ivy league edu for engineering worth $200K?

sakky · April 5, 2008, 3:25am

Uh, no, I said that families who are rich don’t care about costs. I don’t happen to think that a family that makes 200k a year is rich.

Uh, actually, why not? See below.

Actually, yes. But not just because of Harvard or for college costs in general. I think you probably know that plenty of people have moved out of California to nearby states like Oregon, Washington, Arizona, Nevada etc. precisely because of the cost of living. In fact, the term ‘Californication’ has even been coined to describe precisely this phenomenon. Heck, one of my old friends recently decided to move from San Francisco to Seattle, for, as much as he loved San Francisco, the cost of living is just so much cheaper in Seattle. He can actually afford to buy his own house in Seattle, which he couldn’t never do in San Francisco. Washington also has no state income tax.

Basically, if you’re going to insist on paying the high costs to live in California, then, frankly, I have no sympathy for you when you cry poverty. California is beautiful, but the fact is, most Americans don’t live in California, and more generally, most Americans don’t live in beautiful places. It’s not because they don’t want to - as after all, who doesn’t want to live in a beautiful place? But they don’t because they don’t want to pay for it. When Californians insist on paying to live a high-cost lifestyle, only to turn around and cry poverty, that’s just a case of trying to have your cake and eating it too.

EngineersRkool · April 5, 2008, 9:27pm

What if majority of student with <60K income got in and went to Harvard? If Harvard gives complete free rides to these students how would they make revenues? After all, colleges are basically business institutions–it’s not like they care if ppl get educated or not.

sakky · April 6, 2008, 6:08am

Easy: endowment. Think about it. Harvard is sitting on $35 billion of endowment funds. Hence, if they took all of that money and just invested it in 10-year T bonds (the safest investment in the world), which yield about 3.5% a year, that would mean that they would make a whopping $1.2 billion a year just on the interest alone. Remember, that doesn’t involve spending a single penny of their endowment (the principal). They can bring in over a billion dollars a year * just on the interest* of their principal. And of course Harvard, realistically, is not actually going to put all of its endowment into T-bonds, but rather is going to put most of it into higher-yielding investments.

To put that in perspective, Harvard has about 6700 undergrads. Hence, even if every one of them got a free ride, which would cost about 45k each, that would cost Harvard only about $300 million a year, or less than 1/4 what they would get from just the interest earned on their endowment placed in T-bonds. Think about that. Harvard has so much money that they can basically do nothing and still generate billions. That’s the luxury of wealth. It’s like how if somebody gave me a million dollars in cash, I would never have to work again in my life, because I could just park it in 10-year T-bonds and make $35k a year just on the interest, which is enough to (frugally) live on (as after all, plenty of Americans who actually have jobs don’t make 35k a year, and yet they survive). Remember, I wouldn’t be spending any of that million dollars - I would still have it. The 35k yearly interest would be income that I would earn above the million dollars that I already have.

But the point is, Harvard has such vast financial resources that they can easily afford to give away free rides. Tuition is, frankly, a drop in the bucket to Harvard.

waterlogged · April 7, 2008, 8:13am

Good post Sakky. JP’s family has 2 houses and makes 200k and thinks Harvard’s financial aid policy has gaping holes in it. How sad.

elwe · April 7, 2008, 3:54pm

Do you think it is worth an extra your for 3+2 program in LACs with Dart, Columbia, WUSL, ect?

halbhalb · April 7, 2008, 8:26pm

sakky, your analysis of Harvard’s financial resources are way oversimplified. First, tuition does not cover the full cost of a high-end education. Harvard (and most other top schools) already draws from its endowment to pay for its professors, administrators, cooks, janitors, groundskeepers, etc… I think MIT states that each student costs ~200k per year to cover all of the costs. Further, spending a majority of the interest and simply keeping principle is not breaking even. Breaking even is earning ~3-4% to keep up with inflation.

I’m not saying that Harvard couldn’t increase financial aid, but its not a simple as you suggested.

Additionally, @waterlogged; how can you suggest that a family with 200k can pay for an ivy education easily. My family makes just under 200k, has 1 house and 2 apt’s, and will receive 0 financial aid from Cornell, Columbia, or Penn, and presumably Harvard (if I had applied). 50k a year is 1/4 of my families income and is a SERIOUS consideration.

ken285 · April 7, 2008, 9:50pm

And that leaves your family with 150k per year… I don’t see how that’s a problem.

Mr_Payne · April 7, 2008, 11:18pm

Taxes? Cost of living?

ken285 · April 8, 2008, 12:09am

Take 50% off, leaving 75k for other expenses. I still don’t see a problem.

Mr_Payne · April 8, 2008, 12:36am

It’s not always that easy, ie: divorced parents in a high cost of living area.

aibarr · April 8, 2008, 1:05am

Heaven help you if you have two kids in college… =

waterlogged · April 8, 2008, 1:42pm

I didn’t say easily. Why two apts ? If Condos – sell one. I have two in college for approx $50K a yr and not complaining. But I don’t have two houses and I’m living frugally for now to afford it. I also don’t make 200K. I was actually paying almost as much for one student but good financial aid helps.

electrifice · April 8, 2008, 1:49pm

lol, though I agree its not always that simple, I agree with ken’s view. I’m a family of 6 with total income <$60k, living in California… be happy with what you’ve got people! Sell a home, or two, if going to Harvard is that important to you.

ken285 · April 8, 2008, 8:43pm

I’ve also been assuming that the parents have not saved any money whatsoever for college over the years, which probably isn’t the case.

