<p>Of course you shouldn't borrow against retirement savings to pay for your kid's college education. That wasn't my point. The point is, when you add up what's happened to retirement accounts, home equity, after-tax investments, and 529s, a lot of people who were doing fairly well financially suddenly aren't. Their net worth may have declined 25%, 40%, in some cases even 50%. For those 10-15 years from retirement or less, it's all pretty scary. It certainly makes you a lot more reluctant to take on additional debt to pay for junior's education---if college loans are available at all, which they may not be for many people who until recently had very strong credit and apparently sound collateral.</p>
<p>As for financial aid at private schools, that's fine for people who qualify for a lot of need-based aid. But at many top private schools, as many as half of their students don't qualify for any need-based aid, and many others qualify for just a little aid. For most of these people, the net cost of a private school is much higher than a public. Some of these are the truly wealthy, but many more are people in the $80K to $200K income range who may have thought they were doing very well financially, and before the current financial crisis had good reason to believe they could devise ways to self-finance all or most of a $50K per year education for their kids. It's suddenly gotten a whole lot harder. I think this could hit a lot of private schools very hard.</p>
<p>Many things that are luxuries have come to be regarded as entitlements.
My daughter in NYC this summer kept telling her coworkers that she didn't have the money to go out to lunch with them. They kept offering to lend her the money till the next day . They didn't get it.
Lest anybody take this as a sob story, her work study job at Princeton is in the rare books department. She has handled original music by Bach, as well as letters by Vonnegut and Goebbels (about his vacations). At an hourly rate many American workers would envy.</p>
<p>So, is it the general thinking that Flagship State Univ honors colleges are going to get a much bigger number of applications this year, or that many more high achieving students may opt to enroll in them over private colleges? Or both?</p>
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So, is it the general thinking that Flagship State Univ honors colleges are going to get a much bigger number of applications this year, or that many more high achieving students may opt to enroll in them over private colleges? Or both?
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<p>A lot of families will take a cold hard look at these options and ask themselves if they're actually getting a much better education by spending 2-4 times as much. In many cases, the answer is no.</p>
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a lot of people who were doing fairly well financially suddenly aren't. Their net worth may have declined 25%, 40%, in some cases even 50%
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The net worth is irrelevant in this discussion. It's only a snapshot in time. What's relevant is the amount of money they have available to pay for their kid's education. The upcoming education is a 4 to 5 year jaunt for undergrad and longer if the parents were going to pay for grad school. Any parents anticipating doing so, especially at an expensive private, had better not be counting on funds invested in a volatile vehicle. What would they have done (will do) if they leveraged themselves to the wire in order to pay for junior's expensive education, are now a year into it, and find themselves faced with another few or more years to go? Again, this is what I meant by parents making the decision based on the marketplace 6 months ago and now finding themselves worried. IMO, if they find themselves very worried now, 6 months later, then their plan may have been over-leveraged to begin with. I'll except job losses somewhat from this although that's bound to always affect some people.</p>
<p>People's current net worth may have declined significantly from 6 months ago (probably most of us) but it's to be expected that housing markets and the stock market will fluctuate and if one is nearing retirement they need to invest accordingly. This includes not taking out seconds/equity on their home to pay for a college education (also typically discouraged by investement advisors) and moving money out of the volatile area if they feel they don't have enough 'recovery time' ahead of them. For a lot of us I think we do still have recovery time ahead. The major losers are likely to be the people who decide to bail now at near the bottom of the curve (at least I hope we're pretty close to the bottom).</p>
<p>If things truly turn dire then I suppose a number of privates will need to succumb to the laws of supply and demand and figure out how to lower their COA (obviously excepting those top few that'll always have adequate demand).</p>
<p>So ucsd<em>ucla</em>dad, do you think people who are stressing now about the higher costs of private colleges are possibly having more a crisis of confidence than a real change in circumstances from 6 months ago? I am curious about this, not arguing one way or the other.</p>
<p>It may be not just a crisis of confidence as that all of a sudden their net worth had diminished and they no longer feel well set up or on track for their retirement and they will need to re-evaluate their expenditures on education</p>
<p>With two in college, even in public universities, my annual out-of-pocket would be nearly $50K a year...if I didn't count the merit scholarship rec'd by one kid, the fact that one kid is working as an RA to get a free room, and I had saved money for their education in Guaranteed Savings Plan that covers their tuition. Room and board costs alone are still costing about $15K out-of-pocket a year, which I'm trying to pay so that they can graduate undergrad without debt.</p>
<p>I'm constantly amazed by CC - by the kids with incredible stats who debate Ivy vs top 20, by helicopter parents who worry about how much of an allowance to give their children when they're in college or whether to get involved in college-roommate problems, and by parents who apparently don't worry much about financial downturns of the magnitude we've seen over the last six months....time to slink back to the B+, middle-class, public university threads.....</p>
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So, is it the general thinking that Flagship State Univ honors colleges are going to get a much bigger number of applications this year, or that many more high achieving students may opt to enroll in them over private colleges? Or both?
