UCB, I’m too lazy and tired to look it up, but find out the average cost of a house in SF. The median income in SF is way underserved for the housing stock. For that matter, find a comparison of % of salary spent on housing for different markets in the US. I guaranty Bay Area leads the pack. I live a 1 hr commute east of SF, and a 1,400 sf attached townhouse in my area just sold for $760K. Good schools, but it’s nothing like New Canaan or Greenwich CT - just another CA suburb full of tract homes and strip malls. How does someone starting out here get to a place of saving for college when they have to look at that to start?
I know people who live in SF can’t afford private tuition without getting into debt, have bad credit rating while earning high or decent salary. Certainly not $76k. One of my daughters’s roommate parents live in nice house in SF area, mom is a dentist, dad works at a nice paying job, I assume it’s at least 6-figure, which is nothing for SF area, but they have bad credit rating because they sent two kids to pricey private schools. How do I know the parents credit rating? Because they told us, we had to cosign for their daughter before they can move into the apartment.
That house seems to cost about $34,500 for a 80% mortgage at 3.92% and $9,120 for property tax, or $43,620 per year. Yes, that is a lot. But http://www.tax-rates.org/income-tax-calculator/?ref=nav_income suggests that a married couple with two kids and such a house earning $150,000 has after tax income of $119,741, after paying $15,483 in federal income tax, $5,255 in California income tax, and $9,522 in payroll taxes. Surely, the family can live quite well with room for savings for long term goals on the remaining $76,121 after the mortgage and property tax costs.
Of course, not all houses are that expensive, even in places closer to San Francisco than a one hour commute.
UCB – let’s use your numbers. So how much could that family put away for college each year for their two kids? Yes people can and should save. But the point is that folks aren’t going to be able to put away $500k or so in a college fund unless they are way up the income scale.
Full payors are one percenters and up.
Full pay, two Ds, top 50 schools. We are top 5%. Did not have two in college at the same time and that probably made the biggest difference for our family. No loans. No merit. No financial aid. Each level of tuition has been breathtaking but somehow we have adjusted.
And yet a family of four in NYC can qualify for some moderate income housing at an income of $143K. Low income at $52K. A family of 4 cannot live on $70K in this area unless someone hands them a house. The overall median income is meaningless as it is NOT the median income of a family at peak earning power. That includes kids just starting out and retirees.
Again, if a family has been earning $200K for all 18 years of a child’s life, then yes it would not be too difficult to save for college. Most families, however, are not earning at that level until the higher earning spouse is in his forties and thus has much less time to save. Also, anyone that has to pay for childcare in this area knows that it has a tremendous hit on income.
Why is it always assumed that those who make a professional level salary and yet don’t have enough saved to be full pay at an expensive private school have three brand new cars, live in a mini-mansion and take exotic vacations? Not necessarily true. Many bought the least expensive house, but in a good neighborhood. Saving for college can be a priority, but saving for retirement should always come first. But then I also don’t think it is worth never going on vacation or never going to a cultural event to save every single penny for four years of full pay private college, especially for non-elite schools. There has to be a balance between saving as much as possible for college and yet enjoying life, at least a little, on the way there. Once a kid is off at college, their childhood is over and the family bonds and memories are set.
By the way, UCB, you forgot the 15% that should go to the 401K. As well as the salary deduction for medical insurance (probably at least $1,000 per month). That gets the family down to around $43,500 for utilities, food, cars, medical bills, clothes, social life, and anything else. Is it really feasible to save another $20K per year for college?
Many people don’t put money in college funds. But they buy the house early instead of paying rent. They also put money in the retirement plans early. At the time the kids go to college the mortgages are paid off, the house values are appreciated, he retirement funds are decent, and the have money for college.
Maybe not many, but some, buy a house early. Depends on when they settle down and have enough saved for a down payment. Going to graduate school set back both of those goals.
Nobody MUST live in SF. It is just another choice people make on how to spend their money.
The problem my family faces (I think it is common) is that we have not had a 90%+ income for all that long. We put off needed home repairs, drove cars into the ground and pay a mortgage plus high property taxes so the kids could attend quality public schools.
I think our income is just over the threshold to receive any financial aid at any schools except for HYPS.
We have money saved and can easily pay for our kids to attend an in-state public and live on campus. Private schools? Not so much.
