Percentage Of Rich Kids Needing Student Loans Has Doubled Since 1992

Parents Forum
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<p>“At one time, prospective college students from affluent families could count on having their tuition paid for by their parents or college savings accounts. But times have changed and now even students from the highest income brackets are borrowing to finance their high education dreams.” …</p>

<p><a href=“Percentage Of Rich Kids Needing Student Loans Has Doubled Since 1992 – Consumerist”>http://consumerist.com/2014/10/08/percentage-of-rich-kids-needing-student-loans-has-doubled-since-1992/&lt;/a&gt;&lt;/p&gt;

<p>More: <a href=“The Changing Profile of Student Borrowers | Pew Research Center”>http://www.pewsocialtrends.org/2014/10/07/the-changing-profile-of-student-borrowers/&lt;/a&gt;&lt;/p&gt;

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<p>This is a stupid article.</p>

<p>“Nearly 50% of 2012 high-income graduates – those with a parental income of $125,700 or more – left college with student loans. The figure represents a staggering increase from just 20 years ago when just 24% of students in the same income level graduated with loans.”</p>

<p>Parental income of $125,700 is not high income. Particularly not if you live in an expensive part of the country, or have multiple kids in college. How many of you who earn $125,700 or thereabouts consider yourselves “rich”? And obviously, an income of $125,700 had greater purchasing power in 1994! Sheesh.</p>

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<p>" borrowing to finance their high education dreams" is by choice, there are always free or cheap options. So, what is an issue? First, people make a personal choice to borrow, then they become some sort of statistics? It does not mean anything but the fact, that some choose to live beyond their means, but it is their choice, not ours.And again, some others may actually have money, but still decided to borrow, again, it is their choice. I agree that $150k is NOT a high income at all and nobody can pay $50k tuition + $25k living expences and take care of other kids out of this income. So, there are other options in additiona to income and one of them is to borrow and so they do as a personal choice.</p>

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<p>Haven’t college costs more than doubled in the last 20 years? </p>

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<p>The median household income in the U.S. is about 51K. The top 25% is over 85K. <a href=“Household income in the United States - Wikipedia”>http://en.wikipedia.org/wiki/Household_income_in_the_United_States&lt;/a&gt;&lt;/p&gt;

<p>Get real: 125K is a lot of income.</p>

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<p>It’s harder to get a second mortgage these days than before 2008. The value of US homes took a nosedive in 2008. </p>

<p>The Pew article did not use the word, “mortgage.” If they aren’t including mortgages taken out on the family home to pay for college, they’re not counting a significant loan source, which would exaggerate the growth in “affluent student loans.”</p>

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<p>Also, the figures do not account for inflation. According to the CPI inflation calculator, $125,700 in 1993 is the equivalent of $206,906.55 in 2014.</p>

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<p>

College Tuition has risen 3X the inflation rate of Median Family Income:
<a href=“http://www.mybudget360.com/wp-content/uploads/2011/04/college-cost-inflation.gif”>http://www.mybudget360.com/wp-content/uploads/2011/04/college-cost-inflation.gif&lt;/a&gt;&lt;/p&gt;

<p>

It’s nowhere close to being “Rich”, which is the focus group of this thread.</p>

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<p>“Rich,” is that the 1% or is it the 15%? 'Cause 125K is the beginning of the top 14% of household income. </p>

<p>Anyway, the title of the Consumerist article sez “Rich,” but the PEW report, which it is based on, uses “high income.” I suspect we can all agree that 125K is high income.</p>

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<p>The trouble is, the tuition “list price” is not necessarily the tuition a family must pay–that varies with income. So “high income” families may not be able to pay the full tuition. For what it’s worth, this article in Forbes includes a chart listing estimated EFCs for different income levels and number of dependents. 125K does qualify for need-based aid at some colleges: <a href=“http://www.forbes.com/sites/troyonink/2014/01/31/2014-guide-to-fafsa-css-profile-college-aid-and-expected-family-contribution/[/url]”>http://www.forbes.com/sites/troyonink/2014/01/31/2014-guide-to-fafsa-css-profile-college-aid-and-expected-family-contribution/&lt;/a&gt; The EFC for a family with that income, and 1 child, is $28, 496. </p>

<p>In comparison, the EFC for a family with an inflation-adjusted income of $205,000, is $55,132. </p>

<p>The original article does not correct for inflation; to be as rich as 125K families were in 1993, a family needs 205K today. However, families at that level of income should not need to borrow. “Poof” article disappears.</p>

