew up, where I know folks, where folks know me, that the “solution” to the fact that I’m being pillaged is to move far away from my friends, my neighbors, my church, my school (I went to the same high school as my sons, and my family has been associated with the school since 1966).</p>
<p>“Where are you getting ‘evil’ from?”</p>
<p>Because, if one says that those who are [not really] “rich” deserve to be charged dramatically more than those who are “not rich,” for the same product or service, for the mere reason that they are, in the distorted view of many, “rich,” then one is effectively communicating some defect thereof, that the “rich” person is undeserving of the fruit of his own labor, is not entitled to the same level of value to attach to his money as the “non-rich.” Imagine how you’d feel if you went to a car dealer and he said, “Oh, this model is $20K, loaded. Unless you’re ‘rich.’ Then it’s $50K. Oh, and if you’re median income, it’s $5K. Or maybe even free.”</p>
<p>And remember, it’s not just college tuition that we do this with. We do this, now, with health insurance. Subsidies apply to folks whose incomes go beyond median family income. But not families who are “rich” with $125K in income. We do it with certain government benefits (tax credits phase out for the “rich” starting in low six figures of income, other deductions start to phase out, thus even further aggravating the marginal tax rates of the “rich” at income levels in the low six-figures).</p>
<p>Our society has set up a punishing economic gauntlet for folks who move modestly past median income - and with little accounting for their regional cost of living. As one moves past a few hundred thousand dollars per year in income, the marginal rates of taxation flatten out, one gets to maximal costs on goods and services, so costs don’t continue to rise as a percentage of income, and, well, one has more income and costs become a relatively smaller part of an expanding income.</p>
<p>If you have two kids in college, Harvard financial aid, as an example, phases out at something a little north of $280K in income with minimal or no assets. If you actually have some assets of certain types, it phases out sooner. So, if you have two kids at Harvard, and $280K in income, you get to spend $125K on tuition and costs - or about 44% of your gross income. But as your income moves up from that $280K, you’re still paying $125K in tuition for two, and that percentage starts to fall. At $500K, you’re down to 25% of income, and so on.</p>
<p>But the well-off, the better-off-than-average, the not-quite-wealthy, the trying-to-get-there-but-aren’t-quite-there folks really get hammered. This is the donut-hole about which folks talk. For folks who live in high cost of living areas, the marginal increase in living expenses, when one adds up taxes, costs of things like college education, is punishing until one does get to a point where one actually does reach the level of the 1%.</p>
<p>NOTJOE. You totally nailed it. I’ve seen this “donut hole” or “gap” described by other posters. And what usually happens is that folks respond by just pounding away at them. They tell them they’re whining, and “why didn’t you sent them to a public in your home state?” and “just deal with it.” Your car analogy is PERFECT. I saw one poor schmuck’s post that he should stop whining and pay because “he could afford it”. The guy used an analogy similar to yours, that is; “sure I could afford it, but i don’t actually WANT to pay more than i HAVE to.” Again the posters whaled away. There is for sure a reverse snobbery in some of the population. This isn’t aimed at the rich, it’s aimed at the poor simple so and so’s who just clear the “no aid for you” bar, but aren’t wealthy by any stretch. You put it as well as I’ve seen. that’s a keeper.</p>
<p>All of this discussion about income vs. cost of living and college affordability brings up an obvious question: when are colleges going to start factoring geography into their EFC calculators? </p>
<p>Disposable income should be the metric for EFC calculations, not income.</p>
<p>Since many “high income” parents live in high cost areas, they are in effect penalized by the EFC formulas that don’t take geography into account. </p>
<p>I’m confused. I make close to the amazing 125K, though I didn’t always. I have spent most of my life in high cost areas (Boston, Philly, Chicago). I lived modestly, I saved, and I don’t think it’s outrageous to expect someone who makes 125K to pay for her kid’s college. I don’t understand the economics that make it impossible to save for 18 years for an expense that parents should know is coming.</p>
<p>Yep, the poor kid (50K is poor by some of these accounts) may get a scholarship because making it through the “terrible public school” is a major accomplishment, something my little Fluffy never had to face. Education is not a commodity, not a car. True, hospitals and colleges are increasingly run like businesses, but they are not. They are social and cultural institution that are suppose to knit the fabric of society, to create “we the people,” and to allow for a better future. </p>
