<p>Honestly, TV4caster, what the OP or anyone else does with his money is none of my business. But, you know, people are likely to go a little goofy when you talk about how the average savings rate for the top 5 percent of earners “turned NEGATIVE” last year. What is this supposed to tell us, if it’s true? That they’re too rich to be prudent like the rest of us mugs? I mean, thanks for the statistic, wherever it came from, but so what? If I can save (and I’m seriously the worst money manager I know), anyone can save.</p>
<p>Bottom line, we all have to figure out what we’re willing to pay and find schools that are likely to cost us about that much. Someone making roughly four times the median household income in the U.S. who has significant property assets shouldn’t be surprised that colleges are expecting him to pay full freight! But if he doesn’t want to pay full freight, he’ll have to find schools where his D’s statistics make it likely she’ll get merit aid. This is not hard math!</p>
<p>It’s all relative. $200K salary, $140K after taxes, $90K after college
tuition. Piece of cake. Especially if you ask someone that currently
grosses less than $90K.</p>
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<p>The median household income in the United States is somewhere around
$50K. You really can’t live on $90K Net? $92K gross is the bottom of
the top 25%. So 75% of households make under $92K gross. How do they
get by?</p>
<p>But that’s just if you need $50K a year to pay for school out of
income. You should have been socking that away while the kids were
growing up. You could then just pay for it out of savings.</p>
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<p>The mutual fund industry often trots out the savings rate which
excludes 401Ks, stock market portfolios and investment property.
Guess what kind of financial instruments the top 5% use.</p>
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<p>State schools are a bargain for the wealthy that can’t otherwise get a
hefty discount. Your kids also get to mingle with the little people.</p>
<p>^
See, the math really is kinda easy! Also:</p>
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<p>Doh! Of course! I forgot about those instruments! Except the 401Ks, which I discontinued funding last year in favor of stepped-up saving for my D’s college education.</p>
<p>Not wishing to come across as a martyr, really. Just want to point out that funding a college education may demand choices that one would prefer not to make.</p>
<p>I can tell you how this worked in my house … at least part of it.</p>
<h1>1) Delay flipping cars and drive cars into the ground.</h1>
<h1>2) While the kids were in college we stopped making 401k and IRA payments and funneled that money to college … that’s a pretty big chunk of change</h1>
<h1>3) Any incremental money from bonuses, stock options, or stock purchase plans was also funneled to college … (actually we did this since the kids were born … all extra money either paid off the mortgage or went in 529s)</h1>
<h1>4) Since birth we had made monthly payments into the kids 529 plans … initially really small ($50/month for the first kid) but eventually pretty good payments ($250/month for each of 3 kids). When the oldest started school we stopped making 529 payments and funneled the money to college.</h1>
<p>I hadn’t really thought this all the way through in advance but when the oldest hit college between withdrawing money from the 529s and the increased cash flow from stopping IRA, 401k, and 529 contributions (and any bonus/stock money) the hit to our day-day cash flow was not nearly as harsh as I was expecting.</p>
<p>“Not wishing to come across as a martyr, really. Just want to point out that funding a college education may demand choices that one would prefer not to make”</p>
<p>-Yes, agree 100%.
I also would like to add…good planning…which will also involve choices that most prefer not to make. For example, mortgage and car loans should be paid well before, preferrably by HS. Car(s) should be the one(s) that you pay off within 10 -12 months and done with any by college time. All household bill have to be minimized. Shopping also has to be minimized, cannot support both economy and college education, got to choose.
Also, kids who get accepted to Ivy, will get full tuition (or close to it) Merit awards at many state and private schools (D. did not apply to many, was not aspired to apply to any Ivy/Elite, got Merits at every single UG (including private) and graduated from state school where she was on full tuition Merit award).
However, there is no way that family with income of $200k that planned as suggested above is no capable to shell $50k for college tuition every year if they desire to do so. Very easily and going to fansy vacations if they still desire so. Something has to give, work hard, treat yourself well. It could be others choices of that though, but I am talking about very comforatble living.