If the job you have is in SF or silicon valley, what are your options? Any place within a reasonable commuting distance has high housing costs. Should someone quit their job to avoid living in a high COL area? What do you mean by a choice Intparent?
Places that cost significantly less than the one claimed in #60, and less than the hour from work (SF or SJ) mentioned in #60:
http://www.zillow.com/homes/for_sale/24995869_zpid/
http://www.zillow.com/homes/for_sale/24980029_zpid/
http://www.zillow.com/homes/for_sale/24978911_zpid/
http://www.zillow.com/homes/for_sale/19785615_zpid/
http://www.zillow.com/homes/for_sale/19717826_zpid/
http://www.zillow.com/homes/for_sale/19729740_zpid/
http://www.zillow.com/homes/for_sale/24775492_zpid/
http://www.zillow.com/homes/for_sale/24786598_zpid/
http://www.zillow.com/homes/for_sale/25045140_zpid/
Yes, they are still expensive compared to much of the US, but it is not like a $150,000 to $200,000 income family cannot make ends meet. After all, how do the $50,000 to $80,000 income families (the middle of the regional income range) make it?
UCB, where do you think they find the 20% for down payment.
My kid’s friend’s parent works in SF Chinatown. It makes no sense to live so far away like Union City. The cost of childcare to live so far away is horrendous. It makes a lot of sense to live close by.
I know many CCers pass judgement and think how other people should live. There are reasons why people choose to live where they live.
The discussion is not whether they can make ends meet, the question is whether they can save approx. $250K per kid for full pay private college on top of making ends meet and saving for retirement. Those with lesser incomes are not full pay at private college.
Really should be “Those with lesser incomes are not full pay at highly selective private colleges.” Yes, if they can get into those colleges (and their parents are not divorcees who fight about money or are uncooperative with CSS Profile). Most students are not going to be admitted to such colleges anyway.
Anyway, those living in the San Francisco bay area have plenty of good lower cost college options in the UCs, CSUs, and starting at a community college followed by transfer to a UC or CSU. A good college education for the kid of such a family need not cost $250,000. For four years full pay (CC is assumed to be commuter; commuter includes food, utilities, and transportation costs associated with living at home):
UC: about $130,000 (or $100,000 commuter)
CSU: about $100,000 (or $70,000 commuter)
CC->UC: about $80,000 (or $60,000 commuter)
CC->CSU: about $65,000 (or $45,000 commuter)
Yes, those in other states might not find their public options to be as attractive as in California.
There are jobs in places other than SF and Silicon Valley in every industry. No one has to take a job there and live there.
If you have family in SF and Bay Area then why should you go any where else.
The schools in Union City and San Jose are not good. I think to have good odds of a kid going to a selective private school, you need a 7 or above on great schools (info is on Zillow). I guess this isn’t as big a factor if you can be top 10% in a mediocre of lower HS, get into UCx, and then just work like mad. However elitist it seems, there is also a good correlation between most kids aspirations and focus based on their peers in HS, so a low performing HS may not be conducive to good study habits.
Leaving SF and SV means a big cut in pay, and maybe it surprises you but not everyone even has a credible job if they leave the areas where the type of work they do is done. There is no Google-light out in the middle of nowhere, so you might say work in IT… Not a good trade. Many high paying jobs really have a limited number of employers, especially if you want to have an interesting job.
I think if full-payers aren’t complaining, it is none of anyone’s business how they spend their money, where they live etc. Cost of living varies wildly … benefits vary wildly (health insurance, 401k matches, pensions, etc) …
While the $35K UC tuition isn’t chump change, it is a great value … but Cali people pay very high taxes to fund these schools and they are really only accessible to the top 10% of students (CC path also requires commitment and success, it is not a slam dunk).
Which reminds me, where do the other 50% of students go in Cali (say 60-70%) go to college. Say a reasonably bright kid with 1200 SATs, top 25% of their class, and what about the next tier down?
But this site is full of such complaints 
I am a project manager in IT. Believe me, there are startups, large software companies, and thousands of other companies that need CS and IT professionals in other cities. Yes, you take a pay cut, but you also take a major cost of living cut. Major enough that you could save for college for your kids. I have very little sympathy for the “I live in a high cost of living area” argument. I am not saying to move to a small town, but there are a lot of decent sized cities in the US that aren’t as insane as SF or NY for their cost of living. You ARE making a choice.