Upper Middle Class Parents Need Wisdom From This Crowd

Paying for College
1

<p>My D got into Yale yesterday, and was thrilled. So were my wife and I until we got additional email advising us of ZERO financial aid. </p>

<p>My wife makes $175k salary as government "consultant" (label which means no benefits). I am unemployed real estate consultant/developer. I had heard H/P/Y had extended financial aid to upper middle class families like ours, so I was hoping for some help. Problem may be that I had consulting income in 2010, so our income that year was something like $270k gross and $195k AGI (after mortgage deduction, business expenses, etc). I lost that consulting job April 2011, so our gross 2011 income will be $175k wife and $50k husband, for about $225k gross (and probably $155k AGI?). </p>

<p>I have been underemployed since 2008 real estate crash, so even though we were really good savers through most of our careers, we are now down to our last $50k or so in savings. We have some equity in our California home, but we will not go into debt to finance D's college when we have little retirement savings. </p>

<p>With no current income for me and poor prospects of residential real estate employment coming back soon, we may be looking at surviving on my wife's $175k salary for an extended period. After deducting mortgage, health insurance, etc, the reality is that there is no way we can spend $60k+ per year to send D to her dream school. But after seeing D light up yesterday, I would like to figure out some way to make this possible for her.</p>

<p>We are working on getting her into some potential full ride schools, but she has worked so very hard we would want to explore all options before closing the door on the Ivies. Any ideas or advice from this sage and experienced CC readership?</p>

2

<p>I don’t understand the connection between being really good savers through most of your careers and being down to $50K in savings.</p>

<p>Your income was about $200K for 2010/2011, are you saying you still needed to debit your savings to pay living expenses?
In that case doesn’t sound like a full pay school is feasible.
What are her other choices?</p>

3

<p>If you want to make it happen on just your wife’s 175K/year salary, you will need to downsize your life to about 100K to free up the cash. People live in California and live on far far less than even 100K a year. It may mean giving up the house, which I realize is probably not currently on your radar, but it is an option.</p>

<p>You have the unique situation of having the cash for Yale <em>if</em> you drastically change your lifestyle and shift your retirement plans somewhat as well. You have to ask if that is worth it or not. I would say that it is not worth it, especially if your retirement plans are not well funded already. However, it sounds like your family has been living over-extended since at least 2008 if not more…so a lifestyle shift is probably long overdue. However, I am not advising doing this to fund 240K for Yale.</p>

<p>There are many more affordable options out there, including the UCs or perhaps a LAC with some merit scholarship monies.</p>

4

<p>emeraldkity4:<br>
On savings, we have burned through most of our savings to keep house and family afloat during real estate downturn, but that bleeding stopped once my wife got her job in 2010. We can now survive on W earnings without savings, but I posted savings to give full financial picture.<br>
Other choices may be USC, U of Michigan and/or Wash U, some or all of which may offer partial or full rides, as well as UCs. But since she is apply regular admit to each of those schools, we won’t know for some time.</p>

5

<p>My mortgage deduction and dh’s unreimbursed business expeneses (mostly mileage) go on my schedule of itemized deductions. They reduce my taxable income. They do not reduce my AGI. Are you sure you’re figuring your AGI correctly? I suspect that number may be much higher than the $155k you anticipate.</p>

6

<p>ordinarylives:
you are right that mortgage deductions, business expenses come after AGI. I was wrong on that. I went back and looked at 2010 and $75k difference between gross income and AGI primarily consists of self employment tax deduction, SEP contribution and health insurance deduction. So yes, I think 2011 gross of $225k will be reduced to $155k or so after those same deductions. And then 2012 gross of $175k will be even lower AGI of $135k or so?</p>

7

<p>Are you saying that you never put aside any money for your daughter’s education, or that college savings had to be sacrificed to maintain your lifestyle in the last few years? Please understand that those of us who have scrimped and saved to build what we consider to be untouchable college accounts for our kids have trouble understanding how a family that had a very comfortable income for many years and currently grosses $175,000 could expect need-based financial aid from Yale.</p>

8

<p>Be Careful, colleges do not allow many of the business deductions the IRS does. They will add them and any retirement plan contributions back to your AGI.</p>

<p>You might get a better package in future years, it’s certainly worth talking to Yale about. They will lay out for you what you will get at your best guess at future income. But you’re on slippery ground with your wife’s relatively high income, the fact that you make some money too and may make more as the economy recovers, expenses that won’t be allowed, etc. I’d say there’s a good chance, like many of the upper middle hurt in this downturn, that you can’t afford a high priced private with your current expenses and needs.</p>

9

<p>I probably wouldn’t have had/let D apply ED, since in your circumstance a family would understandably want to compare aid packages. That ship having sailed, the prudent thing to do would be decline Yale, apply RD to schools where D is likely to get merit money (down a notch or two from WashU if you really want full-tuition or full-boat) and hope for the best.</p>

10

<p>*Other choices may be USC, U of Michigan and/or Wash U, some or all of which may offer partial or full rides, as well as UCs. But since she is apply regular admit to each of those schools, we won’t know for some time. *</p>

<p>I wouldn’t count on a free ride from WashU unless you’re child is a URM. </p>

<p>If your D is a likely NMF, then she’ll get a half tuition scholarship from USC. That would leave about $35k per year for you to pay. Did your D apply before the scholarship deadline?</p>

<p>The top tier UCs aren’t likely going to give you much since they often base their larger merit on NEED. Regents may only be 1,000.</p>