I said easily, because we are paying $50k for Med. School and we are not making close to $200k, just praying that our jobs will be there tomorrow. However, i would not pay that much for UG, but this is my choice. If one choose to pay that much for UG, they should be able to do so if family’s income is $200k.</p>
<p>Here in our major midwest city, we know many dual-income couples whose household income is in the $150,000 to $200,000 range, who don’t have a financial cushion, much less college tuition monies saved. We have very high property taxes, very high home prices (price reflects neighborhood; lower-priced locations usually have significant socio-economic problems re: crime, particularly bad schools, especially deflating property values, etc), mostly poor-quality public schools (particularly non-selective enrollment HSs), reliance on private and/or parochial tuition-based schools, high commute costs, high sales tax (10%), very high utility costs, etc. Forbes just named our city “6th worst” in USA. There’s not much actual household discetionary income remaining after ALL taxes, housing-related and food costs. These supposed upper-middle income households are taxed hard, literally and figuratively; college costs will be a major problem for their kids.</p>
<p>Well, that’s a huge difference right there.
If I didn’t have to pay a mortgage, I wouldn’t have a problem paying almost full price for a top-heavy-cost school.</p>
<p>In response to higgins2013, here is another perspective on the choices we all make. When I became the widowed mother of a toddler 15 years ago, I faced a choice about where I was going to raise my child. I lived in Chicago at the time in a great neighborhood that I loved (tree lined, lots of restaurants, close to my sister’s suburban home; housing prices high-ish, but not out of my range). There was a selective enrollment elementary school within blocks of my apartment. I decided, however, that I didn’t want to deal with the anxiety around getting my kid into that school (or a magnet school further away) or to otherwise twist and wiggle over school choice, as I had other things I preferred to worry about! I did not have the income at that time to send her to a private school (again, my choice). I ended up in a suburban village with an “urbanesque” feel, high-quality schools and high taxes to match. We are not a full-pay family but we are pay-plenty! I know exactly how fortunate I am. I know that my income puts my ahead of the vast majority of people in this country. I know what college costs. I have saved for it.</p>
<p>People have a choice to spend their money differently than I did (on private schools from K to 12, for instance). Maybe it’s hard for some families to “get by” on $150K to $200K a year. That’s no matter. The point is, any given college costs what it costs and the college administration will want you to pay what they want you to pay, based on their formulas, not yours. </p>
<p>Again, I reiterate that there are schools that offer good merit aid for kids at all levels of ability. So if you don’t want to or feel you can’t pay what your EFC says you should be able to pay, then I’d suggest looking for one of those schools. State schools also worked out fine for many of us!</p>
<p>OK, choice are:
-pay all debts, be able to pay for any college of choice
-do not pay off debts, choose any college, get students loans
-do not pay off debts, apply only to colleges with great Merit packages
-pay all debts, choose only colleges with great merit packages, to enable family to pay for Grad. School</p>
<p>Sorry, I do not know any other choices. We have chosen the last one. Our income is below $170k, we still live very comfortably paying $50K Med. Schol tuition. We have awesome cars of our choices (paid off) and live in one of the best neghborhoods in our city, which has been economically depressed for decades, hence salaries are adjusted downward. It is pretty simple and both refer to Midwest:
-you live in more expensive places, then you have better job market and higher incomes (that is why you are there)
we live in much cheaper place, we have had horrible economic situation and really bad job market for decades (I have been unemployed 9 times, yes, living on single income for many months at a time) with smaller incomes, but since both of us working we are still living here. Still put D. thru private k - 12, S. went to public (by his own choice). Paid full tuition out of paychecks for S’s UG, D. was on full tuition Merit award at her UG. I do not see how is our situation different from others except that we have planned, which included certain choices at every step and with every purchase. We have not owned a new car, as example of choices, but demos with few thousand miles have been serving us fine.