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<p>Periwinkle is on the right track. We can’t really tell whats happened to college costs, because the schools don’t give detailed breakdowns on what people are actually charged. The only thing you’re certain about is what they want to charge the highest income families. And even then there are some schools that purport to charge the same tuition as Harvard but offer everyone at least a 10K scholarship to make them feel good about themselves.</p>

<p>Costs have gone up a lot (see Mitch Daniels of Purdue recent comments in the news), but you can’t tell exactly how much and for whom. The only thing you can be relatively sure of is that full-pay families have been asked to carry more and more of the burden for others, and over the past 4-5 years some schools have figured out that they might be better off with a different strategy.</p>

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<p>“Get real: 125K is a lot of income.”</p>

<p>$125K is a very nice income. Unless you’re buying a basketball team. Or having to pay a substantial part of the list price for a private college.</p>

<p>The MSRP of most colleges and universities is well out of reach of everyone except folks who are truly quite well-off. Even the discounted price most colleges will offer based on financial need is well out of reach of many folks, at least if they’re trying to make the amount from current income rather than from accumulated savings or through debt.</p>

<p>Ironically, for those who are more solidly middle class and who have very high-achieving children, college is often more affordable than for folks who have much better incomes but are not really wealthy.</p>

<p>Thus, the Harvard student whose family income is $65K (above the national median household income, but only by a modest amount) goes free. Much below $60K, and even the student contribution of roughly $4.5K may be reduced or waived. On the other hand, the Harvard student whose family income is $150K can expect Mom and Dad to chip in roughly $15K, plus a student contribution of $4.5K, and the Harvard student whose family income is $200K will pay roughly $45K, plus a student contribution of $4.5K. At about $240K or thereabouts (less, if the family has any noticeable savings, investments or assets), the family gets to pay all $63K!</p>

<p>So, the more or less middle class folks pay 0%, the mildly-upper middle class folks pay 10%, and the somewhat higher upper middle-class folks pay 22%, and the folks with $240K get to pay a little over 25% of their gross (pre-tax) income.</p>

<p>Remember, too, that the marginal tax rate at $240K, depending on the state in which you live, could easily be 35% - 40%. So, on your marginal income, the government gets 35 - 40 cents of every dollar, Harvard gets 25 cents, and you, the poor slob who actually makes the money, gets to keep 35 - 40 cents. In a sense, for upper middle class earners, your marginal income is for the benefit primarily of the government and your child’s school. </p>

<p>And this is if your kid is able to get into one of the most very generous schools!</p>

<p>A really quick glance at Notre Dame’s net price calculator reveals that a typical family with $125K in income, with little or no savings, average tax deductions, would be expected to pay over $25K per year. $2.7K would be a student contribution, and they’d offer $7.5K in loans to help meet that number, but overall, this “high-income” family would be expected to pay 20% of their pre-tax income in tuition and other costs.</p>

<p>Yep. $125K is a nice income. Except if you want to buy true luxury goods - like a college education.</p>

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<p>^ I was with you right up until that last line.

To be more accurate it should be true luxury goods - like a college education at a private school. There are ways of cutting the cost of college education (in-state Us, community college) but everyone focuses on the horror stories. </p>

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<p>Erin’s Dad, generally I agree with you, that a family with a $126K income should swing a public education. But for those earning a lot less - particularly those in that $51K bracket - even state U’s have gotten prohibitively expensive. My state flagship is more than $25,000/year. Even with the first two years at a comparatively inexpensive community college, it will still be a huge expense for a working/middle class family that has (like most of us) more than one child to educate. </p>

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<p>@Erin’s Dad,</p>

<p>In the beginning of my post, I originally stated: “Unless you’re buying a basketball team. Or having to pay a substantial part of the list price for a private college.”</p>

<p>The omission of “private” in the last sentence was unintentional.</p>

<p>Nonetheless, although public universities are more affordable, at least in my state, the merit aid and financial aid are not necessarily all that great unless one is a pretty good student. My younger son, a freshman at Harvard, received an offer from our state flagship that wasn’t much better than the offer from other, private schools with much better reputations. Without the merit scholarship he was offered, the financial aid would have been a meager help. Although he didn’t apply to other in-state schools, many of them are less generous than our flagship. Even public universities can be a stretch, in many cases, for upper-middle class families. However, it is true that they can often be less expensive than most private schools.</p>

<p>For many folks at $125K, the cost of the typical offer from many private schools is just unattainable without heavy borrowing. But even the cost of a public school may require significant belt-tightening to avoid heavy borrowing.</p>