<p>@notjoe Exactly. Exactly. Exactly. I would go a little further and say that this applies to the 1% as well. Unless someone did, in fact, give them their money…they have worked for every penny…especially considering the difficulties in taxes, business regulations, etc…to even make it there. </p>
<p>The top 1% is anyone making above $386,000 a year…including those who make a billion dollars + a year. That’s a pretty big category. Being charged more for the same services just because someone “thinks” you can afford it goes back to my statement earlier about everyone thinking someone is “rich” if they make more than them. </p>
<p>We are pretty well off financially according to many standards, and I am not complaining about that. But no one gave it to us. We started out without a penny…literally. We pay more in taxes, more for healthcare, more for school services, more for anything with a sliding scale attached to it, etc. And that’s fine (or at least this isn’t the forum to argue that). It is what it is. But for the purposes of this article, it’s worth noting that if my children had Ivy League intentions, there is no way on God’s Green Earth that we could pay full boat for that without some loans. The income is just not disposable or liquid. As it is, with four kids attending college in overlapping years, just paying for the in state schools we are looking at will be an interesting challenge. Yet, my husband’s family member who lives in a household (in the same town we do) where neither parent works and where they obtain everything from food to healthcare through federal benefits, will likely see their children go to college for free wherever in the country they want…It can be a frustrating thing. </p>
<p>@ekdad1212,</p>
<p>Actually, my own view is that we’re all dealing at the level of the symptoms, not the cause. The cause is government “support” for higher education. The government’s education policies toward high education have been “captured” by the industry interest group, and these policies, under the guise of “helping” the middle class have funneled many tens of billions of dollars to the industry, especially through the scam known as student loans. Studies show that pretty much the net effect of increasing student loans and, to a lesser degree, financial grants for lower-income people, is that the coffers of the industry have grown ever-fatter.</p>
<p>In 1978, I commuted to a private university for about $3500 per year. Lived at home, so I saved that cost for my parents. I didn’t go to Georgetown because they gave me no aid or scholarship money, and their tuition represented 10% of my father’s salary, and I just couldn’t ask my parents for that sort of sacrifice. I got nearly full tuition where I went, my parents let me live at home rent-free (and fed me for free, too!), and I got a decent PRIVATE college education. Today, the tuition at the same university is $39,000 per year. That’s about an 11-fold increase in cost. In the meanwhile, the cost of living has increased roughly 3.7-fold in the same period. So, after inflation, my $3500 tuition should have grown to roughly $13,000 per year. How did it manage to triple - TRIPLE in real, after-inflation terms over the course of less than 40 years? Is the school three times as good as it was in 1978? I doubt it.</p>
<p>More importantly, HOW DID THIS HAPPEN? WHO CAN AFFORD $39K PER YEAR per child, with the kid COMMUTING to school? It happened primarily through the expansion of student loans.</p>
<p>The system became even more absurd when student loan lenders were made exempt from the usual hazards of bankruptcy law. Thus, there are no risks for lenders. They’ll get their money, even if they have to collect from you after you start drawing Social Security. The schools get their money because, well, it’s all free to them. They have no obligation toward those debts. The only folks who get to pay are parents and students.</p>
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<p>Someone in the 1% you praise, pretty easily I’d hope. It’s about 10% of their gross income, right?</p>
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<p>It’s not about deserving to be charged more. It’s that (as a society) we have decided that people mostly shouldn’t be denied access to things on the grounds of money. There are then two ways of doing that: make it free for everyone at the point of use (like K12 education, the police, fire services, most government services for old people like medicare, etc) or subsidise those who can’t afford it (like we do with healthcare and higher education). Those are, as far as I can see, the only two options that don’t mean some people get denied access on grounds of cost. Which would you prefer? Please don’t dodge the question.</p>