I am not trying to push my way to anybody, I am just trying to say that there are choices, so enjoy them while they last, they may disappear because of forces that are out of our control.</p>
<p>Not referring specifically to the OP, but so many times in the last few years I’ve encountered parents who seem taken by surprise at the cost of college and that they really do have to pay for it. I’ve met parents of high school seniors, with 2-3 siblings coming after, who haven’t yet saved a dime for college. Many of these people are folks I’ve known over the years, and they have appeared to live quite comfortably–way better than us at least–judging by their houses, clothes, jewelry, cars, vacations, habit of dining out, etc. Most have two incomes, compared to our one. I guess I assumed they were taking care of their financial business. In reality, many seem to have been living without a thought to the future, or were robbing Peter to pay Paul.</p>
<p>I think there’s the idea that it shouldn’t hurt to pay for college, that it shouldn’t entail any sacrifice. Ideally, it wouldn’t, but that has never been the case in our country. It sure as heck cost my parents and I still remember my dad freaking out over my college bill. So I really have a hard time understanding how folks earning over $200,000 (which is more than double what many of us earn) are so unprepared. I completely understand that they don’t have the entire amount saved, because the costs have risen so much, but to have nothing? In the end, state schools are still pretty reasonable, and especially so if the student can commute. People earning in the $200,000 range can surely afford them.</p>
<p>absweetmarie, sounds like you and your D did it absolutely right. But that’s not what many do. Many students (and parents) start off looking at schools they’ve already heard of. For a student like the OP’s daughter, that often means the Ivy League, some other highly selective schools well known for their academics, and their local state school. If you’ve been here on CC long enough to go through an admissions cycle, surely you’ve seen the unhappiness in the spring when a student applied to the high end and (reluctantly) to their state university. They don’t put any effort into finding good matches and safeties because they’re sure that they’ll get into at least one of their reaches…and then it doesn’t pan out.</p>
<p>Along those lines, CFG, I’m amused by all of those parents who pay good money to send their kid to private high schools, and then complain about the lack of financial aid given by colleges. :rolleyes:</p>
<p>For the record, 6 years ago we were in the OP’s shoes. I was distraught and posted that my S was unlikely to be able to attend the Ivies he got into due to finances. So I am not without sympathy! My beef, though, was partly that the Ivies were marketing themselves to the middle and lower class. They claimed to be affordable and touted their generous FA. The fact was that affordable to me did not mean taking out massive loans. HYP might have been doable for us then, since they had suspended loan aid at that point. The others hadn’t followed suit yet, and S’s acceptances fell in the latter group. In the end, even on our salary, we made it work. But plenty of people wouldn’t live like we live in order to do it.</p>
<p>Me either and I never addressed that issue.</p>
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<p>I got that from a recent NYT article and my point was to show that it obviously isn’t as easy to save as people think or that subset would be doing it. Now that I think about it, you are right, it is probably more a reflection of our society and its profligate spending than anything else. As for your ability to save, congratulations but saying that if you can do it anyone can is not a valid statement. There are plenty of people who have made every sacrifice available and still are losing ground (I’m not talking about the top 5% here, but your blanket ‘anyone’ statement.</p>
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<p>I agree and never said otherwise. My problem was with the poster saying that saving 50k per year would be easy.</p>
<p>One of the best things we did to help pay for college: bought a house at the bottom of the market with a mortgage that was less than renting the townhouse we lived in at the time. Pure dumb luck,as it turns out. The real estate agent thought we were nuts – “but don’t you want to live in [expensive DC area suburb]?” Um, no. </p>
<p>Our tuition payments are several multiples of the mortgage payment – suffice it to say we are glad we are still in our 60s-era split level, but after both kids are out of school, there will be some serious deferred maintenance and upgrades taking place. You’ll find me in the Parent Cafe complaining about contractors. ;)</p>
<p>MarkBass-- ran $20,000 @ 6.8% (unsubsidized Stafford rate) for ten years and got $230.16. Also remember that unsub Staffords will accrue interest during college unless the student/parent is making interest payments. Students who have subsidized rates will pay less – the interest rates on those have been lower in recent years (S2’s sub Staffords are in the 3 and 4% range) and the interest is paid by the gov’t while the student is in school.</p>
