We don’t expect perfection, and we saved ahead in 529 accounts, so we’re not complaining (couldn’t save enough for full pay privates, but we can cover the schools the kids picked). I’m just responding to the quote about “How are we going to be able to buy the boat” above my post. I honestly felt that was a bit tone deaf. In our case, the assets that make us ineligible for financial aid at most schools are our retirement savings, which really aren’t lavish. (We would have been eligible for financial aid at the wealthiest privates, so we are definitely in the “donut hole” category.)
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I might argue you’re not a real donut hole family because your story, which of course I know is more detailed than we’re going to get into on CC, sounds like $90/year is not reasonably doable w/o aid. It’s an imprecise term but the meaning I ascribe to it when I use it is a family that has the technical ability to pay the cost of a private college education without materially compromising their retirement planning or ability to meet their current reasonable needs but would involve really cranking down on discretionary spending for a number of years. So, no conversations about second homes/condos, $100,000 boats, vacations to Europe, etc. IMO, those things can and should be sacrificed before other people’s money (and it is other people’s money) is allocated to the education of your children.
I don’t think private education is a right. It’s a good and service. We’re going through this right now with my oldest daughter and her two children. Over $40k / year to the independent schools in her city or the local public schools. It’s a choice and, right now, it would be pretty tough for them w/o my help. Like I said, it’s a discussion and ultimately a choice each family makes. If it’s important enough and it is reasonably doable, then that’s the decision. But if it’s not reasonably doable even with sacrifices, then that’s the decision.
I think (I know) there are people who take the trip to Europe, who buy the boat, who have the second home/condo who also see the price tag and think there’s no way they’re doing it because they would have to sacrifice one or more of those or similar things.
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Which schools are now counting IRA’s or 401K’s in the calculation???
Hugs to you. Tough to make trade-offs for sure. But as our financial advisor told us “Your kid will find someone to lend him the money to go to college. But NOBODY is lending you a nickel to retire!”
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Our savings is mostly held in taxable accounts, but we don’t need to get into those details. Our parents did not have retirement savings, so we are also supporting them, and very aware of not wanting our kids to be burdened that way in adulthood. Yup… nobody is lending money for retirement.
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I wonder though, if those “boat people” also have the discipline to search every conceivable way to stack merit aid so their child can attend the school of their choice? That’s a good Thought Experiment right there.
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I for one think balancing your desired retirement timing against your education budget is totally reasonable. If that means certain colleges are not within budget for your kids, then that is also reasonable.
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The Boston Globe did an investigative report on the outcomes for Boston HS valedictorians (there are many HSs in the city) a couple of years ago, and most didn’t last at the colleges they matriculated to. Some were unprepared but many just ran into financial problems.
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I remember this piece. Just so sad.
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Yes I recall that too. There is a person with a radio talk show in my neck of the woods who used to say never take out more in total student loans than you expect to earn your first year of employment. In this day and age as employment is less certain, that may be risky too.
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I mean, I find this so hard to fathom. I’ve known so many kids who were not in the zip code of being their school’s val, including those who came from crappy high schools (like my own) who not only made it through college but excelled.
I can see struggling for a bit but not lasting? As in dropping or flunking out?
Wow. Those must be some bad schools.
My impression is that merit aid is hard to “stack”. If you mean private scholarships, those are so hard to come by and are so competitive and/or narrowly targeted. The word I’ve heard is that the days of the smartest kid (whether rich or poor) walking out of high school loaded with private scholarship money is mostly a thing of the past. If you mean merit at the schools, then that limits school choice considerably as many of the top privates (or most?) don’t generally give out merit aid.
Or am I wrong about all of that? We were full pay so I didn’t bother to fill out FAFSAs or apply for anything. The Wes kid had a couple of private scholarships that put a small, very small, dent in the Wesleyan overall cost and she was a damn competitive applicant. There were so many for which she wasn’t eligible and many others that were very limited and had many kids chasing them. Just didn’t seem like the kind of thing one could plan on.
