I live in North Jersey. Like @blossom says, not Short Hills! Not nearly. But the same county. For a whole lot less money. Absent special circumstances, the average family making 270K in Essex County should be able to afford 70K out of income. Unless, of course, they choose to LIVE like the average family making 270K. But that’s a choice. Again, like Blossom says, if you think you deserve the lifestyle that goes with that income, you may have problems. But I’d like to think someone who makes that much money can have some perspective and see the big picture. Or choose, like many do, to limit education choices to inexpensive ones. Again, a choice. And a dang lucky one to have.
“What if the $270k family lives like a family earning “only” $120k, which should be around median or higher even in high cost of living areas?”
Then they would see the vast majority of the extra $150K they earn go to either extra taxes or Harvard (subsidizing other kids).
According to a little income tax calculator I found, a family of 5 making $120K and living in SF would pay $27K in income taxes, leaving $93K for everything else. Harvard would expect that family to pay $13K, leaving $80K to live on.
A family of 5 making $270K and living in SF would pay $87K in income taxes, leaving $183K for everything else. Harvard would expect that family to pay $70K, leaving $113K to live on.
So if one parent makes $120K and another parent decides to work at a job making $150K instead of staying at home (or someone works 90 hours a week to make $270K instead of 40 hours a week to make $120K), $117K of that $150K extra income goes to taxes+Harvard. That’s a marginal tax rate of 78% on the extra $150K earned.
“I guess I’m pushing back at the idea that all aid MUST make it possible for ANYONE to send their kid ANYWHERE, regardless of the choices that were made 10, 15, 20 years ago regarding lifestyle, costs, expenses.”
But I’m not espousing that idea. I’m just pointing out that Harvard’s “great” fin aid still isn’t enough for many families in the doughnut hole (and essentially is a progressive tax on top of our progressive tax system that amounts to a marginal 78% tax rate if you increase your income from $120K/year to $270K/year).
Paying tuition is not a tax.
I mean, why shouldn’t every cent over plenty-enough to live on go toward tuition? Why should other people’s money subsidize that higher income?
Harvard and like-minded/funded schools do not have “doughnut holes”-- FA is on a gradual scale. This myth that the upper middle class is a special, discriminated against group, is sort of ridiculous.
People with less money may get more aid, but they’re living “lesser” lifestyles, which that 270K family is free to adopt–if it’s so wonderful–at any time.
Wow. It’s so easy to speculate what a family earning the hypothetical $270K should do, and to judge them for not doing it, in any region of the US, but there are so many situations our judgmental imaginations cannot account for. High medical bills. Special needs child. Mental illness involving expensive therapy. Cancer patient desperately trying alternative treatments because conventional ones have failed. Alimony payments to a bitter ex-spouse. Multiple children.
You can take each one of these scenarios and blame the family or say how you would do it differently, but until you are in the exact situation as the family you are judging, you really don’t know.
@3puppies:
“I heartily disagree with the oft-repeated line that OP includes, that this (parents avoiding loans) means students “need to focus the college search towards public universities in place of private.””
This is true. Students don’t need to pursue cheaper options, just as families don’t need to avoid a 78% marginal tax rate if they could.
@garlard:
“Absent special circumstances, the average family making 270K in Essex County should be able to afford 70K out of income”
Very true. Yet some families would prefer to not incur a 78% marginal tax rate even if they could take that on. What a strange sentiment. You probably have trouble understanding.
I have said over and over that of course there are outlier specifics, but overall, I’m saying people have choices". Those with high incomes have *more choices. And this comes from the OP’s assertion that schools are “requiring” them to take loans in order to go to them. No. They’re not.
All of those things listed above are true for any family at any income. But harder for those with lesser incomes. That’s not judging. That’s just factual.
The specific case in which loans can be “required” is for the family earning $120K in SF who bought their house in the late 1990s just before their kids were born. A modest family home that cost $400K then is now worth $1.5M. Most tippy-top (i.e. CSS Profile) schools will expect you to borrow against your home equity to fund college, so that $13K per year suddenly becomes the full $70K. A few don’t, but you have to be very careful (don’t apply to Georgetown for example).