<p>And I don’t see ‘rich’ as either a term of praise or a term of criticism. It’s just a description. Some people are poor, and some are rich.</p>
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<p>Do you feel the same way about poor people (often minorities) who are forced out of cities like NYC and SF by gentrification and rising rents? Seems like pretty much the same situation to me…</p>
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<p>This suggests that you are in fact getting something for all the extra money you are spending: safety and good public schools! So it’s not like you derive no benefit from living in an expensive area; your money is just spent on things you value in a more indirect way.</p>
<p>@mamalion,</p>
<p>I’m happy it’s all worked out for you. However, other than your time in Boston, you don’t really know what expensive is. For most folks, the single most expensive item in most family’s budgets is housing… Both Chicago and Philadelphia, housing costs are about average. Boston is significantly more expensive, nearly as costly as my own region. In my metro region, prices are nearly double the national median. In my county, they’re nearly 2.5X the median. But I’m lucky. In parts of the New York region, prices are more than 2.5X the national median. In San Francisco, about 3.5X the national median. In other parts of California, 4X the national median. </p>
<p>If you’re making $125K in a market where the median home price is $200K (what it was in Chicago in 2013), your mortgage payment might be in the range of $860, before taxes and insurance. If your taxes are similar to my area, it’ll run you a total of about $1100 or so per month. If you live in my county, and buy a median-priced home, it will run you more like $2500 per month. Fourteen hundred dollars per month adds up. Heck, if I put that into a college savings account and got a 5% return, I’d have half a million dollars! And that’d pay for two kids to go to college! But I can’t spend that $1400 per month on a median-priced house where I live and also save it. It doesn’t work that way.</p>
<p>I can’t even imagine how tough it must be in even more expensive parts of the country. .</p>
<p>My situation is fine. I’ll get my two kids through school without borrowing. But that’s because they went to one of the most generous schools in the country, there are no loans in the aid package, I don’t make $200+K per year (so, I’m not getting killed on financial aid, or the lack thereof), and I don’t live in San Francisco.</p>
<p>But, my older son’s first choice school would have cost me an additional $10K per year, much of which I’d have had to borrow, and roughly $20K of the financial “aid” to my son was loans. So, he didn’t go to his first choice school.</p>
<p>Of course, the hidden premise here is that we should all live simple, plain, frugal, inexpensive lives relative to our income, so that we can save huge fortunes to hand over to the private (and often public) colleges of our children’s choice. As I mentioned in a post upthread, my own college tuition amounted to a much more modest amount, and even if my parents had had to pay it out of pocket, would have amounted to only a modest percentage of their income. I’m not convinced that the after-inflation value of my college education has increased three-fold over the past few decades.</p>
<p>We need to re-think the role of colleges and universities in our country.</p>
<p>After WWII, we had thousands of GIs going back to school on the GI Bill, and we put serious money into having schools for them to attend. You could attend college tuition-free in California or New York. And it wasn’t because we wanted to reward veterans. It was because we saw education as a public good, like primary education, police departments, firefighters, road repair, etc. The colleges and universities produced two things: research and an educated population, both of which were considered to benefit our entire society. We were quite happy to have our government take a portion of the taxes it collected from us to keep the university system humming.</p>
<p>In the decades since, however, we have changed to a private good model - that is, instead of viewing research output and educated graduates as something that we all want and benefit from, we have changed to viewing it as a business providing a service. The student, not the community, is seen as both the investor of the money (tuition) and the beneficiary of the service (gets a diploma, advances in career prospects and income). Now we get angry at the idea that our taxes are being used to provide SOMEONE ELSE an education. We peg the value of the degree to the individual’s income and say he should pay for it himself, as he benefits from it himself.</p>
