Columbia financial aid

Roger_Dooley
Fri, 08 Feb 2008 11:26:08 +0000

$200K definitely wouldn’t allow a luxury lifestyle in the NYC metro area, but would make that family quite a bit better off in comparision to many who live and have to make ends meet in that region.

The reason for the disconnect is that $200K is a lot of money in many areas, and even in NY/NJ should allow some level of savings with the right lifestyle choices, i.e., buying a house that isn’t a financial stretch, not trading cars often, etc.

Our society is aspirational, though, and I think many people would prefer to work at the limits of their income in order to maintain an upwardly mobile, if not luxurious, lifestyle. In fact, I’d say all but the most frugal (or destitute) among us have had periods when we spent just about all of our income to have a better house or drive nicer cars. Financial Planning 101 tells you never to do that - rather, you should save first, and then figure out what you can spend on housing, transportation, etc. Most of us don’t do that with sufficient dedication. If one employs that strategy for many years, though, the combination of healthy income and lack of college savings is a killer if the student wants to attend a high-priced college.

The whole issue of planning for college costs is very tricky - an family that expects to have a high income at college time should plan to pay for the costs out of pocket, and, if possible save the full amount in advance. But, if the family is eligible for aid from an income standpoint at college time, those same savings will end up increasing the EFC and the out of pocket cost. Add other variables into the equation - job changes, divorce, remarriage, tuition jumps, rule changes, stock market gyrations, etc. - and determining the right strategy starting 18 years in advance is next to impossible. Certainly, though, money saved in the parents’ name and available for tuition will give the student more options without greatly inflating the EFC and without requiring a crushing load of student loans.