<p>Is the financial crisis making a difference as to which schools your child is applying to? Are you telling your child to cross certain schools off their list because now you can't afford them? Is your child applying only to publics, though in the spring you envisioned them at a private? Are you looking hard at the tuition costs of different privates?</p>
<p>I am going through that now, but not in so many words, my parents are stretching the dollar so I can go to my private college, I feel trmendously bad, even considering transferring based solely on the money issue</p>
<p>Why would the parent have been able to afford the school 6 months ago but not now unless they lost their job?</p>
<p>Because their money was in the stock market.</p>
<p>and 401K too. And the house value is decreased. Parents will not be able to have equity loan or to sell the house.</p>
<p>^^^
Student's college fund in a mutual fund is down also</p>
<p>USCD_USCLA -- It's tough out here. The last six months have been absolutely brutal. In addition to the points already made (losing equity to borrow against, assuming you can find an equity lender right now; 401K values damaged for those who need to borrow against retirement savings; 529 accounts and other savings in mutual funds losing value by the day; qualifying for loans is much more difficult; some state universities have already been alerted that their State funding will be reduced or frozen, resulting in signficant increases next year (PA, for one) and colleges that fund scholarships from endowments will have to address the reduced value of their accounts..... </p>
<p>Employers are also eliminating bonuses this year, and many are going to be putting freezes on raises. Many people are worried their employes will be doing cut-backs, whether through elimination of jobs or restructuring jobs to reduce hours. Banks and financial institutions aren't the only shaky industries right now, obviously -- transportation industries, retailers, etc. are all struggling. This is not a good time to pile on credit and loans.</p>
<p>It's not surprising families have to reassess their ability to pay for college. If you don't, you're very, very fortunate.</p>
<p>
</p>
<p>Many families are suffering a sextuple whammy. First, most people have a lot of their net worth tied up in home equity which in a "normal" economy supplies good collateral for loans, but home equity has fallen apart in many markets with declining home prices, reducing both their wealth and their ability to borrow. Second, other after-tax investments, especially stocks and stock mutual finds, have shrunk dramatically. Third, many 401(k)s or other retirement accounts are now worth a fraction of what they were a month ago or a year ago; while these are rarely used directly to finance college, it means people are literally much less wealthy than they were, or planned to be, and many are worried about how they'll finance their retirement, so spending $50K per year on their kids' education looks a lot less attractive. Fourth, in some cases 529s or other forms of education-specific savings have declined in value. Fifth, credit markets have dried up, making it very difficult for a lot of people--even ordinarily very credit-worthy people---to secure student loans. And sixth, even if they haven't yet lost their jobs, many people are worried about the possibility that they'll lose their jobs, or that (as for small business owners) their income will decline in a generally lousy economy. The very wealthy can still easily afford even the highest-priced colleges. The merely affluent and the middle class are hurting, in many cases scared, and many will be reluctant to commit themselves to a $200K + investment in a college education for their kids, especially if cheaper options like in-state publics or colleges offering generous merit aid are available.</p>
<p>But most advisors advise against using or borrowing against retirement savings for college tuition. I know some people do it but it's never been very fiscally sound. Also, if one were to have a kid attend college within a few years their savings shouldn't have been in higher risk investments hence my comment about 6 months ago.</p>
<p>There is also a future uncertainty for many about job loss. </p>
<p>I assume less parents who were willing to take out parent plus loans are willing to do so now. Many who were willing to borrow against their home won't be willing to do so and could not get a Heloc if they tried (also their home values decreased and there might not be any equity to borrow against). </p>
<p>More parents are finding 50k per year a ridiculous amount of money, even if they don't pay full sticker price. </p>
<p>Some parents might feel that if their child is not at a tier one, they might as well go to an instate public. Some parents are finding instate public Us (esp. honor colleges) to be the way to go anyway, esp. if grad school is on the agenda.</p>
<p>
[quote]
More parents are finding 50k per year a ridiculous amount of money...
[/quote]
But haven't they always? Doesn't the concern expressed on this thread point to the risk some parents take to leverage themselves to the max for the sake of the expensive private school? OTOH, some of the privates can be cheaper than states if the financial package is good.</p>
<p>If a parent has $200,000 in money market funds to pay for kid's 4 years at expensive college (not that this was anthing close to an issue in our household!) and then the market collapsed on their retirement funds and home equity - college funds might suddenly become parents main savings.<br>
Yes, it's time to tell the kids that things have changed.</p>
<p>^^^
There's a general uncertainity about the market in general. While not all assets may be tied up in a 401K, We, anyway, feel a reluctance to tap into other assets we may need for retirement (in 5-7 years) at 62/65. We always felt we could afford to spend SOME money earmarked for retirement for private school or we could sell other assets. Not knowing how far the market may go down, and being unable to sell other assets has caused us to rethink Ss choice of schools. He is very well aware of the situation and if he can't go to a #1 private school where he'll get no merit aid, well so be it. If in a few years if the market turns around and he's truly miserable where he's at ( though I doubt it) he can always transfer. This is a learning experience for us all.</p>
<p>Maybe it is just the schools my S applied at, but the private LAC he is attending offered more scholarship and merit money than the flagship state school. It is actually cheaper for him to go to the private school.</p>
<p>Yeah........ I really don't think people should forego applying to private colleges, because they certainly can be better deals for some kids than publics. That said, it's always good to apply broadly to public and private, and especially now. My son's private college is more affordable than daughter's public due to FA differences between them.</p>
<p>bbkitty - i wonder whether students applying this year will find this as likely to occur -- i can't help thinking that the colleges' financial aid/merit offers could end up being affected by the state of the economy -- more parents applying for and possibly qualifying for aid, endowments suffering in the market, budget problems, donors being less able to donate. </p>
<p>i really wonder if we'll see private schools become less affordable not only because of the parents' assets declining, but because of the schools' assets being impacted as well.</p>
<p>we've enjoyed a time period when the attitude has been that a private college education can be available to the non-wealthy. but to some extent that has been a luxury of a vibrant economy. i wonder just how great an impact the current economic situation will have -- i think we cannot even begin to imagine since i think what is going on is of a magnitude that we are just not even going to be able to comprehend for a while.</p>
<p>There are some positives to this.
First, if people refuse to pony up, maybe layers of college administrators will be axed and profs won't be allowed to get by with teaching only 2 or 3 courses a term. Between government subsidies and outsized endowment returns, colleges and universities have been part of the leisure class for too long.
Also, to be honest, for many of the posters here, this a discussion among the wealthy. Princeton isn't about to toughen up its financial aid standards.
529s? I had to look it up. No excess income here.</p>
<p>My sympathies go out to all those affected by the current financial problems. Hopefully the situation turns around for the better.</p>
<p>Danas-- You are right, any discussion of parents who used to be able to afford $40K per year, but now can't, is a discussion about wealthy people. And if you look at high-end privates, not just the elite schools but the schools below that, you notice that only around half of the students get financial aid. In other words, at many private schools, there are a lot of kids with rich parents.</p>
<p>Or, there <em>were</em>. But what now? Princeton and Yale will still be handing out scholarships, but schools with smaller endowments will be strapped.</p>
<p>I have never made a decision for my D based on finances nor discussed them with her. Fortunately, it was never necessary. While not truly "necessary" now, I feel if we (her father and I) are reducing our spending (not buying a new car or doing certain needed home improvements), it is time to tell her that is there a limit on what we can spend for her off campus housing next year. To be honest, I think she was a bit taken aback by this, but she seemed to understand and accept it. The whole world is making sacrifices; it is time she does, too.</p>