<p>The universities themselves (if they have the resources) do make a sincere effort to avoid being engines of inequality - to avoid increasing the gap between the rich and poor - but reaching out to low income students and giving them need-based aid. And that’s great! Except… it’s typically far too late to make up for the handicaps of growing up poor. There just aren’t enough poor students who are ready to do top level academic work by the time they are 18. People need to be fully supported in health and learning and safety and role models and fostered interests for their ENTIRE LIFE, not just from HS. And we don’t do that, for the most part; we let people who lose out in the great birth lottery muddle along in horrible conditions until they are 18, and then look at test scores (with no preparation or support) and grades (from failing schools in unsafe areas) and tell them that this is a meritocracy and you just don’t have what it takes compared to those who won big in the great birth lottery.</p>
<p>Our middle class is disappearing. The rich get richer, the poor get poorer, some middle class families climb to wealth but more get dropped into poverty.</p>
<p>Here’s an idea: have every single family pay at a same rate, for example 10% of their after-tax income, per child, for college. This is exactly like the “flat tax” that some billionaires keep whining for. That’s not progressive, but it’s not nearly as regressive as the system we have now with a maximum fixed price.</p>
<p>Also: remove tax exemptions for donations to universities. If Meg Whitman has $30M income, she has to pay about 1/3 of that ($10M) in taxes; but if she donates $30M to Princeton, she gets her taxes reduced by $10M, so is out of pocket only $20M, Princeton gets $30M, and the Federal government then has to make up the $10M they are not getting from Meg Whitman from somewhere else - that is, us. The bottom line is that the government is effectively giving a 50% matching donation for her donation to Princeton, which has to come from somewhere, which works out to be her forcing other people (us) to pony up that 50% match. ■■■? </p>
<p>“Someone in the 1% you praise, pretty easily I’d hope. It’s about 10% of their gross income, right?”</p>
<p>I don’t see where I’ve praised the 1%, although I find that most (not all) folks who make a lot of money worked really hard for it and deserve what they have. On the other hand, I’ve met a few folks who have inherited wealth, or who have achieved it through immoral means. Those few are hardly praiseworthy.</p>
<p>We’re not talking about the 1%. We’re talking about whether or not someone with $125K in income is rich. There’s a noticeable difference between $380K in income and $125K in income. You’re moving the goal posts. By about three football fields. C’mon, you can do better than that.</p>
<p>“It’s not about deserving to be charged more. It’s that (as a society)…”</p>
<p>Wait a minute. I’m often told, well, if you “rich” people can’t afford a private college, just send your kids to a public school. Why don’t we say the same thing to the median-income family? Why is that advice only good for the higher-income family? Why does the median-income family get to send their kids to elite schools for free, but if the family with $125K in income can’t afford 20% or more of gross income, well, there’s always the local community college.</p>
<p>“Do you feel the same way about poor people (often minorities) …”</p>
<p>Are you suggesting that we force lower-income people out of their homes to cheaper places so that they can pay for college? Oh, wait, only mildly-well-to-do people have to be forced to substantially alter their standard of living to send their kids to college. The low-income folks go free. Forgot about that rule. LOL.</p>
<p>“This suggests that you are in fact getting something for all the extra money you are spending: safety and good public schools!”</p>
<p>You’ve taken that out of context. I was commenting on what what another poster said he/she is able to do on an income of less than half of $125K per year. For less than half of $125K per year, he/she has a decent house in a nice neighborhood that is safe, with good schools.</p>
<p>What I said was, in my area, $125K per year just about buys what he/she gets for less than half that. But I forgot the rule - the evil “rich” are not entitled to a similar standard of living available to middle-income folks who live in less expensive areas - and NO PRIVATE COLLEGES FOR THEM!</p>
<p>@keepittoyourself Not necessarily in some cities. In my city, the top 20% lives in my area of the city; I’d say most of the people probably have family incomes of 125k or higher (90k at least, although they generally have lots of savings and/or bought their house when the area was much cheaper). But the median home price is ~700k, and most people have quite a few children who go to college (actually, almost all the children go to college–96% of students from the high school in the area go to college). </p>
