I bought my first home with 0% down. It didn’t change anything as far as my obligation to pay my mortgage. Yes, there’s less “skin in the game” but I think other factors contribute greater towards default.
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I’ll throw out some off center thoughts on just the article, not the comments here…
…is anything in the article really new? I have been binging Jane Austen during the pandemic. The upper middle class in those books is just as stressed about sliding backwards into working class, just as active in looking for opportunities for their children - to the point of allowing richer relatives to adopt them.
…is it wrong? I can identify with quite a bit in the article. I married in my thirties, had my child mid-30’s, have spent a bundle on tutors to get her over the hump of dyslexia. My parents were wealthy baby boomers - at 50, I am just accepting that I am not going to “do better” than they did. I’m doing “almost comparable” but not quite. They had the optimisting go-go 80’s powering them a long way. I’m a Gen X’er who had the pleasure of a few recessions while I was starting out. I don’t think I’m “the problem” in this country by any stretch, but I do want my child to grow up and have just a good a life as I have had, if not better. And it does feel harder to achieve. My mom stayed home, my husband and I both work very good professional jobs in the same geographic area…but we’re not “killing it” 80’s style, the way my dad did.
…the happiness/stress thing. I was just reading the retirement thread and someone posted a great story about being happy with “enough” - and that is sort of where I am today. I have WAY more than enough. I can share. I can help others. I can help my kid. Am I immune to envy or the temptation to keep up with the neighbors? (No, but I really do try to keep sane.)
…the whole idea of meritocracy is kind of ridiculous. Is it a meritocracy when you’ve paid for tutors, or private school, or a college coach to help with the essays. I don’t know how people can say that with a straight face. But I also think-it’s senseless to not use your advantages when they are needed.
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^^^^^Wow, excellent post. 
I think the bigger problem is the way college costs have increased. It may be misguided for the semi-rich to complain about those with large financial aid packages, but this feeling is because of price gouging by universities. My feeling is that most colleges with high tuition rates are not worth it and I want to stay in a specific budget for my daughter. I don’t begrudge those who choose/want to pay $80k per year, I just think it is not wise.
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$80k/year colleges are not-for-profit and report spending, so you can review where the $80k is going. I think a big issue that is often ignored is the average cost after FA at $80k/year colleges is typically far less than the sticker price… sometimes a small fraction of the sticker price. At some colleges, the inflation adjusted average price is largely unchanged in recent decades. That is price is increasing for wealthy, sticker price kids (usually increasing for top 9.9% that is subject of this thread). And price is decreasing for kids who aren’t wealthy, which is the vast majority of persons in the US, and sometimes the majority of persons at the college. Some example numbers I listed in another thread for Stanford using 2013 $ are below.
Average Net Cost at Stanford Over Time (2013 $)
1999 – $31,700
2000 – $30,400
2001 – $32,800
2002 – $33,100
2003 – $30,600
2004 – $31,400
2005 – $32,700
2006 – $32,600
2007 – $33,100
2008 – $31,900
2009 – $29,300 (large increase in financial aid this year, likely due to new policy)
2010 – $29,200 (still abnormally low average cost)
2011 – $29,700 (still abnormally low average cost)
2012 – $30,400
2013 – $31,700 (finally recovering from 2009 FA increase and returning to normal level)
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The changes over those years may have had to do with the economic downturn that pushed the overall level of income and wealth down during in 2009.
When our kids applied to Stanford about 5 years ago, the financial aid calculator showed it would be about the same price as a UC (in-state) for us. Neither got in at the time so we didn’t find out for sure, but it can be a pretty good deal despite the high list price.
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This is not unusual for high endowment per student colleges. For example, Harvard’s website claims, “Harvard is more affordable than public universities for 90 percent of Americans” … .so probably well correlated with whether’ the student’s family is among the top 9.9% “semi-rich” or not. The website also mentions that the majority of kids receive FA, and among that majority average cost is $12k/year.
My wife and I are probably in the 1% by income but not for wealth (we no longer own a home, for one thing, although we have decent retirement savings). We feel fortunate that we’ve been able to give our D19 and S22 a more financially comfortable childhood than either of us enjoyed, including six experientially enriching years living in Europe.
My parents did quite well for themselves for a while as senior administrators in state and local government agencies, which gave us a pretty upscale life in the ’70s and early ’80s, especially for a Black family. But my mother developed bipolar disorder, and her career never fully recovered. My parents split up and my father had a few underemployed wilderness years before he remarried and had a bit of a rebound. My younger brother and I lived essentially in poverty throughout high school, but crucially my parents managed to prioritize education — my brother somehow was able to go to private schools, I went to an exam-entrance public school, and we both went to good colleges.
That experience of lost security and standing left me determined never to go through that again, or let my kids do so. My wife is motivated by a somewhat similar childhood situation, as her parents were air-traffic controllers who were both fired during the strike. Her mother became a teacher and later a letter carrier; her father became a computer admin for banks. They owned their home outright (unlike my renter parents, who were evicted from our apartment when our fortunes waned), and while neither of them had gone to college, they also sent my wife and her younger sister to good private universities. (My wife is half-Black, but her parents and sister are White; her biological father was Black and her mom married another man later.)
I wouldn’t say we stressed about our kids’ activities and schooling, but we wanted them to have opportunities and take full advantage of them. We largely let them determine their own extracurriculars and course of study, and luckily they’re both good and self-motivated students. They don’t necessarily want to get rich, per se, but they’re practical and don’t romanticize struggle. D19 is pursuing a business degree at Parsons, with a minor in art history, and wants to work on the business side of the art world. S22 hopes to study communications, my wife’s profession, at either NYU or Fordham. We’re happy that they can be full-pay and debt-free anywhere, and we’re happy to use our connections to ease their way forward when we can. So perhaps we’re part of the problem of the 9.9% and its exclusionary meritocracy, but we won’t apologize for that — we’ve come through a lot and we don’t feel like we’re doing anything wrong.