DocT · April 8, 2008, 9:50pm

Its not easy paying for an ivy league education even on $200k. However, sacrifices can be made and it is still possible to pay for it out of current income without having saved anything.

xjis · April 8, 2008, 10:51pm

my family earns less than 30k, no savings for college, and i just graduated from cornell… (my sis is still attending USC)

now i just learned that cornell will be offering free ride starting next year for families w/ incomes less than 65k.

… gah

sakky · April 10, 2008, 4:26pm

Uh, that’s not the point. What matters in this discussion is what the student pays which is just the tuition. Sure, it costs much more for Harvard to provide an undergraduate education, but the students have never paid for that before, so that’s not something they have to factor into their financial calculations.

And given that Harvard has earned over 20% on its endowment over several decades, which makes it the most successful university endowment fund in the world (so successful that Harvard’s endowment managers are constantly fending off job offers from the world’s top hedge funds), Harvard can easily beat inflation.

I deliberately made it simple just to illustrate the basic point that Harvard’s financial aid costs it basically nothing, relative to the immense financial resources that Harvard has. Undergraduate tuition is merely a rounding error in Harvard’s total budget.

Now, if you want to discuss this point in greater detail, I am certainly game, and I can cite you a mountain of academic literature that has demonstrated the basic point that Harvard could provide full rides to all its undergrads (and probably all of its grad students) without much problem. But I doubt that such a discussion is necessary because I don’t think you disagree.

But if you do, then by all means, please, by all means, point to a feature that would actually substantially change the calculation such that Harvard wouldn’t have the financial resources to offer full rides to all of their undergrads. But don’t quibble; don’t point to minor adjustments that don’t change the underlying analysis. At the end of the day, Harvard’s vast financial resources throw off immense annual returns that easily dwarf whatever they are earning in undergrad tuition. That’s the overall point.

k14 · April 11, 2008, 1:25am

I posted this on the Cornell thread, but I thought it is relevant to the OP’s situation:

My father also earns a high income (240k+) yearly…

However, if he sends me to Cornell (engineering), he’ll end up paying 100k/yr for college (no financial aid for me, and my brother will be attending med-school simultaneously).

Our taxes and house mortgage combined add up to 100k/year, also.

So are we expected to live on 40k/yr for a family of five? What about car payments and such? And my dad is going to retire soon. I also have another brother who will start college - shouldn’t we also be saving for him?

And I may also attend med-school.

So pitting Cornell for 50k/yr against UT Austin (instate) for 13k a year, I’m starting to see the benefits of attending my state school.

I just feel its a pity that even with such a “high” income, it will put a strain on my family if I attend Cornell.

RacinReaver · April 11, 2008, 3:13am

Couldn’t you and your brother also help pay for undergrad/med school? Most parents I know of will help support undergrad (since that’s what’s planned for), but will require the kid to come up with the funding for any further education. I know my brother’s paying for law school by taking out loans and when applying to grad schools for engineering, I only looked at ones that guaranteed funding since I had a decent amount of debt from choosing to go to a private school instead of a public.

sakky · April 11, 2008, 7:34am

I agree with RacinReaver on this one: why exactly is your family obligated to pay your brother’s med school bills? Let’s face it. When it comes to their incomes, doctors aren’t exactly hurting. Why can’t he just take out loans like the vast majority of other med students do?

I once posted an article from CNN/Money that described a married couple of newly-minted doctors who had a combined net worth of negative 400k because of their med-school loans. Yet it seemed to me that they still lived a relatively good life, being able to (somehow) buy their own condo and so forth. More importantly, they both felt confident that their future earnings would be able to retire their debt relatively easily.

Uh, that’s a deliberate mischaracterization of your finance. You’re talking about 40k after taxes and after your mortgage. Furthermore, that 40k, presumably, is already paying for you and your brother. Hence, the fair figure would be 40k for a family of three, after taxe s and rent/mortgage. That’s a pretty high income. Forget about even the rent/mortgage piece. Most American families don’t make 40k after taxes.

Uh, what about them?

Let me put it to you this way. I once owned a car that cost me, literally $700. Yes, that’s right, not 70k or even 7k, but $700. Granted, that was in 2002 dollars, and it was an old, ugly beater. But who cares? It worked, it got me from point A to point B. In fact, not only have I never owned a new car in my life (and perhaps never will), the most expensive car I have ever owned cost me $2k. It’s not like I didn’t have the money to buy something better, for I certainly did. I just didn’t feel like spending the money. Your family can do the same. Is that really so outrageous? You don’t need to have a new, nice car.

Nor do you necessarily have to buy old crappy beaters. Let me give you another example. My old roommate drives a gorgeous black BMW 740i. He looks like an investment banker in that car. What did he pay? About $3500. How’s that? Because it’s a 1993 BMW. Hence, it’s very old. But who cares? It still works great. The only thing that doesn’t really work is the AC. But honestly, so what? He just rolls down the window if he’s hot.

The point is, you don’t have to live an extravagant lifestyle. There are many things that people buy that you just don’t need. They’re nice to have, but you don’t really need them. Again, instead of buying a new car that costs you 25k, you buy an old car that costs $2.5k. That’s major savings right there. After all, it is estimated that a new car loses 10% of its value the moment you drive it off the dealer’s lot. Hence, right there, you’ve just lost $2.5k.

ivy league edu for engineering worth $200K?

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