<p>At least in my area, your taxes increase a lot with income–especially if you earn above 90k (no matter where you live and how that is relative to your income level). High schools in richer areas charge more to students for after-school programs and similar things, because the school itself doesn’t get any money for being in a rich area (I know for a fact that if you choose to go on any of the trips for the marching band at my school, which is a class, your total cost is around 3k for all the stuff you have to donate; conferences for activities like Debate, DECA, and MUN can cost up to 1k each; most sports cost around $500 at cheapest, although it’s usually 1k)… The money adds up. If one lives in an area where more people do more extracurriculars because they can afford it, then they’ll be at a disadvantage during college admissions if you didn’t do as many extracurriculars or if you weren’t able to do sports because you didn’t have the money.</p>
<p>The top 20% is not rich. Now, if you said 10%, then maybe; and 5%, then most definitely (unless you live in a small town where everyone is poor or something).</p>
<p>But 20%? That states that a fifth of everybody in the US is rich, which I certainly wouldn’t say.</p>
<p>Years ago I had a roommate who was in med school. One day she went on rant, why I don’t know, saying “I worked hard. I deserve med school, I deserve my parents’ paying. I worked hard.” All I could think was that the little boys in Pakistan making soccer balls worked hard, too.</p>
<p>@FCCDAD,</p>
<p>Part of the problem is that higher education, and education generally, has grown in cost compared to the rest of life. As I said before, I went to a private university. It’s a school that traditionally has lived hand-to-mouth, not having any appreciable endowment or really rich donors. It is almost entirely dependent on tuition, and was even moreso when I was there than it is now.</p>
<p>When I google it, I find that the median household income in the United States was about $13K in 1978, when I graduate high school and went to college. Tuition at my school (not including room and board) was $3500 per year. That’s about 27% of median household income at the time.</p>
<p>Now a year at the same school is $39K, not including room and board. Nationally, median household income is about $51K per year. So, the cost of this school relative to what people make has gone from 27% of what folks make typically to 76%. These are costs with no government money, no subsidies, just what the university thought it needed to charge for attendance in 1978, and what it thinks now.</p>
<p>A similar growth in costs has happened in our public universities and colleges. In my own state, when I was young, a year at our flagship university was measured in hundreds of dollars per semester, not thousands. Today, a year there is over $10,000 for tuition alone - roughly ten times what it was then. It’s hard for the government to keep supporting a program that’s growing three times faster than the rest of everything else. What was a small added tax expense grows larger and larger, and eventually, taxpayers don’t want to keep paying higher percentages of their income for the same thing, or maybe even for something that hasn’t even held its value.</p>
<p>“Our middle class is disappearing.”</p>
<p>Not because not enough people are going to college or getting degrees. Attainment of four degrees is at an all-time high:</p>
<p>“Last year, 33.5 percent of Americans ages 25 to 29 had at least a bachelor’s degree, compared with 24.7 percent in 1995, according to the National Center for Education Statistics. In 1975, the share was 21.9 percent. The number of two-year college degrees, master’s degrees and doctorates has also risen recently.”</p>
<p><a href=“Data Reveal a Rise in College Degrees Among Americans - The New York Times”>Data Reveal a Rise in College Degrees Among Americans - The New York Times;
<p>Getting folks degrees in sufficient numbers isn’t the reason for the shrinking middle class.</p>
<p>“Here’s an idea: have every single family pay at a same rate, for example 10% of their after-tax income, per child, for college.”</p>
<p>Are you including private universities in this deal? How do they integrate into the picture?</p>
<p>My own view is that we’re ignoring the cost side of the equation. Through the use of government programs for which the higher education industry has lobbied, we’ve increased the pool of money available, on a per-student basis, to this industry, without any accountability or any real upper limit, and without any benefit to the middle class or the taxpayer, and actually, with much harm to both.</p>
<p>My father got his degree paid for by the GI Bill after he served in WWII. He went to night school for many years while working one, two, or three jobs to achieve his degree. One of my very earliest memories is attending his college graduation. But I can pretty much guarantee, it didn’t cost sixty thousand dollars per year, even after taking into account the effects of inflation in the larger economy.</p>