<p>Sounds like you need to identify some “sure thing” big merit awards.</p>

<p>how much can you pay each year? You need to determine that! </p>

<p>Since you’re not able to add to your savings right now, is it reasonable to think that you can pay $30k or more per year for college? That doesn’t seem to make sense. Do you have an extra 2500 per month to put towards college right now?</p>

<p>Be Careful, colleges do not allow many of the business deductions the IRS does. They will add them and any retirement plan contributions back to your AGI.</p>

<p>Very true. This is shocking for those who are self-employed or consultants. </p>

<p>I think you were too optimistic expecting any aid from Yale. When they’re giving aid to those with $175k incomes, it’s when there are other kids in college as well. </p>

<p>What did Yale’s NPC tell you? </p>

<p>*With no current income for me and poor prospects of residential real estate employment coming back soon, we may be looking at surviving on my wife’s $175k salary for an extended period. *</p>

<p>Perhaps time for a career change for you? After all, if you’re looking for ways to afford Yale, you may have to work in another field…even for less money.</p>

11

<p>OK people, give EnVinoVeritas a break. Yes, they appear to have a lot of $$ but believe me…whatever it is…it goes fast here in CA. Expenses are enormous in So Cal, for example our medical insurance for a horrible HMO is $1600 per month for a family of 4! So, don’t slam him but help him for not being able to pay for it…believe me, it is not all that easy to to save and if they have gone through their savings…it is what it is.</p>

<p>We know many families in our upper middle class area going through the same thing, EnVinoVeritas has a wife with income…he is very lucky…many one time upper middle class couples are struggling. The RE business here sucks and houses are not selling and the devaluation makes it almost impossible to sell…so no RE jobs and hard to refinance/sell is is the reality of the situation</p>

<p>I wish I had some help for you, luckily my D has decided to go to school in-state but was accepted to out of state schools that also left us wondering how we would pay for it…but she did not get into an Ivy so that makes you dilemma even more taxing. </p>

<p>I would contact the financial aid department and tell them the facts…they may be be able to help you or put you in the right direction to find some scholarships…</p>

<p>Good luck to you and congratulations to your daughter…</p>

12

<p>I agree with SockHermom, this forum is for support and help not to critique someone lifestyle. Times are tough and we all want to do what’s best for our children. It’s been very difficult for our family as well. I’m sure with the economic downturn people will now choose to live differently, but until we can get out of this mess we all need to support and help one another by offering good solid suggestions.</p>

<p>Best of luck Envinoveritas!</p>

13

<p>Didn’t think I was slamming OP (and I did offer what I believed to be a helpful suggestion). </p>

<p>Believe me, a dollar doesn’t go as far in NYC as it does in other places, but $270K gross ($195K AGI) isn’t poverty even in the Big Apple - - and lots of families have to get by on on much less. The good news is, D was admitted to Yale, and if OP digs really deep (like most families have to, since most kids don’t get admitted to a school with Yale’s endowment and generous finaid policies) - - probably deeper than OP and wife are comfortable - - they can probably pay for Yale. </p>

<p>Or - - again like many other families - - they will have to tell D the family can’t afford her dream school. But with $195K AGI, even a SoCal family can still pay for college (maybe not a top tier school at $50K), and a D with stats to get into Yale will certainly qualify for free-ride at any number of solid LACs/unis.</p>

14

<p>OP, would you consider cashing some retirement savings? Maybe cover half with that and half with loans?</p>

15

<p>Thanks for all the feedback. </p>

<p>SockherMom:
thanks for the support. I am surprised by the vituperative tone of some of the comments, but shouldn’t be. California is very expensive, which you seem to appreciate. We are both self-employed, and we average about $13k-$18k a year just in medical expenses (premium costs plus deductibles). Thanks for your good wishes. </p>

<p>Mom2collegekids:
We did get USC application by Dec 1 as required, and they have history of offering full rides to the very top students from D’s school. So were are hopeful there.</p>

<p>Maybe we were too optimistic in expecting aid, but that hope was borne of Yale’s NPC calculator. It estimated Yale support based on our AGI. But as others have said, I am guessing they rejected our AGI and added back in self-employment costs and retirement contributions. Thus, the surprise. </p>

<p>I am looking for other work, but it is always challenging with 20 years experience, senior leadership roles, etc, all in one area. I have started another business outside RE (solar farms) but it failed. Still think my best bet is keeping active in RE business circles so that I can get back to regular employment when things firm up. </p>

<p>Yes, we saved something into a college savings account. Between that and scrimping, we were thinking we could swing about $25k or so per year for this D (another one two years behind). Part of the challenge is how much to spend for undergrad versus saving to help with grad school. </p>

<p>Anyone know of good source for finding smaller merit scholarships for D to apply to? </p>

<p>Foolish pleasure:
Yale is EA, not ED.</p>

16

<p>My bad, forgot Yale was EA - - then you’re in the catbird seat; you can wait for the RD decisions and award letters (be they need-baseed or merit). </p>

<p>As for the NPC, check out the thread about $9k gap at Duke (apparently NPC projected EFC of $4k, but actual EFC was/is $11K).</p>

17

<p>Loans and funding are more readily available for grad school, i’d spend on undergrad and let the kids handle grad school.</p>

18

<p>Agree…grad school is not your worry now. Concentrate on undergrad for your 2 kids.</p>

19

<p>I believe FAFSA adds back in retirement contributions ( for the preceding year).</p>

20

<p>FAFSA does add back in retirement contributions for the year of the contribution.</p>