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Stanford is a bit of a different animal due to the large endowment and that one must be much further up the economic scale to be full pay. I am curious if the numbers would be similar at say Drexel, Santa Clara or somewhere like that? Also, costs really did balloon in the 80’s, 90’s and 2000’s. Another issue is that colleges were in a race to add ammenities which also increase cost aka: huge gyms, lazy rivers etc.
Drexel is the first college you listed, so I’ll use Drexel as an example.
2019-20 Stats for Drexel
- 100% of students receive institutional grants or scholarships
- Average aid for those 100% of students = $30,449
- Overwhelming majority of students live off campus, making precise costs unclear
- University reports average net cost including room+board of $71,659
- Expected average net cost ~= $71,657 - $30,449 = $40,208
- Drexel reports actual average net cost for 2019-20 was $39,463… reasonably matching expectations
Unfortunately I was unable to find information before the sub-prime mortgage crisis, which distorts results. Nevertheless, I will look at the oldest available year in IPEDS. The summary above, suggests Drexel’s average net price has decreased slightly since 2008-09, after adjusting for inflation.
2008-09 Stats for Drexel
- 74% of students receive institutional grants or scholarships
- Average aid for those 74% of students = $16,237
- Overwhelming majority of students live off campus, making precise costs unclear
- University reports average net cost including room+board of $48,125
- Expected average net cost ~= $48,125 - 74% * $16,237 = $36,110
- After converting from 2008 $ to 2019 $, average net price = $42,878
I don’t know much about Drexel, but it appears that they have notably increased FA and/or scholarships since 2008, which is enough to counteract the increase in sticker price. It is also worthwhile to note that sticker price is meaningless at a college like Drexel where ~100% of students do not pay sticker price.
I expect Drexel is playing in to a psychological effect where students favor Drexel over competitors because of the larger scholarship. For example, suppose a student is deciding whether between Drexel and College X. At Drexel, the student receives a $30k scholarship off their $70k sticker price (that nobody pays) for a net price of $40k. At College X, the student has the same net price of $40k, but receives no scholarship. It sounds like the student is getting a better deal at Drexel with his/her big scholarship, so he/she chooses Drexel.
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Well, maybe you are right that that there has been some correction since 2010 but costs are still pretty out of control.
I chose Drexel because my daughter got a pretty nice scholarship there but was still real high cost.
Also since we are talking about “semi-rich” you can’t really say the average student pays $x because most of that is due to financial aid. The average semi-rich number is going to be much higher (albeit true maybe no one or few pay full freight at Drexel).
Anyways I guess the more relevant question is what it is worth to pay. I know everyone had a different answer. Seems like your answer is different than mine.
I remember an old post about full ride at Wake Forest vs full pay at Stanford.
I didn’t say “the average student pays…” . I said “average net price” and specifically mentioned something to the effect of “price is increasing for wealthy, sticker price kids (usually increasing for top 9.9% that is subject of this thread)” multiple times.
At most colleges, top 9.9% kids receive little grant-based FA. However, merit scholarships can be more variable. Some colleges give more aid in terms of merit scholarships than FA. You can get some idea of this balance by looking at average net price by income among federal database kids (mostly federal FA recipients), which is listed on the College Navigator and College Scorecard websites, among other sources.
For example a comparison between Drexel and Stanford is below. Stanford appears to be far less expensive for typical lower and middle income kids than Drexel, but Drexel appears to be less expensive for typical wealthy kids, including typical top 9.9% “semi-rich” families . I expect Drexel would be far less expensive for most kids with high enough income to receive $0 income-based FA than Stanford since Drexel offers substantial merit scholarships, and Stanford does not.
Average Net Price by Income among Fed Database Kids (Median of past 3 years)
$0-$48k Income – Stanford = $1k, Drexel = $26k
$48-$75k Income – Stanford = $2k, Drexel = $33k
$75-$110k Income – Stanford = $11k, Drexel = $36k
$110k+ Income – Stanford = $46k, Drexel = $42k
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Can confirm. Our friends who applied ED with no application for financial aid received a $20K “merit” scholarship just as an incentive to attend.
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Seems like $20k is an almost automatic discount if they give it to ED admits who are already almost certain to attend.
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My older daughter (3 yrs ago) received a $17k merit scholarship at Drexel and that still made the school much more expensive than similar options.
Anyways, that is just one student so not definitive and everyone’s situation is different. Can’t compare to Stanford as she didn’t have the #’s to apply. I would think that there aren’t many students applying to both Stanford and Drexel.
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Drexel is a popular engineering safety school in my neck of the woods, JBS, so I don’t think it’s true that Stanford/Drexel don’t have crossover. Penn State is expensive if you are a PA resident (and the opposite of urban). Drexel is a “better deal” for many instate residents, so if Stanford and its ilk are the reach schools, Northeastern, RPI are the match schools, Drexel is often a safety- and kids often end up there when the finances are viewed side by side.
Agree that everyone’s situation is different. We know kids who have ended up at one of the notorious “they gap you” schools with FANTASTIC packages-- and kids who have regretfully turned down some of the mega generous schools because the numbers didn’t work. Very hard to peer into someone else’s checkbook!!!
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Agreed and makes sense Blossom.