<p>I am in the 200k is not enough money to pay full freight at an Ivy camp but than again I live in the DC/Balto metro area. Working married families make this much or they can not afford to live here. Well actually there are two types of families in our area. Those that make over 100k or those that are heavily subsidized by those they make over 100k. Guess which group carries the expensive purse. </p>
<p>I could say the same thing about any income level. If you ask someone making 30k per year how easy it would be to live on $50k per year they will say its quite easy. Ask the 60k person how easy to live on $90k and they too would say it is simple and would probably say they could save the entire amount. </p>
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<p>Many of them don’t get by and even if they are getting by they aren’t doing well.</p>
<p>However, at the risk of drawing more wrath I will offer up a few more tidbits about impediments to savings for some people, even those in the upper brackets. I make a good salary and made lifestyle decisions based on that salary. A couple of years ago my company took 5% of my pay away. Then they took away my pension. Next it was our 401k match. Then they raised my medical premiums 400% but lowered the premiums of most of the rest of the company. They said that I was ineligible to get the yearly bonus and put my (and two other people’s) money in the pot to be split between the rest of the staff. I don’t want pity, because I still make a decent living and by driving 10 year old cars w/ almost 200k miles, giving up cable and newspaper, and continuing to live below my means in other ways I have not had to do anything drastic. There are other lifestyle choice I could make that would help me save if I needed to save 50k per year but luckily because I planned I don’t have to (more in a later paragraph). </p>
<p>I also live in an expensive area because I want the best school for my kid. Sure, I could give that up and move to an even cheaper house if needed but there really aren’t any in my current school district. I’m sure others would run into the same problem. Others have suggested stopping funding a 401k. That is possible for someone, but financial planners recommend against that because even with that money most Americans won’t have enough to live comfortably in retirement. So it becomes a choice: forgo a 401k cushion to pay for college, or possibly eat cat food in retirement or skip medical needs because of a lack of funds. </p>
<p>I applaud some of the others who have made sacrifices and moved for example. In my case that wouldn’t be possible. I could, but wouldn’t make nearly the kind of salary I do now. Again, luckily, I planned better than most and don’t have these problems, but my point is that for some it isn’t as easy as “just do it” or “the math is easy”.</p>
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<p>I have In fact, one of the smartest investments I ever made was to downsize from a big house in a top neighborhood and take the money and buy prepaid college plans. That 44k investment will now get me 8 years of tuition at any state school. Currently that means it is worth about 96k and will be worth much more than that in 7 years when the last kid finally uses her last year.</p>
<p>My husband and I are fortunate to be in the $200k a year group, although we work multiple jobs and tons of overtime to get there. We have three kids, two overlapping, so we couldn’t pay full freight at private schools. We saved as much as we could along the way (this is a relatively new income, for many years it was less than $50k) and sent D1 to the best school she could go to, which wasn’t an ivy or a name school and she was happy. D2 had a very specialized dream (for which she worked and laid the foundation all through high school), so she got decent money at her out of state flagship and, with the Stafford loans, we paid the rest. OUr third is bringing up the rear by a long while, so we expect to be able to pay out of income and savings the full cost of whatever school we all agree is right for him. And I can tell you that we are beyond grateful for our good health and opportunities that will allow our kids to get the education we never had. Isn’t that the bottom line? Get the education and make a magnificent, productive life?</p>
<p>One big change these days is that many of us are effectively locked into our houses. My parents downsized and made a 300% return on a home we lived in for 15 years. They used some for college costs and most for retirement. Most of us would be happy to get out of our homes without a loss these days. </p>
<p>There are many ways for middle/upper middle class families to afford college: save, do a CC for 2 years, stay in-state, get merit money by going to a school with “lower stats,” work more (both parents and the student) if possible, etc. </p>
<p>Regardless, it is hard to be just above the need aid levels at most schools. I do think we as a society need to get away from the “everyone has the right to a $200,000 education” mentality that is so pervasive in my peer group (good public school in a middle class community).</p>
In fact, one of the smartest investments I ever made was to downsize from a big house in a top neighborhood and take the money and buy prepaid college plans. That 44k investment will now get me 8 years of tuition at any state school. Currently that means it is worth about 96k and will be worth much more than that in 7 years when the last kid finally uses her last year.</p>