One of her scholarships was a national level scholarship and that was cool. But in terms of money, ten or 15 K, or whatever it was, barely moved the needle.
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This is a good point and you are not wrong.
I was on the board of a foundation which funded scholarships– the policy was “last dollar”. So we would only evaluate applicants who already exhausted every other form of funding, starting with Pell and then including any state grants, the colleges own financial aid (need or merit or sometimes “need packaged with merit”) etc. Bottom line- it is hard to stack awards. At many private colleges, a kid who wins outside money has just reduced his or her need so the need based aid goes down. A full pay kid who wins one of the big national awards- yes. Fantastic deal. But many of them, while technically open to all, give token awards to kids with no need and save the big guns for the kids with high need.
Read the fine print from whatever organization is evaluating the applications (which is not always the organization which funds the award…. hence the need to make sure you are eligible before taking the time to write, edit, )
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My feeling is that’s true; but I also think it’s a highly sensitive issue.
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There’s not much on CC that isn’t. I thought any school dropping legacy admissions might finally be the thing that would rally the troops to a consensus on something.
Alas, …
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Some of my kids had the stats to get accepted into top private schools, but we couldn’t afford them, so they were not an option. Many families are in this situation.
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Some loans may be necessary for a student to take in order to attend college. But as others have said, taking out excessive loans can be fraught with future problems, especially if a student/their family took out loans based on potential future earnings in the planned field of study, but then the student either decided to change their major to a less potentially lucrative one or they washed out of their desired major or career.
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I can introduce you to my daughter, who ‘only’ borrowed $20k (within the direct loan limits), borrowed 2015-18 when the rates were lower, got a few years of no interest under Covid rules, now has a masters (did not borrow anything for grad school) and yes, struggles to pay her loan payment. She’s a teacher.
I wish there was a lot more counseling on the front end of a student loan. Have a chart that shows how much this loan will cost to take it out,how much payments will be if the student delays repayment until 6 months after graduation, how much payment will be if the student already took out $xxx @ Y% rate last year, etc. (similar to the credit card disclosures that tell you how much it will cost you to only pay the minimum payment this month, and that it will cost you a bazillion dollars over the next 10 years to buy that lawn mower today). I think my daughter would have still taken the loans, but she would have know how much the repayment would be and would have seen it growing while she was in school.
One example:
‘How much is monthly payment on a $30k loan ($27000 plus accrued interest) @5% on a 10 year payment plan’:
Your estimated monthly payment is $318.20.
Here is a quick breakdown of the loan details:
- Total Repayments: $38,184.00
- Total Interest Paid: $8,184.00
- Loan Term: 120 months
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I completely agree with you. I remember what it was like to repay my student loans. It was a struggle, it limited the choices I could make and it took longer than I thought it would because (as life often does) nothing went according to plan. I had no idea what I was signing up for when I signed those loan papers, starting at 17 years old.
My experience with my loans is why we chose a budget for our children that would not include them taking student loans. Our oldest was angry that we wouldn’t allow student loans. She has since changed her mind and is grateful we didn’t allow her to take out loans.
She has been able to have more opportunities because she doesn’t have student debt hanging over her head. She’s could take the prestigious post grad fellowship that paid basically peanuts because her overall expenses are low. She’s been able to save money for retirement even during grad school because she doesn’t also have debt to cover/debt accumulating.
I realize sometimes loans are unavoidable if a student wants to get a college degree. That was my case. But anyone thinking that loans aren’t a burden and no one struggles if they are smart, hardworking, ‘successful’, etc is fooling themselves about what debt is. And, if you have student debt - often times you will also have other types of debt as well (car loans, credit card debt, etc).
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There should be significantly more loan counseling and information given when those college loans are offered. Most students and many parents have no idea what the long term impact of loan repayment will look like. Thus my suggestion that every student take a personal finance course before senior year of high school. Learn about budgets, expenses, compound interest, income vs loan impacts, retirement planning, etc. This isn’t something that should wait until college…or after.
As noted, sometimes loans are needed. But having information up front about loan repayment should not be an afterthought.
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