<p>Dstark–say there’s something i’d like to have. I save the money. I can buy it. Where is the penalty?</p>
<p>I mean sure, I’d love it if spending could be penalized, but I don’t know how it can. Except in the uncertainty in life it brings to them–unnecessary financial disasters that we hear about every day.</p>
<p>I like that I can sleep well at night. If the price for that is a little less aid, so be it. I have made choices that make my life a little more civilized, a little less chaotic. As I said above, lucky me!</p>
<p>dstark, savers come out with a lot more money in the end, no matter how you cut it. They may have to pay more, but the “more” that they have to pay is only a small fraction of the “more” that they have sitting in the bank. </p>
<p>Only a small fraction of colleges will meet full need with grant aid. Most financial aid packages are built first on loans and work study. </p>
<p>So what you and all the others who wish they could be so lucky as to have 100% less money accumulated so they could be given 5.6% more, is $18-25K in debt, and an on-campus job. Let’s say hypothetically your EFC is being driven up by $200K in savings. We’ll assume you are married, older spouse age 51, so you’ve got an asset protection allowance of $50K – leaving $150K to add to your EFC. $150 x 5.6% is $8400. </p>
<p>OK, now I am going to give you the most generous aid package that a student is likely to get:</p>
<p>$3500 Stafford loan
$1500 work study
$3400 in grant money</p>
<p>Are you happy? </p>
<p>Keep in mind that you had to divest yourself of at least $150K of your $200K to qualify. </p>
<p>Keep in mind that each year the amount of the loan + work study goes up. Also, it is quite possible that the student won’t be able to get enough work study hours. </p>
<p>The thing that irks me is that if I had $200K lying around, I would easily be able to figure out how to get even more free money than the $3400 college grant I didn’t qualify for. I’d buy stocks or bonds and they would pay me interest and dividends. I wouldn’t have to work at all for the interest, it would just magically show up as extra money on my monthly bank statements. </p>
<p>No matter how you do the math, the person with more money in savings at the beginning always comes out with more at the end.</p>
<p>Calmom and Garland, With similar incomes, savers can end up paying more for college than spenders. Paying more for college, that’s what I am acknowledging. There is a savers penalty. The op is right. </p>
<p>I’m not arguing the relative merits of one person’s decision over another.
I’m not telling anybody what to do. </p>
<p>Ok. I will. I’d rather be the saver than the spender (but I’ll pay more for college). ;)</p>
<p>We invested in private school for our son’s elementary and middle school education and then sent him to public high school–both excellent decisions, it turns out. One so-called friend commented at the time that people in our area (public schools aren’t great) who care about their children’s education suck it up, make a sacrifice, and send them to private school. I’m hearing that again on this thread.</p>
<p>Now we are putting a cap on college spending because we are older parents (late 50s, late 60s). We will have saved enough for about a year of college, maybe a little more. We live in an expensive region, and we have modest but comfortable incomes, no inheritance, some but not many liquid assets, okay but not huge retirement savings, and big home equity–and we want to conserve our assets so our son absolutely does not have to take care of us financially when we are older (we’re going through that ourselves, and it’s terrible). We have taken interesting vacations with our son for many years–not wildly expensive, but experiences that he has truly reveled in. But that’s our only “extravagance.” We’ve had this talk with our son, and he’s not bothered by the fact that he’s not going to be applying to top-tier liberal arts colleges. We will gratefully accept any merit aid offered (and there are schools he won’t be able to attend without it) because we’ll be proud that he’s received that honor. But we do not feel entitled to it, nor do we expect need-based aid (though I’ll file the FAFSA just in case).</p>
<p>Not everyone with college-age kids has income-producing years ahead of them. We’re past our peak and very close to retirement. It’s not about savers vs. spenders, or about people who are willing to sacrifice and people who aren’t. It’s about making individual choices, living with them, and not judging others for their choices.</p>
<p>And, Dstark, since it’s how you like to be, for all kinds of good reasons, smile and acknowledge how much healthier it is, and feel bad for all those spenders who are paying the penalty of all that anxiety you are freely opting out of! :)</p>
<p>“Mini, do you have a pension?
If you have a pension, then you are a saver.
I’m not talking about social security.”</p>
<p>My REAL pension is that I can live on a thousand bucks a year, including medical care, and do work that I love in south India, and, if I could figure out a way, I’d be there now.</p>
<p>Garland, absolutely it’s better to be a saver. Psychologically it’s better. Financially it’s better. You can change careers. You can handle more ups and downs. You can make your kids’ lives easier. You can stay in your social class easier. :)</p>
<p>If you find a reasonable place to live, maybe you won’t need one. (I suspect I can pack up everything I own, tent, cars, and all, and it still doesn’t equal the value of two rooms in your house. ;))</p>
<p>Yup. There is a tent city with a conditional use permit pending right next to the Unitarian church in town, and they even have garbage disposal! Then you will no longer be penalized or punished. ;)</p>
<p>Maybe you can get a nice dowry for your son? :eek:</p>
Often, but actually when dh was starting out salaries for assistant professors seemed to be pretty much the same across the board. I’m not complaining, but we’d be a lot richer if he had accepted offers in Shreveport, LA or Mobile, AL. He’d even have had more lab space. However we knew exactly what we were sacrificing when we chose to live in NY.</p>
<p>For most people that I know who are like Geezermom and myself (“not everyone with college-age kids has income-producing years ahead of them”), we are financially limited to where we can send our kid. </p>
<p>I for one will able to give my kid an even more valuable gift than that of a college education, but the gift of knowing that she and her two other siblings will not have to take care of me when I am older.</p>
<p>For people who feel penalized by their savings, I can put the “penalty” in perspective.
The interest on the savings if placed in bonds or other assets should match the 5.6% assessment. Not too tough to do, especially since everyone gets some kind of “asset protection” allowance. You don’t to even hit 5.6% after tax.
Very roughly what you are giving up is the return on your savings for the time your S or D is in college. Your savings effectively aren’t even touched.
Hope you feel better!</p>
<p>Sending DD to Europe for three weeks in summer, buying her a new bike, a new camera, purchased a violin for her at $2000, sending DS to Asia for about a month in summer, me buying a SLK32 AMG, we going to Thailand for a 14 day vacation, redone all windows and a new kitchen for my house; just to name a few things. We want to make sure our taxable cash account is down to about $1K after all these.>></p>
<p>Laserbrother,
You are missing a critical point. With very few exceptions, financial aid is not “free.” Almost every financial aid package is going to include a significant portion of LOANS and WORK STUDY that your daughter must pay back. DO NOT “SPEND DOWN” unless you are happy at the thought of your daughter possibly taking on student loans. It is far preferable to have the money in savings and turn down the loans if offered. Further, even if you spend down everything you own, sell your house, etc., you will still have that salary of $120,000 a year…and that means it is likely that you will not get much in the way of financial aid. So, if you want a “good deal” best to quit your job too. Then, you’ll get those “great deals” you want…but you will, however, be living in poverty.</p>
You can handle more ups and downs. You can make your kids’ lives easier. You can stay in your social class easier. :)</p>