Maybe it’s appropriate to require some of that equity to be spent and for parents to downsize after retirement, but it’s no longer a question of should they have saved more out of current income. And presumably the reason primary home equity is excluded from the FAFSA is that it’s not thought to be appropriate/desirable for people to be forced to leave their home due to college bills. That’s especially the case when they have locked in low CA property taxes based on the original home purchase price. And if you had 3 kids, how much equity would you be left with to buy a home for retirement?
Only while the family has a kid at Harvard. For years before the kid is at Harvard (or after the kid graduates), the after tax difference between $120k and $270k pretax income is $93k versus $183k, so the family saves an extra $90k per year, according to your calculation.
@ucbalumnus: Well, it’s not unusual for a family to have several kids spaced several years apart. So only while a family has at least one kid at an expensive private where they are full-pay, more like (which could be a decade or more).
And Harvard doesn’t lop off much if you have 2 in college at the same time. For that $270K family, 2 kids at schools with Harvard’s fin aid policy would cost $114,500.
Okay, waving the white flag and leaving this debate. Y’all are right–it sucks to be well off in Murica. /sarcasm.
This is mostly irrelevant because only a few thousand kids fall into the category of super high achievers, donut hole income, and admitted to a top 15 private school. The vast majority of those donut kids attend their state flagship because it is the best value for the family. In the small group of my son’s friends, people turned down Cornell, Columbia, WUSTL, Rice, Brown, Vanderbilt, WIlliams, etc. etc. because Michigan was $40,000 cheaper and offered similar education quality. The only schools that were not turned down were H,Y, S, and Wharton.
@TooOld4School, actually, doughnut-hole kids make up roughly 20-25% of matriculants at top 15 privates (and almost by definition, they would be super-high-achieving). That would mean that there are already in the high thousands who choose a top private. As there are almost certainly more doughnut hole kids who turn down a top private at full pay, in total, they actually number in the 5 figures.
TooOld4School, you are probably right, but half of the parents of the “few thousand kids” you mentioned in #53 are on CC, so that problem will get a lot of attention here.
In any case, debt is extra bad in your 50’s ! It was a great feeling paying off the mortgage, last car loan, etc. etc. It’s amazing how much lower your costs are. Now if we could only do something about insurance and those pesky taxes…
I want to echo the sentiment about unexpected job loss and health issues - everything takes longer to recover from in your 50’s and beyond.
If anyone who makes $270,000 wants to trade incomes with me, I’ll be more than grateful. My oldest DD attended a meets full need school and after the school and federal grants, what we were responsible for was about a third of our income. $5,500 was covered by Stafford and Perkins and the rest split between parent and child’s savings,summer job, and $2,000 work study. It is all relative.
@MomOf3DDs, my parents made roughly $16K a year total and they paid roughly a third of their income each year as well for my undergrad (with the rest covered by Stafford, Perkins, Pell, work-study, the state grant for poor kids, and the school’s grant; back then, that was what “meets full need” meant*), so I certainly understand your situation and would not want to trade places with you.
But if you ever face a situation where you have a choice of paying a 78% tax rate or not, you may not opt to pay the 78% tax rate either. In fact, growing up in the situation I did, if anything, made me appreciate the value of money and understand that having more money is better than having less money.
*I also worked summers but my parents believe in Communism within the family, so summer work was donated free labor at my parents’ restaurant.
@PurpleTitan - I don’t doubt that there are wealthy families who would rightfully make a choice to preserve a big chunk of their assets. I encourage families to do what is best for their own situation - and if that means they are better off avoiding loans, or coming up with a list of schools where they aren’t faced with the 78% marginal tax rate you describe, all the better for them.
But that does not always mean that families with older parents and little cash assets should necessarily avoid private schools (which is what OP implies). While some probably should, others would be foolish to choose some of the great publics over some of these extremely generous private schools.
Most families who earn $270K have the choice and the ability to be full pay anywhere they like. Most families earning <100K do not have that choice. When we start talking about how much home equity a family has, or what if the family has 3 kids over several years, vs. a family with 1 kid, this proves my point that each family has to look at their own situation and determine what choices are even available to them, and then to decide what is best for themselves.
Some, not all, but some, of the very wealthy families like to imagine they are better than other families because they have more money. They seem happy to complain how it is not fair they should have to pay more for the same education while others get so much aid. Sure, having more choices can make the process more complex - but that does not necessarily mean the system is tilted against the rich, nor even against the “donut hole” families.