<p>No, it’s not all that selective - no group with me in it is selective. (What did Groucho say about not wanting to belong to any club that would accept him as a member?)</p>
<p>But seriously, by a combination of (a) planning ahead, (b) living frugally, and (c) selecting an affordable college, most families could manage it. But those who don’t start thinking about paying for college until the first kid is a junior, who aren’t willing to give up the luxuries, and who insist on a high-net-price, prestigious college, are probably not going to be able to manage without some debt.</p>
<p>For us it’s about no loans for us or our son. Started saving when he was little, rarely eat out, occasional vacations - all choices very happy to make in order to afford his choice of school.
Biggest decision - a cross-country move that allowed us to capture equity in house from expensive part of country (northeast) and purchase home in less expensive area, using that equity to help fund college. Planned long ago - not necessarily been easy for any of us but right choice. Continue to live frugally but to enjoy life!
DS also knows we will fund college but nothing after. Fortunately in major where graduate studies likely to be funded (math/physics).</p>
<p>I’m stupefied that so many people are saying you can’t afford something if it means going into debt. That means that nobody can “afford” to buy a house? It seems to me that you can afford something if your long-term plan allows you to pay for it without unduly threatening some other goal (like retirement). If you have to borrow money for it, what matters is whether you can service the debt and still follow your overall plan.</p>
<p>No, not that you can’t afford “something” if it means going into debt. I can’t afford something if it means going into debt when there are just-as-good alternatives that I can pay for without debt. I have a mortgage; right now, in fact, I’m in the middle of doing a re-fi to take out some money for necessary repairs and to lower the interest rate. I need a place to live; I can’t rent anything equivalent to where I live in my community for anything close to what it costs me to service the debt on my house.</p>
<p>If the only way I could afford tuition is by borrowing then I am putting to much risk on my kids’ education. My ability to pay may not always be the same, especially over 4-10 yr period. It is not the same when it comes to a house, I could always downsize when it comes to housing, I wouldn’t be willing to down grade my kids’ education.</p>
<p>Hunt: “I’m stupified that so many people are saying you can’t afford something if it means going into debt. That means that nobody can afford to buy a house?”</p>
<p>I assumed when we were discussing “afford” on this thread, we were discussing it in terms of college, and my answer was directed at affording colleges.</p>
<p>However, since you asked, generally we have avoided debt like the plague. Took out a 15 year mortgage, with 20% down on the house we are in now. Bought a small home in a neighborhood with good public schools. 5 years left on the mortgage. That is the only debt we have. If it had been possible to purchase a home with cash, we would have done that. Purchased every car we’ve ever owned with cash. Pay off every credit card at the end of the month. We do not touch our home equity or our retirement accounts for any reason. It is a freeing way to live, though not a common one. </p>
<p>We have used 529 accounts, savings and current earnings to pay for kids’ colleges. Hopefully our luck will hold, and we’ll get all three of them through without needing loans.</p>
<p>It is easier to define “cannot afford” than “can afford”.</p>
<p>If you would spend the money if you had it, but you simply don’t have the money, and cannot finance it in a way that you could realistically repay over a manageable period of time, then you cannot afford it.</p>
<p>Otherwise, you can afford it.</p>
<p>If you have the money but you don’t want to pay, then affordability is not an issue- you just have different priorities. </p>
<p>I think that there’s a difference between something being affordable, and something being a justifiable expense.</p>
<p>How much one can afford is, I think, a subjective standard these days, and whether or not something is a justifiable expense (whether affordable or not) is definitely subjective.</p>
<p>For me, what I can afford is based on my income, my savings, my expenses, and how comfortable I am with taking on any debt/ exhausting savings/ rejiggering expenses etc.</p>
<p>Whether it’s then a justifiable expense is part 2.</p>
<p>I may be able to afford a new lexus right now, but for me it isn’t a justifiable expense, so I drive a used corolla and it gets me where I need to go.</p>
<p>I think many people see college choices the same way. They may be able to afford option A, but option B seems like a better value for them and therfore the added cost for option A isn’t a justifiable expense.</p>
<p>Let’s not turn this into another pointless discussion of whether a college education is worth the cost or not. My point is that there are some things that you may want to buy that are too expensive for you to expect to have the cash saved up in advance. This means a house for almost everybody, and even a car for a lot of people–probably most people. But if your expected cash flow is sufficient, you can afford to buy a house or a car on credit. A college education is no different.</p>
<p>For my family, it means mostly from income and investments income. Not from savings, not from retirement savings nor home equity. It also means H&I are able to save the maximum amount in our retirement account.</p>
<p>re #52 – I take no absolute position on who should borrow. But there are differences. One difference between houses/cars and college expenses is that you can resell the house or car, if you find the debt is too much. You will never resell the car at a profit, but you might cut your losses. Many people today cannot resell their houses at a profit, and there is an uproar over that, because it is a complete reversal of longstanding expectations. With tuition, room and board, the money is gone, just as certainly as if you had bought a seat in a theater or a night in a hotel. Again, at least the under-water homeowners can resell the home, at least to cut their losses.</p>
<p>Moreover, most college debt is nondischargeable in bankruptcy. They can tack on fees and interest until you are 90 and then they can garnish your social security checks. Not true with houses and cars.</p>
This is true, and it should be taken into account in determining how much (if any) to borrow. I think some people do borrow too much, but that doesn’t mean you shouldn’t borrow anything.</p>
<p>Whenever we talk about “affording” anything, it is in the context of also affording other things that we value as much or more. Starting most fundamentally with food and shelter. Retirement is a wild card, requiring a crystal ball, which of course you don’t have.</p>
<p>At one extreme, you could refrain from all discretionary spending until you’ve got money saved up from now to age 120. I don’t know anybody who is that extreme. At the other extreme, you could spend what you have today, saving nothing or very little, assuming that things will change between now and retirement so that you will have what you need when you need it. Most 22 year olds who are graduating from college this month will live that way at least over the summer. The question is, when do you move forward from that very youthful mindset, and how rapidly?</p>
<p>“Afford” in our case means our son chose a school on his favorites list that gave him very generous merit aid, ensuring he can get his bachelor’s degree without loans. Tuition will be about the same as that of the private high school he currently attends.</p>
<p>Afford for me ment the tuition and fees, books and commuting costs of our state universities. I thought I was being generous with not sending her to Community College. Dd had other plans for a sleep away college. Now I am still saving for the room and boarding charges. Been able to meet that with current income because the tuition with a bit extra was saved before we came to the new aggreement. Still ticks me off but we are not really forgoing anything other than saving the entire amount for a new care we will need in a few years. DD will graduate with no loans but it does mean now that the bar is higher and my two other dds will want the same.</p>
<p>For us, college is a cash flow problem. We came up with a maximum amount we felt comfortable borrowing in order to get our D through 4 years of school without totally depleting our non-retirement savings and emergency fund. That amount is one we feel we can pay off fairly quickly and painlessly. If my H gets bonuses as he has been, we may not need to borrow at all. If we suffer a dramatic loss of income, we’ve told my D she will have to transfer unless the college she has decided to attend will give us generous aid. As it is one of the few colleges in the country that guarantees to meet need for all admitted domestic students (even if they did not apply for/qualify for aid as first-years), that’s some peace of mind at least.</p>
<p>P.S. I’ve seen a formula that says the total 4-year COA should be 1/3 current income, 1/3 savings, and not more than 1/3 debt. I think that’s a reasonable rule of thumb unless you have particular circumstances that make taking out debt, or more debt, highly unadvisable.</p>