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<p>that's certainly what i would predict. and personally, i think some students who have always thought of their state flagship as their "safety" may be in for a rude surprise if the admissions offices are trying to make sure they aren't over enrolled next fall.</p>
<p>^^^Not just flagships either...S2 attends a state u. that (on CC) would prob. be called "third tier..directional school. This school is the fastest growing state u. in our state. They admitted the largest freshman class in the school's one hundred year history this Fall and were apparantly surprised by how many accepted and enrolled. Two hundred freshmen were left without dorms rooms initially (most have moved on campus by now). </p>
<p>The school has already announced that next year's admission standards will be raised and there will be fewer admits than this year.</p>
<p>"that's certainly what i would predict. and personally, i think some students who have always thought of their state flagship as their "safety" may be in for a rude surprise if the admissions offices are trying to make sure they aren't over enrolled next fall."</p>
<p>There was a story on this for UNH a few years ago. Many in-state students thought that they could easily get in as it was their home-state school and were surprised when they didn't get in. Limited housing is a problem but UNH has surprising interest from those in other states.</p>
<p>My son will still be applying to private colleges. I'm sure we won't qualify for much, if any, need based aid. Hopefully, he'll receive some merit aid at some of the colleges. I don't and never did feel like we had his college funds invested in "volatile" markets. They were the most conservative available by reputable fund managers--Vanguard and Fidelity. I'm just curious usc-ucla-dad where and how you were able to fund your children's education-- if you care to share</p>
<p>We are fortunate that DD received a generous need based FA. We should be able to support her using current income w/o dipping into our limited cash reserve. </p>
<p>Our DS is a junior in HS. based on experiences learnt from DD's FA packages from top tier schools, we have decided before this crisis that we will not apply to those expensive private schools, except HPYSM, again. </p>
<p>The bottom line, DS is going to a school we could afford w/o loan.</p>
<p>Neighbor is at a top LAC, receiving no financial aid. Her mom just told me all their college funds were in a mutual fund (stocks) and they only withdrew what was needed for this year. She almost started to cry, as she told me this. The only good news is that I would think top LAC's have better endowments, so we'll see if they're willing to step in and help some more of their students.</p>
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So ucsd<em>ucla</em>dad, do you think people who are stressing now about the higher costs of private colleges are possibly having more a crisis of confidence than a real change in circumstances from 6 months ago?
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I think you stated it well - I think some are just realizing more now the risk they may have always been taking in leveraging themselves highly to pay the high COA costs at some of these colleges. Unless one has a fairly clear 4-6 year or more plan on how they'll pay college costs with non-risk funds then they've always been at risk. The current world financial outlook may be opening their eyes to the idea that they might have been a little too confident before (i.e. expecting that the housing market would only appreciate, that the stock market would only go up, etc.).</p>
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I don't and never did feel like we had his college funds invested in "volatile" markets. They were the most conservative available by reputable fund managers--Vanguard and Fidelity.
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As long as money's in the stock market it's exposed to short-term risk and always has been. I don't think it's a big problem from a longer view but in the short term trying to get that extra few percent of appreciation puts the money at some risk. If their kid is currently in college and using these funds or will be in college within a few years then it might be wise to forego the possiblility of that extra few percent of appreciation and move the money to more conservative guaranteed vehicles like CDs or T-Bills. We all want the extra few percent and as long as they're doing well we're reluctant to move out of it but as the time gets closer to the need of use of the money we're actually taking more and more risk of exposure to an unusual downturn event and should consider that exposure.</p>
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I'm just curious usc-ucla-dad where and how you were able to fund your children's education
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By saving money outside of the stock market in CDs, etc. since I knew the funds would be needed imminently. I didn't want to tap into 401K or home equity. I also drive a > 40 year old car that appreciates in value and costs very little and the family car is 11 years old with 156K miles on it (it still works fine). I've had no car payments to be concerned with the entire time my Ds have been in college which frees up money to contribute to college on an ongoing basis. If both kids had wanted to go to colleges that cost double what the ones they attend cost then I'd have to sit down with a calculator and seriously consider whether I could afford it or not since I'd be pushing the leverage envelope. Neither of them wanted to however and are still attending well respected universities that afford excellent opportunities but as others have pointed out, even though they're state schools they're still pretty expensive. </p>
<p>I'm just wondering if people who are concerned are truly impacted in paying for their kid's college because of the downturn or if it's more of a perception and confidence issue. I understand concerns about potential job loss.</p>
<p>Is anyone concerned about the financial aid packages of their current college students? This crisis is hitting the schools' funds as well. I have a D who is a junior in HS but at the moment I'm more concerned about what next year's FA package will look like for my older D's sophomore year in college. We really need it to stay the same in order for her to stay there.</p>
<p>We have a small of college money in an index fund, which has been suffering, but the bulk is coming from current income and a money market account. S used his external merit $$ towards this year's expenses, as well as taking out a Stafford and working. I do worry about what will happen with FA happens when S2 (current junior) applies to schools next fall. </p>
<p>One point I haven't seen raised here -- while it may get harder to be admitted to flagships this year as more and more families flock to what's affordable -- remember that merit packages may be reduced, too. State universities get their funding from taxes, and in these times, revenue is down. There may be a move to focus shoring up FA rather than using merit offers to atttract top students who they may be getting regardless, due to the economy.</p>
<p>As a parent of a student that is looking for merit and financial aid, I worry too about the availability. I'm beginning to wonder if the merit aid I assumed he'd get will still be available and available to him, or are they cutting back and offering less aid. My son applied to one of our flagships--it's well known for his major and he could "see himself there". Even if there is no aid available, it's do able financially. We're lucky I guess--- but who knows where this will end up?</p>
<p>"that's certainly what i would predict. and personally, i think some students who have always thought of their state flagship as their "safety" may be in for a rude surprise if the admissions offices are trying to make sure they aren't over enrolled next fall."</p>
<p>Boy am I glad that not only did D apply and was accepted to schools last year even though she was taking a year off- but we paid a deposit to hold the place for the one she chose.
Our 401K may have tanked- but that decision was prescient :)</p>