<p>So, I will amend what I wrote thusly: Yep. $125K is a nice income. Except if you want to buy true luxury goods - like a private college education, or choke down the cost of a near-luxury good - like a public college education,. </p>

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<p>It’s a bit unclear, but the second link seems to say that the income levels are based on quartiles. So high-income graduates are those whose parents’ income are in the 75th percentile or higher, which in 2012 was $125,700 a year. But in 1994 it was probably different.</p>

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<p>If the tax rate for a family with a $125k income is 30%, they can pay $30k/year out of pocket for college (after taxes) and still have more than the US median income left over. I’m sure that’s difficult to live on if you’re in an area where the cost of living is high. I wonder how the store clerks, waitresses, and other service industry personnel in your area manage.</p>

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<p>There are tons of options available to lower the cost and even bring it down to zero. Many are using it. So, if somebody choose the high price option, again, it is by choice. Double cost or triple cost or whatever, I am talking about cost for specific student at specific place chosen by family and not the general idea of triple cost which is irrelevant for a specific student. Out of 4 of us we paid only one UG tuition and it was very very long time ago at the in-state public. Even at that time, we would have not chosen the OOS or private UG, there was no reason to choose what we could not afford. But others are choosing the options that they have to borrow for, houses, cars, education…UG education is only one example. So, why anybody else is concerned? It is their personal choice. We are “cheap” people, others are not, so we are different… </p>

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<p>"125k income is 30%, they can pay $30k/year out of pocket "
-No, cannot. It is not $30k / year. First, there are plenty of UGs that are much more expensive than that. And there are living expenses that are close to $25k (at least for our kid who lives at the very cheap location, not those NYC or CA and who does not have to have any meal plan either). Than another factor is that we have only one dependent, but how about families with 3+. Still another point, we do not have mortgage, car loans while most others do. I can bring many more points, including but not limited to the fact that some can withdraw from the retirements fund free of fine and the others have to pay fines for such withdrawals. There is no way that family with 125K, which is NOT rich and cannot affod to live in any mension or drive Mercedes, there is no way that this family can afford potentially few tuitions of $50k + $25k living expences for few kids. Math does not add up…they have to either withdraw or borrow if they did not choose much cheaper or free options </p>

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<p>@austinmshauri,</p>

<p>Most higher paid folks do actually live in higher cost areas.</p>

<p>Other than payroll taxes, someone with median income, with four people in their household, with a mortgage proportional to their income, will pay little or nothing in federal and state income taxes. On a gross of $50K, net will be in the range of $45K.</p>

<p>For someone similarly situated with $125K in income, taxes could run roughly $40K, leaving the family with $85K. But now, the median income family gets to pay about $5700 for a child at Notre Dame. They get to keep roughly $40K to pay the mortgage, food bill, etc. The second family gets to pay over $25K, leaving less than $60K to spend on the mortgage, etc.</p>

<p>But in a high-cost area, things cost more. The median home price in the US for a new single-family house is about $270K, and about $200K for a previously-owned home. However, in my county, single-family houses run around $470K, for new and previously-owned combined. That’s double. So, the family with with $125K starts out with 2.5 times the income of the family with $50K, but winds up, after taxes and tuition, with only about 50% more income than the family that starts with $50K. But dollar for dollar, the “higher income” family’s housing dollars are worth only half the “lower income” family’s housing dollars. The “higher income” family in the higher cost region has less spending power than the “lower income” family.</p>

<p>Here are some profiles in my area of families with $125K in household income: a married couple, late 20s with bachelors degrees, each has been a public school teacher in my county for five years, haven’t started on their masters degree, yet. A married couple, the wife is a clerk at a large organization, she has an AA degree, the husband maintains boilers for a large organization, has a high school education, and some certifications. A not-quite supervisory level federal employee with some years on the job - single income.</p>

<p>I don’t think folks with these sorts of circumstances are the folks we think of as “high income,” and certainly nothing near to rich. They’re ordinary folks with incomes that aren’t that high for an area where costs can be as much as double the median in the rest of the country, and even greater than in many parts of the country. It may look like they have a lot of income, but compared to most places, they don’t.</p>

<p>Our progressive income tax significantly disadvantages these working-class families. Adding the insult of radically-progressive college tuition to the injury of the tax structure is just rubbing salt in the wound. Due to these harms, many families with “higher income” are actually significantly worse off than many median income families who don’t live in high-cost areas.</p>